The Memorandum of Association in Nigerian Company Law: Content, Purpose, and Legal Effect

There is a well-known description of the memorandum of association as the company’s charter, the document that defines its relationship with the outside world. While the articles of association govern the company’s internal affairs, the memorandum announces to the world what the company is, what it is authorised to do, and the conditions under which its members have agreed to associate. Every company incorporated in Nigeria must have a memorandum. Without it, registration is impossible. With it, the company acquires its name, its identity, its objects, and the framework within which it will operate for the entirety of its existence.

Understanding the memorandum of association is not merely a matter of academic interest. In practice, every dispute about a company’s capacity to act, every question about whether a transaction is within the company’s authorised scope, and every alteration to the company’s fundamental constitution begins with the memorandum. Section 27 of CAMA 2020 sets out what the memorandum must contain, and no law student can afford to be unfamiliar with it.

The Nature and Function of the Memorandum

The memorandum of association is the external constitution of the company. It defines the company’s relationship with the outside world by specifying the name under which it is known, the territory in which it is based, the purposes for which it is formed, the nature of its liability structure, and the financial foundation on which it rests.¹

CAMA 2020 does not define the memorandum, but section 27 sets out its mandatory contents with precision. A memorandum that omits any of the required particulars cannot be registered by the Corporate Affairs Commission, and registration will not proceed until the deficiency is remedied.²

In practice, the memorandum and articles of association are now filed together as a combined document, commonly referred to as the MEMART. Under current CAC procedure, the MEMART is submitted electronically through the Commission’s portal as part of the package of registration documents required for incorporation.³ While they are filed together, the memorandum and the articles remain conceptually distinct documents serving different functions, and students must be careful not to conflate them.

Mandatory Contents of the Memorandum: Section 27 of CAMA 2020

Section 27(1) of CAMA 2020 identifies the mandatory clauses that every memorandum must contain. Each clause performs a specific legal function and carries specific legal consequences.

The Name Clause

The memorandum must state the name of the company.⁴ The name is the company’s legal identity: it is the name by which the company will be known, by which it will sue and be sued, and by which its property will be registered.

Section 29 of CAMA 2020 governs the restrictions on company names.⁵ The Commission will refuse to register a company with a name that is identical or too similar to an existing registered name, a restriction designed to prevent confusion and protect the public from dealing with the wrong entity. The Commission will also refuse names that are likely to mislead as to the nature or extent of the company’s activities, or names that contain prohibited words such as “Federal,” “National,” “Government,” “Municipal,” “Chartered,” “Bank,” or “Insurance” without the prior approval of the relevant government authority.⁶

Section 30(1)(a) of CAMA 2020 requires that the name of a private company limited by shares must end with “Limited” or “Ltd.”⁷ The name of a public company must end with “Public Limited Company” or “PLC.”⁸ The name of a company limited by guarantee must end with “Limited” or “Ltd” unless the company obtains a licence dispensing with the requirement.⁹ These suffix requirements serve a public notification function: anyone dealing with a company whose name ends with “Ltd” or “PLC” is on notice that its members enjoy limited liability.

A company may change its name by special resolution under section 30 of CAMA 2020, subject to the Commission’s approval of the new name.¹⁰

The Registered Office Clause

The memorandum must state that the registered office of the company is to be situated in Nigeria.¹¹ The precise address of the registered office need not be stated in the memorandum itself; it is provided separately in the registration documents. What the memorandum must confirm is that the company has its registered office within Nigeria’s territory, establishing the territorial jurisdiction of the Nigerian courts and regulatory authorities over it.¹²

The registered office is the company’s official address for all legal purposes: it is the address to which statutory notices are served, to which court processes are delivered, and at which the company’s register of members and other statutory registers must be kept or made accessible.¹³

The Objects Clause

Every memorandum must state the nature of the business or businesses the company is authorised to carry on, or, if the company is not formed for the purpose of carrying on business, the nature of the objects for which it is established.¹⁴

Under the old CAMA 1990 and CAMA 2004, this clause carried enormous legal weight. The ultra vires doctrine, as applied in Nigerian company law, meant that any act of the company that fell outside the objects stated in its memorandum was void and could not be ratified by shareholders.¹⁵ This created a trap for third parties who dealt with companies without checking their objects clauses, and forced company lawyers to draft excessively long and all-encompassing objects clauses to ensure that no conceivable act of the company was inadvertently excluded.

CAMA 2020 has fundamentally reformed this position through section 35. Section 35(1) provides that unless the memorandum specifically restricts the objects of the company, the company shall be deemed to have unlimited capacity to carry on any lawful business and to do all such things as are incidental or conducive to carrying on such business.¹⁶ Section 44 goes further, providing that where a company enters into a transaction that is beyond any restriction on its objects stated in its memorandum, that transaction is not void merely by reason of that restriction but takes effect as between the company and any other party.¹⁷

The combined effect of sections 35 and 44 is the effective abolition of the ultra vires doctrine as a trap for third parties. A company incorporated under CAMA 2020 with an unrestricted objects clause can do anything that a natural person of full capacity can do. A company that does choose to restrict its objects is still bound by those restrictions as between itself and its members, but those restrictions cannot be used to invalidate a transaction with an innocent third party.¹⁸

The Status Clause

The memorandum must state whether the company is to be a private or public company.¹⁹ This single declaration has significant consequences for the company’s governance regime. A private company is prohibited from inviting the public to subscribe for its shares or debentures, must restrict the transfer of its shares, and cannot have more than fifty members.²⁰ A public company may issue shares to the public, may be listed on the Nigerian Exchange Group, and must comply with the more stringent governance requirements applicable to public companies under CAMA 2020 and the Investment and Securities Act 2007.²¹

The Liability Clause

The memorandum must state whether the liability of the members is limited by shares, limited by guarantee, or unlimited.²² This is one of the most commercially significant clauses in the memorandum, because it determines the maximum exposure of each member in the event of the company’s insolvency.

For a company limited by shares, each member’s liability is limited to any amount unpaid on the shares held by that member.²³ Once shares are fully paid, the member bears no further liability, however large the company’s debts. For a company limited by guarantee, each member’s liability is limited to the amount they have undertaken to contribute upon a winding up.²⁴ For an unlimited company, the members bear unlimited personal liability for the company’s debts, though the company itself is still a distinct legal person from its members.²⁵

The Minimum Issued Share Capital Clause

For companies with share capital, the memorandum must state the amount of the minimum issued share capital with which the company proposes to be registered, and the division thereof into shares of a fixed amount.²⁶ Under section 27(2)(b) of CAMA 2020, the minimum issued share capital is not less than one hundred thousand naira (₦100,000) in the case of a private company, and not less than two million naira (₦2,000,000) in the case of a public company.²⁷

This is one of the most significant changes introduced by CAMA 2020. Under the old CAMA 1990 and 2004, the relevant concept was “authorised share capital,” meaning the maximum amount of share capital the company was authorised to issue. Under CAMA 2020, there is no authorised share capital. The relevant concept is the minimum issued share capital: the amount that must actually be issued to and paid up by the subscribers at the time of registration.²⁸ A company can no longer declare a large authorised share capital on paper while issuing only a fraction of it. All share capital must be fully issued.²⁹

The memorandum must further specify the names of the subscribers and the number of shares each subscriber has agreed to take, as well as a requirement that each subscriber with significant control disclose their PSC status and the name of any beneficiary for whom shares are held in trust.³⁰

Additional Requirements for Companies Limited by Guarantee

For companies limited by guarantee, the memorandum must contain additional provisions not required of companies limited by shares. It must state that the income and property of the company shall be applied solely towards the promotion of its objects and that no portion shall be paid to members.³¹ It must state the amount each member undertakes to contribute to the assets of the company if it is wound up while they are a member or within one year after they cease to be a member, not exceeding a specified amount, the total of which must not be less than ten thousand naira.³² This contribution undertaking is the member’s guarantee, and it is the source of the company’s name.

Alteration of the Memorandum

The memorandum is not immutable. CAMA 2020 makes provision for its alteration, though the process is more demanding than alteration of the articles.

A company may alter its objects clause by special resolution under section 51 of CAMA 2020.³³ After the resolution is passed, a copy must be delivered to the Commission for registration within fifteen days. Members holding at least fifteen percent of the nominal value of the company’s issued share capital, or debenture holders holding at least fifteen percent of the nominal value of the company’s debentures, may apply to the court to cancel the alteration within twenty-eight days of the resolution.³⁴ The court may confirm or cancel the alteration as it thinks fit.

The name of the company may be changed by special resolution, subject to the Commission’s approval of the new name.³⁵ Where the Commission requires a company to change its name, for example because it is too similar to an existing name, it may direct the company to do so by notice.³⁶

The status of the company, whether private or public, may be changed through the re-registration procedures under sections 56 to 77 of CAMA 2020.³⁷ Re-registration requires a special resolution and compliance with the conditions applicable to the new status.

Effect of the Memorandum Under Section 46

Section 46(1) of CAMA 2020 provides that subject to the provisions of the Act, the memorandum and articles of association, when registered, shall have the effect of a contract under seal between the company and its members and between the members and the company’s officers.³⁸ This means that by subscribing to the memorandum, every member agrees to be bound by its provisions and is entitled to enforce its provisions against the company and against other members.

However, the memorandum as a contract has its own peculiarities. It binds members in their capacity as members, not in any other capacity. In Hickman v Kent or Romney Marsh Sheepbreeders’ Association,³⁹ the court held that the memorandum and articles operate as a contract between members in their capacity as members. A person cannot rely on the memorandum or articles to enforce rights in a capacity other than that of member.

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CAMA 2020 Highlight: What Changed in the Memorandum Requirements

Minimum Issued Share Capital replaces Authorised Share Capital (section 27(2)(b)). This is the most significant change. Under CAMA 1990/2004, companies declared an authorised share capital on paper and were required to issue at least 25% of it. Under CAMA 2020, there is no authorised share capital. All share capital must be fully issued. Minimums are ₦100,000 (private) and ₦2,000,000 (public). Companies with unissued shares at the commencement of the Act were required by the Companies Regulations 2021 to fully issue all shares by 31 December 2022.

Objects clause no longer restricts capacity against third parties (sections 35 and 44). Under CAMA 2020, unless the memorandum specifically restricts the company’s objects, the company has unlimited capacity. Even where there is a restriction, it cannot be used to invalidate a transaction with an innocent third party. This effectively abolishes the ultra vires doctrine for third parties. Students must unlearn the old common law rule that transactions outside the objects clause were automatically void.

MEMART filing. The memorandum and articles are now filed together as a single combined document. This is a procedural change introduced through CAC practice and the Companies Regulations 2021, not a change to the substantive requirements of the memorandum.

PSC disclosure in memorandum (section 27(4)). Any subscriber who holds shares in trust for another person must disclose that fact in the memorandum along with the name of the beneficiary. This is a transparency requirement with no equivalent in the old Act, and it dovetails with the broader PSC register obligations under section 119 of CAMA 2020.

Name suffix rules unchanged. Private companies must still end with “Limited” or “Ltd,” and public companies with “PLC” or “Public Limited Company.” These rules are unchanged from the old Act.

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Footnotes

¹ J Olakunle Orojo, Company Law and Practice in Nigeria (4th edn, Mbeyi & Associates 1992) 72.

² Companies and Allied Matters Act 2020 (CAMA 2020), s 41(1).

³ Companies Regulations 2021 (CR 2021); AOC Solicitors, ‘Incorporation Documents: The Memorandum of Association and Articles of Association Under CAMA 2020 in Nigeria’ (AOC Solicitors, 2021).

⁴ CAMA 2020, s 27(1)(a).

⁵ CAMA 2020, s 29(1).

⁶ CAMA 2020, s 29(2); Infusion Lawyers, ‘Registration of a Private Company Limited by Shares in Nigeria (In Light of New CAMA 2020)’ (Infusion Lawyers, September 2020).

⁷ CAMA 2020, s 30(1)(a).

⁸ CAMA 2020, s 30(1)(b).

⁹ CAMA 2020, s 26(5).

¹⁰ CAMA 2020, s 30(2).

¹¹ CAMA 2020, s 27(1)(b).

¹² Orojo (n 1) 73.

¹³ CAMA 2020, ss 115 and 417.

¹⁴ CAMA 2020, s 27(1)(c).

¹⁵ Ashbury Railway Carriage & Iron Co Ltd v Riche (1875) LR 7 HL 653 (HL); Orojo (n 1) 75.

¹⁶ CAMA 2020, s 35(1); Kasunmu Chambers, ‘A Summary of Changes Under the New Companies and Allied Matters Act (CAMA) 2020’ (Kasunmu Chambers, 2020).

¹⁷ CAMA 2020, s 44.

¹⁸ CAMA 2020, ss 35 and 45; Wigwe and Partners, ‘What is New in the New CAMA?’ (Wigwe and Partners, August 2020).

¹⁹ CAMA 2020, s 27(1)(d).

²⁰ CAMA 2020, s 22(1) and (2).

²¹ CAMA 2020, s 24(2); Investment and Securities Act 2007.

²² CAMA 2020, s 27(1)(e).

²³ CAMA 2020, s 21(1)(a).

²⁴ CAMA 2020, s 26(1).

²⁵ CAMA 2020, s 25(1).

²⁶ CAMA 2020, s 27(2)(a).

²⁷ CAMA 2020, s 27(2)(b); Pavestones Legal, ‘CAMA 2020: Share Capital Requirements Under Nigerian Law’ (Pavestones Legal, April 2021).

²⁸ ibid; Punuka Attorneys and Solicitors, ‘Get to Know the New Companies and Allied Matters Act (CAMA) 2020’ (Punuka Attorneys, August 2020).

²⁹ CAMA 2020, s 124; Companies Regulations 2021, reg 13; Pavestones Legal (n 27).

³⁰ CAMA 2020, ss 27(3) and 27(4); s 119 (PSC obligations).

³¹ CAMA 2020, s 27(5)(a).

³² CAMA 2020, s 27(5)(b).

³³ CAMA 2020, s 51(1).

³⁴ CAMA 2020, s 51(3); AOC Solicitors (n 3).

³⁵ CAMA 2020, s 30(2).

³⁶ CAMA 2020, s 30(3).

³⁷ CAMA 2020, ss 56–77.

³⁸ CAMA 2020, s 46(1).

³⁹ Hickman v Kent or Romney Marsh Sheepbreeders’ Association [1915] 1 Ch 881 (Ch).