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OBJECT CLAUSES OF A COMPANY IN ITS MEMORANDUM OF ASSOCIATION

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The object clauses are no more than a list of the objects the company may lawfully carry out. They are certainly not objects that the company must execute. It is fairly common knowledge that most companies in drawing up the objects clauses of the memorandum of association cover a spectrum far wider than what they can accomplish immediately. It seems to me that the inclusion of the terms of the preincorporation agreement in the memorandum of association of a company is an indication of a strong desire by the contracting shareholders that the proposed company after its incorporation should execute the terms of the agreement so included. This can be taken together with the acts of the company after incorporation in determining whether a new contract has come into existence.

— Nnamani, JSC. Edokpolo v. Sem-Edo & Ors. (1984) – SC.89/1983

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SOME FOREIGN CASES ON LIFTING COMPANY VEIL

In Littlewoods Stores Ltd v. I.B.C. (1969)1 W.L.R. 1241 Lord Denning M.R. said: “The doctrine laid down in Salomon’s case has to be watched very carefully. It has been supposed to cast a veil over the personality of a limited liability company through which the Court cannot see. But that is not true. The Court can and often do draw aside the veil. They can and often do pull the mask. They look to see what really lies behind. The legislature has shown the way in group accounts and the rest. And the Court would follow suit.”
The English case of Jones v. Lipman (1962)1 WLR 832 exemplifies the situations in which the corporate veil will be lifted when a company is used as a mere facade concealing the true facts, which essentially means it is formed to avoid pre-existing legal obligations.

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WHO MAY SUE FOR INJURIES DONE TO THE COMPANY

Jenkins, L.J. in Edwards Vs Halliwell (1950) 2 ALL ER 1084 @ 1066, where His Lordship held inter alia: “The rule in Foss Vs Harbottle, as I understand it, comes to no more than this. First, the proper plaintiff in an action in respect of a wrong alleged to be done to a company or association of persons is prima facie the company or the association of persons itself. Secondly, where the alleged wrong is a transaction which might be made binding on the company or association and or all its members by a simple majority of the members, no individual member of the company is allowed to maintain an action in respect of that matter for the simple reason that if a mere majority of the company or association is in favour of what has been done, then cadit quaestio. Thus, the company or association is the proper plaintiff in all actions in respect of injuries done to it. No individual will be allowed to bring actions in respect of acts done to the company which could be ratified by a simple majority of its members. Hence the rule does not apply where the act complained of was ultra vires the company, or illegal or constituted a fraud on the minority and the wrongdoers are in the majority and in control of the company.”

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IN RECEIVERSHIP COMPANY DOES NOT LOSE ITS LEGAL PERSONALITY

It is important to appreciate the fact that the company neither loses its legal personality nor its title to the goods in the receivership.

– Karibi-whyte, JSC. Intercontractors v. National Provident (1988)

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NON-REGISTRATION OF COMPANY CHARGES VOIDS IT

The effect of non-compliance with the provisions of section 94 is quite grave. Non-registration at the Companies Registry of charges created by the company, as opposed to existing charges acquired by the company, destroys the validity of the charge. Unless the prescribed particulars are delivered to the Registrar within 30 days of the creation of the charge, it will, so far as any security on the company’s assets is conferred thereby, “be void against the liquidator and any creditor of the company”. But this is “without prejudice to any contract or obligation for repayment of the money thereby secured, and when a charge becomes void under this section the money secured thereby shall immediately become payable”.

– Augie JSC. Bank v. TEE (2003)

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A COMPANY’S LEGAL PERSONALITY DIES AT THE DEATH OF THE COMPANY

A company is a legal person with legal capacity to sue or be sued. That legal personality and capacity continues until the company dies a legal death in the process, and as a result of winding up and dissolution.

– Oputa, JSC. Intercontractors v. National Provident (1988)

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COMPANY WILL NOT BE USE AS AN INSTRUMENT OF FRAUD

It must be stated unequivocally that this court, as the last court of the land, will not allow a party to use its company as a cover to dupe, cheat and or defraud an innocent citizen who entered into lawful contract with the company, only to be confronted, with the defence of the company’s legal entity as distinct from its directors. Most companies in this country are owned and managed solely by an individual, while registering the members of his family as the share holders. Such companies are nothing more than one-man-business; hence, the tendency is there to enter into contract in such company name and later turn around to claim that he was not a party to the agreement since the company is a legal entity.

– MUNTAKA-COMASSIE JSC. Alade v. Alic (2010)

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