The Corporate form of ownership consists of an association of business persons who have invested their money in a profit making business and are known as stock holders. The association is a peculiar one, in that, it is legally an artificial being since it may own property, enter into contracts, be liable for debts, sue and be sued, and conduct day-to-day
business. A distinguishing feature of the corporation is that each stockholders liability to the company’s debt is limited to the extent of their investment in the company. Thus, corporations are known as limited liability companies act of 1968, and must be incorporated in Nigeria
Public company is normally formed to enable the investing public to share in the profits of an enterprise without taking part in the management, it is characterized by the following:
(1) The minimum number of members is seven, while there is no
(2) Free transfer of shares among the investing public via the stock exchange
(3) Issuance of a prospectus to the public to subscribe for shares in the company,
(4) Making public the audited annual report of accounts of the maximum company
Laws of incorporation require that stockholders elect a board of directors (who preside over all policy for running affairs of the corporation) and that records of the company are maintained at a designated location.
Limited liability companies are created by application to the registrar of companies, federal Ministry of Commerce and Industry, Abuja, by filling the necessary forms for incorporation and registration and by paving the appropriate fees. As specified in the companies Act of 1968, the major documents required for incorporation are the memorandum of association which specifies the terms under which the company will continue to exist as corporate entity it contain such information as the:-
(a) Name of the company with limited as the last word to inform the public that it is a limited liability company,
(b) Location of the registered office,
(c) Goal or objects of the company, and
(d) Procedure for altering the memorandum.
The Articles of Association direct the internal functions of the company and contain such information as:
(a) Condition for issuing and transferring shares
(b) Power and responsibilities of the board of directors, and
(c) Methods of auditing company’s accounts
The prospectus gives pertinent information about the company for the guidance of the investing public After all the legal requirements and documentation have been provided, a certificate of incorporation is signed by the registrar of companies and issued to the company. It is required to be display at the company’s headquarters.
A private company is formed to enable private operators to carry on a business which they control and whose profit they share even though the business has been personified by incorporation and its liability has been separated from that of its members. In addition to meeting the general requirements expected for incorporation, the law requires that to qualify as a private company in Nigeria, a company must also meet the following conditions.
(1) The number of member must not be less than two nor exceed fifty
(2) It must not sell its shares to the members of .the public.
(3) Members must not transfer their shares to others without the consent of the other shareholders
The private company is particularly popular among serious businessmen because even a family business that could have been run as (since the minimum number of members is two) enjoys limited liability and other advantages of Incorporation
Advantages of Corporation
Various advantages accrue to the cooperate form of ownership
(1) Public companies especially have the ability to accumulate substantial capital many corporations have accumulated vast amounts of money for investment into assets through the sale of shares of stock and bond.(debt).
(2) The length of life of the corporation is usually to perpetuity.
(3) It is relatively easy to transfer ownership of share of sock which disturbing the business of the corporation
(4) The corporation has limited liability, that is, the stockholders only liability is the value of his stock exceptions to this general rule apply if a stockholder is also an officer of the corporation and is guilty of fraud or negligence
(5) Many Nigeria businessmen incorporate the business in order to take advantage of certain favourable government economic policy measures that are not available to other forms of business ownership for example, a business enjoys higher foreign exchange travelling allowance as a managing director of an incorporated firm, than if he operates, as a sole proprietor
Disadvantages of Corporation
These include the following:
(1) A corporation requires greater time and money to be set up than other forms of business legal fees, registration fees, government official’s bureaucratic delays, etc
(2) Most stockholders in public companies can exert little, if any, control over the corporation,
(3) There is a wide range of legal restrictions building constructions, In addition individuals management, the corporation are subject to law in terms of their conduct in operating the corporation
Federal or state government may, through special status or acts of the legislature, establish wholly government owned companies which are known as statutory corporations, A Statutory corporation is thus a legal entity it has a board of directors appointed by the owner government and operates in essentially the same way as a limited liability company, It is usually described as a public owned enterprise and here ‘public’ means the general citizenry as represented by the government, no shares of stock are sold to the public, examples of statutory corporations are Nigerian Airways, the Nigerian Coal Corporation, Nigerian Telecommunication, National Electric Power Authority, Nigerian Water Corporation and the Nigerian Railway Corporation, Statutory corporations are usually established to operate in areas of economic activity which are of strategic national importance and/or involve heavy capital investment, private investors are therefore either excluded by deliberate national policy one unable to mobilise the capital even if they are free to operate. As a result, government companies tend to operate as monopolies but, unfortunately, monopoly profits seem always out of their reach as they depend in many cases on government subventions.
Some of these corporations are becoming inefficient in the discharge of their responsibilities to the citizenry and are also marred with mismanagement and fraud by their executives. Effort are however, being made by the present government to break the monopolies of some of these corporations e g Nigerian Airway, Nigerian Electric Power Authority (NEPA), and Nigerian Telecommunication Services by privatizing and commercializing some of them so as to make them more efficient.