How to Acquire Membership of a Company in Nigeria and Who Qualifies

In Nigerian company law, being a shareholder and being a member of a company are not the same thing. A person may hold shares in a company without yet being its member. A member may cease to hold shares and yet remain on the register. The distinction, which Nigerian courts have consistently maintained, is not a technicality. It determines who may vote at general meetings, who may enforce the articles as a statutory contract, who bears liability in a winding up, and whose name appears on the document that constitutes the ultimate proof of membership: the register of members.

This article examines the nature of membership, how it is acquired, who may become a member, the role of the register of members, and the liability that flows from membership. The governing provisions are sections 105 to 118 of CAMA 2020.

Definition of a Member: Section 105

Section 105 of CAMA 2020 provides that the subscribers of the memorandum of association of a company shall be deemed to have agreed to become members of the company, and on its registration, shall be entered as members in its register of members.¹ Any other person who agrees to become a member of a company and whose name is entered in its register of members is also a member.²

Two elements emerge from this definition. First, the agreement to become a member. This agreement is constituted, in the case of subscribers, by their signature to the memorandum; in all other cases, it is constituted by an allotment of shares, a transfer of shares, or some other mode of acquisition recognised by the Act. Second, and critically, entry in the register of members. Agreement alone does not make a person a member. The entry in the register is the indispensable step that converts agreement into legal membership.³

This two-element structure is what the courts mean when they say that membership and shareholding are distinct. A person who has purchased shares from an existing member, paid the purchase price, and received the share certificate has an equitable interest in the shares, but is not yet a legal member of the company. Legal membership comes only when that person’s name is entered in the register. Until then, the transferor remains the legal member, even though they may have parted with all their interest in the shares.⁴

Distinction Between Member and Shareholder

Nigerian courts have consistently distinguished between a member and a shareholder, and students must be clear on this distinction. In Ponmile v Sparks Electrics (Nig) Ltd,⁵ the court held that proof of shareholding is by a share certificate, while proof of membership is by the register of members. Entry in the register is an indispensable condition for membership. The share certificate by itself, without entry in the register, does not constitute a person a member.⁶

In Oilfields Supply Center Ltd v Johnson,⁷ the court confirmed the same principle: shareholding and membership, though usually co-extensive in a company with a share capital, are conceptually distinct, and the register of members is the definitive record of membership.

The practical consequence is that a person who receives a share certificate but whose name has not been entered in the register cannot vote at general meetings, cannot enforce the articles as a member, and is not counted in determining the minimum or maximum membership numbers required by the Act. Entry in the register is not merely evidence of membership: it is the constitutive act that creates it.⁸

Methods of Acquiring Membership

Section 105 of CAMA 2020, read together with the provisions on allotment and transfer of shares, recognises four principal methods by which a person may become a member of a company.

Subscription to the Memorandum

The subscribers to the memorandum of association are the founding members. By signing the memorandum, each subscriber agrees to take the number of shares opposite their name, and upon the company’s registration, they are deemed by law to have agreed to become members and must be entered in the register.⁹ This is the only mode of becoming a member that operates without any separate transaction after incorporation: the subscription itself, combined with the subsequent registration of the company, creates both the agreement and the obligation to enter the member in the register.

Allotment of Shares

A person who is allotted shares by the company after its incorporation acquires the right to membership upon the allotment. Section 149(1) of CAMA 2020 provides that the company shall complete and have ready for delivery all certificates within two months after the date of allotment.¹⁰ Allotment is the company’s act of accepting an application for shares and appropriating a specific number of shares to the applicant. It creates an immediate contractual right to those shares, and the allottee is entitled to be entered in the register. Until entry in the register, however, the allottee is not yet a member.¹¹

Transfer of Shares

Transfer is the voluntary assignment of shares from an existing member to another person by sale, gift, or any other lawful transaction. Section 151 of CAMA 2020 provides that shares in a company are transferable in the manner provided by the articles.¹² The transferor executes a share transfer form, which is delivered to the company together with the existing share certificate. The company examines the transfer, and if it is in order and the articles do not give grounds for refusal, enters the transferee’s name in the register and issues a new share certificate. The transferee becomes a member on entry in the register, not on the date of execution of the transfer form.¹³

For private companies, the articles must restrict the transfer of shares by virtue of section 22(2)(a) of CAMA 2020.¹⁴ The common restriction is a pre-emption clause requiring shares to be offered first to existing members, and a power for the directors to decline to register a transfer in specified circumstances. The articles of association of each private company must therefore always be consulted before any share transfer is attempted.

Transmission by Operation of Law

Transmission differs from transfer in that it occurs not by the voluntary act of the parties but by operation of law on the death or bankruptcy of a member. Section 155 of CAMA 2020 governs the transmission of shares on the death of a member.¹⁵ On the death of a shareholder, the shares devolve to the personal representatives of the deceased, being the executors named in the will or, where there is no will, the administrators of the estate appointed by the court. The production of the grant of probate or letters of administration is sufficient evidence of the personal representative’s title.¹⁶

However, the personal representative does not automatically become a member by transmission. Section 155(3) of CAMA 2020 provides that the personal representative may elect either to be registered as a member in respect of the shares or to transfer the shares to another person.¹⁷ Until the personal representative is registered or transfers the shares to a registered member, the personal representative is entitled to the same dividends and other advantages as if they were a member, but cannot vote or exercise other membership rights at meetings.¹⁸ The name of the deceased member remains in the register until the personal representative or transferee is registered in their place.

On the bankruptcy of a member, the shares vest in the trustee in bankruptcy by operation of law. The trustee may elect to be registered as a member or to transfer the shares.¹⁹

Capacity to Be a Member: Section 106

Section 106 of CAMA 2020 governs who may become a member of a company. The general rule is that any legal person may be a member: any individual with full contractual capacity, any corporate body, and any unincorporated association that has sufficient legal standing to hold property.²⁰

Infants

An infant, meaning a person under eighteen years of age, may become a member of a company, but with an important limitation. Under the general law of contract, an infant’s contract is voidable at the infant’s election at any time before reaching majority or within a reasonable time thereafter.²¹ If an infant repudiates membership, the company must remove the infant’s name from the register. The infant can recover money paid for the shares only if there has been a total failure of consideration, meaning the infant has received nothing of value in exchange for the payment.²²

Furthermore, section 20(2) of CAMA 2020 provides that an infant may not join in the formation of a company as a subscriber unless at least two other subscribers who are not disqualified have also subscribed to the memorandum.²³ An infant who is a member is not counted in determining the legal minimum number of members.

Married Women

Section 106 of CAMA 2020 is unequivocal: a married woman has the same capacity to become a member of a company as any other person. This is consistent with the general principle of equality before the law in section 42 of the Constitution of the Federal Republic of Nigeria 1999.²⁴ A married woman may hold shares in her own name, independently of her husband, and may exercise all membership rights including voting, receiving dividends, and transferring her shares.

Corporate Bodies

A company or other corporate body may be a member of another company. There is no prohibition on one company holding shares in another, subject to the specific rules on subsidiary companies and the prohibition on a company acquiring shares in its own holding company under section 166 of CAMA 2020.²⁵ A corporate member exercises its membership rights through a duly authorised representative, who may attend and vote at meetings on its behalf under section 248 of CAMA 2020.²⁶

The Register of Members: Sections 109 to 116

The register of members is the central institutional mechanism of membership under CAMA 2020. It is not merely a record of who holds shares: it is the document that constitutes and proves legal membership.

Contents and Location

Section 109 of CAMA 2020 requires every company to keep a register of its members containing the names and addresses of each member, the date on which each person was entered in the register, the date on which any person ceased to be a member, and in the case of a company with share capital, the number and class of shares held by each member and the amount paid or agreed to be paid on those shares.²⁷

Section 110 provides that the register must be kept at the company’s registered office or at some other place in Nigeria notified to the Commission.²⁸ It must be open for inspection by members without charge and by any other person on payment of the prescribed fee.²⁹ This accessibility is fundamental: the register is a public document that any person dealing with the company can inspect to verify its membership.

The Register as Evidence: Section 116

Section 116 of CAMA 2020 provides that the register of members is prima facie evidence of any matters directed or authorised by CAMA 2020 to be inserted in it.³⁰ This means that a person’s name appearing in the register is prima facie proof that they are a member, and a person’s name not appearing is prima facie proof that they are not. However, unlike the certificate of incorporation, which is conclusive evidence of registration under section 41(3), the register of members is only prima facie evidence: it can be contradicted by other evidence, and the court may order its rectification where it is inaccurate.³¹

Rectification: Section 115

Section 115 of CAMA 2020 empowers the court to rectify the register of members where a person’s name has been entered or omitted from it without sufficient cause, or where default or unnecessary delay in entering or removing a person’s name has occurred.³² The court may order rectification and may also award damages to any person aggrieved by the wrongful omission or entry. The right to apply for rectification is available to any person aggrieved, including the company itself.

Liability of Members: Sections 117 and 118

Section 117: Limited Liability

Section 117 of CAMA 2020 provides that the liability of a member of a company limited by shares is limited to any amount unpaid on the shares held by that member.³³ A member who has fully paid for their shares bears no further liability, regardless of the company’s debts. This is the principle of limited liability that makes the incorporated company such an attractive vehicle for commercial activity, and it is one of the consequences of corporate personality recognised by the House of Lords in Salomon v A Salomon & Co Ltd.³⁴

Section 118: Liability Where Membership Falls Below Minimum

Section 118 of CAMA 2020 provides that if a company carries on business for more than six months with fewer members than the legally required minimum, every person who is a member of the company during the time after those six months and who knows that the company is carrying on business with fewer members than the required minimum, is jointly and severally liable with the company for the payment of its debts contracted during that period.³⁵

This is one of the most significant veil-lifting provisions in CAMA 2020 and a direct exception to the principle of limited liability. The minimum number of members for a public company is two. For a private company, following CAMA 2020’s innovation, a single-member company is now permissible under section 18(2).³⁶ This means section 118 no longer operates against sole-member private companies, a significant practical change from the old Act.

---

CAMA 2020 Highlight: Key Changes Affecting Membership

Single-member private company (section 18(2)). CAMA 2020 allows one person to form a private company. The old minimum of two members for all companies no longer applies to private companies. This eliminates the section 118 risk for sole entrepreneurs who no longer need to include a nominal second subscriber merely to comply with the old minimum membership requirement.

PSC disclosure integrated with membership (sections 119–123). CAMA 2020 introduces the Persons with Significant Control regime alongside the membership provisions. Every person who holds directly or indirectly 5% or more of the voting rights in a company must notify the company within seven days of acquiring that threshold interest. The company must maintain a PSC register under section 119. This overlaps with and supplements the register of members but is distinct from it.

Threshold for substantial shareholding disclosure reduced. Under CAMA 1990/2004, substantial shareholders of public companies were those holding 10% or more. Under CAMA 2020, section 120 reduces this threshold to 5%. Members holding 5% or more of voting shares in a public company must now make the prescribed disclosures.

Register of members now includes electronic records. The Companies Regulations 2021 provide for the maintenance of the register of members in electronic form, provided the electronic record is capable of being reproduced in legible form. This modernises the register-keeping obligation.

Section 118 veil-lifting no longer applies to single-member private companies. Because CAMA 2020 permits single-member private companies, a private company operating with one member is not in breach of the minimum membership requirement and cannot attract the personal liability consequences of section 118.

---

Footnotes

¹ Companies and Allied Matters Act 2020 (CAMA 2020), s 105(1).

² CAMA 2020, s 105(2).

³ J Olakunle Orojo, Company Law and Practice in Nigeria (4th edn, Mbeyi & Associates 1992) 105.

⁴ ibid 106.

⁵ Ponmile v Sparks Electrics (Nig) Ltd (1986) 2 NWLR (Pt 23) 519.

⁶ ibid 525; Legal Emperors, ‘Membership of a Company Under Nigerian Law’ (LinkedIn, March 2018).

⁷ Oilfields Supply Center Ltd v Johnson (1987) 2 NWLR 625.

⁸ Orojo (n 3) 106.

⁹ CAMA 2020, s 105(1).

¹⁰ CAMA 2020, s 149(1).

¹¹ Orojo (n 3) 107.

¹² CAMA 2020, s 151(1).

¹³ CAMA 2020, s 152; Orojo (n 3) 108.

¹⁴ CAMA 2020, s 22(2)(a).

¹⁵ CAMA 2020, s 155.

¹⁶ CAMA 2020, s 155(1).

¹⁷ CAMA 2020, s 155(3); Legal Emperors (n 6).

¹⁸ CAMA 2020, s 155(4).

¹⁹ CAMA 2020, s 157; Orojo (n 3) 109.

²⁰ CAMA 2020, s 106.

²¹ CAMA 2020, s 106(1); Orojo (n 3) 110.

²² ibid.

²³ CAMA 2020, s 20(2).

²⁴ Constitution of the Federal Republic of Nigeria 1999, s 42; CAMA 2020, s 106(2).

²⁵ CAMA 2020, s 166.

²⁶ CAMA 2020, s 248.

²⁷ CAMA 2020, s 109(1)(a)–(e).

²⁸ CAMA 2020, s 110(1).

²⁹ CAMA 2020, s 112(1).

³⁰ CAMA 2020, s 116.

³¹ CAMA 2020, ss 115 and 116; Orojo (n 3) 112.

³² CAMA 2020, s 115(1).

³³ CAMA 2020, s 117; s 21(1)(a).

³⁴ Salomon v A Salomon & Co Ltd [1896] UKHL 1, [1897] AC 22 (HL), per Lord Macnaghten.

³⁵ CAMA 2020, s 118(1).

³⁶ CAMA 2020, s 18(2).