CONVERTING YOUR PRIVATE COMPANY LIMITED BY SHARES

TO PUBLIC COMPANY LIMITED BY SHARES (LTD –PLC).

We are in a world of heavy commercial activities, the increase in population and

innovation and change in lifestyle has led to increase in the demand for supply of
goods and services and this in turn lead to the incorporation of Business-name and
Limited Liability companies (Private or public).

The form of business or entity to be adopted by one or group of people desiring to

do business and provide goods or services, shall depend on the type of business
they wish to do, the industry the business falls under and the regulations placed on
it or many other reasons which might be kept secret by the individuals.

The forms of Business entities available for business in Nigeria is regulated chiefly
by the Constitution of the Federal Republic of Nigeria, which in Second schedule,
Item 32 which provide thus “Incorporation, regulation and winding up of
bodies corporate, other than co-operative societies, local government
councils and bodies corporate established directly by any Law enacted by a
House of Assembly of a State.”

From this provision, the Company and Allied Matters Act (CAMA) was enacted
and amended in 2004, it created The Corporate Affair Commission and appointed
a Registrar General who is in charge of formation of Companies, Business-names
and Incorporated Trustees. From this, Companies and Business are chiefly used
for business as Incorporated Trustees in itself is not an entity for business
operation. The act provides for it as a vehicle for promotion of common interest
in science, sports, culture, education, social development etc. It is used by a group
of individuals with common interest to promote any of the above.

COMPANY

A company is a business entity, registered by a group of individuals, having a

common memorandum and article of association, which they subscribe to, to bind
them in the running of the affairs of the entity. It is incorporated or registered by
complying with applicable laws. Under Section 18 of the CAMA, two or more
individuals are required to incorporate a company in accordance with the legal
requirements.

Section 19(1) of the Act makes it mandatory that when a company, association,
Partnership of 20 (Twenty) persons is formed for purpose of carrying on business
for profit, that it must be incorporated as a company. It goes further to exclude
Co-operative societies registered under a law in force in Nigeria, Partnership for
purpose of carrying on business as Legal practitioners and Accountants Sec 19 (2
a&b). Sec 19 (3) goes on to criminalize and penalize an association of more than 20
persons as described in 19 (1) above.

CAPACITY OF INDIVIDUALS TO FORM A COMPANY.

According to the Act in Sec 20 (1), the following individuals can join in the
formation of a company.
a.   A person that is not less than 18 years of age; or
b.   A person must be of sound mind and must have not been found by a court
in Nigeria to be of unsound mind; or
c.   A person must not be an undischarged bankrupt person;
d.   A person must not be disqualified under section 254 of the act (Fraudulent)
The person disqualified under Section 20 (1a) “minor”, can however join in the
formation of a company, if two or more people that are qualified under the section
joins in the formation.

A company can join in the formation of a company as long as it is not going

through liquidation. Sec 20(3). Also foreigners and aliens can join in formation of a
company subject to the trade or business being such that is not restricted from
foreigners participating. Sec 20(4).

TYPES OF COMPANIES
There are various types of companies provided for by the Act. While some are
limited by shares, others are limited by guarantee and some are unlimited. Section
21(1a, b&c)

Companies limited by shares is mostly used for business as the liability of members
are limited to the amount of shares that remains unpaid for. It can be private or
public.

PRIVATE COMPANIES LIITED BY SHARES.

A private company under Section 22 of the Act, is that in which it is stated

a.   That in its Memorandum that it is Private company.
b.   That its Article restrict the transfer of its shares.
c.   That the total number of its member’s asides the employees does not exceed
50 (Fifty)
d.   That without an authorization by law, it shall not invite members of the
public to subscribe to its shares or debenture or deposit money with it for a
fixed period or payable at call, whether or not bearing interest.
e.   Multi- member shares shall be treated as a single member share.

Failure to comply with the provisions in Section 22, the private company shall
loose its privileges and exemptions as a private company and shall be treated as if it
were not a private company. This is however subject to the finding of a court that
the failure was accidental, due to inadvertence or some other sufficient cause or
such grounds as it is just and equitable to grant relief. They court may make such
others to exempt the company from such consequences of its action in Sec 23 (1).

PUBLIC COMPANY LIMITED BY SHARES

A public company is a form of company limited by shares, wherein it is stated in it

Memorandum to be a public company. Section 24 CAMA.

SIMILARITIES BETWEEN A PUBLIC COMPANY AND A PRIVATE

COMPANY

According to the Act, a public company and a private company limited by shares
are similar in the sense that they are both
a.   Liability of members is limited by share
b.   have minimum of 2 (Two) subscribers to its Memorandum and Article
c.   can transfer its shares, however there is restriction in the transfer of shares
of a private company.
d.   At least a minimum of the 25% (Twenty-Five Percent) of the company’s
share shall be allotted.

DIFFERENCES BETWEEN A PUBLIC COMPANY AND A PRIVATE

COMPANY

According to the CAMA, this are the differences between a private company and a
public company limited by shares.
a.   While the name of a private company ends in the word “Limited” Sec 29(1)
or “LTD” Sec 29(5), a public companies name ends in “Public Limited
Company” Sec 29(1) or “PLC” Sec 29 (5).
b.   While the transfer of the shares of a Private company is subject to some
restrictions Sec 22(2), that of a Public company is not restricted.
c.   While the maximum number of members of a private company aside its
employees shall not exec 50 (Fifty), that of a Public company is not
restricted to any number.
d.   While the minimum shares capital of a Private company shall not be less
that N10,000 (Ten Thousand Naira), that of a Public company shall not be
less that N500,000 (Five Hundred Thousand Naira)
e.   While the age of the director of a private company is not mandatory to be
disclosed, the age of a Director above 70 (Seventy) years of age for a public
company shall be disclosed.
f.   While there is no specification to the qualification of a person to be
appointed secretary for a private company, the Act however provides under
Sec 295 (a-e) the qualification of a person that can be a Secretary (A legal
 Practitioner, a Chartered Secretary, an Accountant that is Chartered under a
law inforce in Nigeria or a firm of any of them).
g.   A private company cannot invite the public to subscribe to its shares or
Debenture or to deposit money payable on call with or without interest,
with, while a public company can invite the public to subscribe to its shares.

REASON FOR USE OF PUBLIC COMPANY LIMITED BY SHARES

(PLC)

There are several reasons why a group of persons desiring to form themselves into
a company can choose to use a Public company limited by shares. It can be
because of government regulations or industry requirement; it can also be because
of the ability of a Private company to raise capital from the public through offer of
shares or debenture or any other instrument.

A private company limited by shares can also convert to become a public company
limited if the industry regulation changes or it desires to raise capital from the
public.
If people desiring to form a company opts for a public company, it can so be
incorporated as such.

CONVERSION OF A PRIVATE COMPANY LIMITED BY SHARE TO

A PUBLIC COMPANY LIMITED BY SHARES

The process for the conversion of a Private company to a Public company is one
which requires the services of professionals who are skilled in company law as it is
a process that requires strict compliance to the law.

The process is provided under Section 50 thus.

a.   The members of the private company desirous of converting to a Public
company shall at a meeting pass a “Special Resolution” that the company be
so re-registered, the “special resolution” shall alter the company’s
memorandum to state that is a Public company, it shall also make such
alterations to the memorandum and article as to bring it to conformity with
provisions of Section 27, 28 and 29 of the CAMA.
b.   Application is then made, accompanying the Special resolution in the
prescribed form, signed by a director and a secretary of the company,
attaching a copy or copies of memorandum and article of the company to
reflect the resolution, a copy of a written statement by the director and
secretary certified on oath that the paid up share capital as at the date of the
application is not less than 25percent of the authorised share capital, a copy
of the company’s balance sheet on the date of the resolution or six months
preceding it, whichever is later, a statutory declaration in the prescribed
form by a director and secretary of the company, stating that the special
 resolution required has been duly passed and that the company’s net assets
are not less than the aggregate of the paid up share capital and un-
distributable shares and a copy of prospectus or statement in lieu of
prospectus delivered to the Securities and Exchange commission within the
preceding year.

With the above application made, the Corporate Affairs Commission shall re-
register the company as a Public company and it shall become one. Notice should
also be taken that for the company to be able raise capital from the public, that is
shall comply with the provisions of the Securities and Exchange Commission and
any other requirement precedent to be listed on the stock market.

Kingsley Okoyefi Esq.

Kingsleyokoyef@yahoo.com
08061269003