The sections, word for word
Every section on this subject, exactly as printed in the Official Gazette (Act No. 3 of 2020). The explanation follows beneath.
Section 43. Powers of companies and prohibition of donations for political purpose
(1) Except to the extent that the company’s memorandum or any enactment otherwise provides, every company shall, for the furtherance of its business or objects, have all the powers of a natural person of full capacity.
(2) A company shall not have or exercise power either directly or indirectly to make a donation or gift of any of its property or funds to a political party or political association, or for any political purpose, and if any company, in breach of this subsection makes any donation or gift of its property to a political party or political association, or for any political purpose, the officers in default and any member who voted for the breach shall be jointly and severally liable to refund to the company the sum or value of the donation or gift and in addition, every such officer or member commits an offence and is liable to a fine equal to the amount or value of the donation or gift.
Section 44. Effect of ultra vires acts
(1) A company shall not, carry on any business expressly prohibited by its memorandum and shall not exceed the powers conferred upon it by its memorandum or this Act.
(2) A breach of subsection (1), may be asserted in any proceeding under sections 344-358 of this Act or under subsection (4) of this section.
(3) Notwithstanding the provisions of subsection (1), no act of a company, conveyance or transfer of property to or by a company shall be invalid by reason of the fact that such act, conveyance or transfer was not done or made for the furtherance of any of the authorised business of the company or that the company was otherwise exceeding its objects or powers.
(4) On the application of—
(a) any member of the company, or
(b) the holder of any debenture secured by a floating charge over all or any of the company’s property or by the trustee of the holders of any such debentures, the Court may prohibit, by injunction, the doing of, any act, conveyance or transfer of any property in breach of subsection (1).
(5) If the transactions sought to be prohibited in any proceeding under subsection (4) are being, or are to be performed or made pursuant to any contract to which the company is a party, the Court may, if it deems the same to be equitable and if all the parties to the contract are parties to the proceedings, set aside and prohibit the performance of such contract, and may allow compensation to the company or to the other parties to the contract for any loss or damage sustained by them by reason of the setting aside or prohibition of the performance of such contract but no compensation shall be allowed for loss of anticipated profits to be derived from the performance of such contract.
Section 45. Effect of reliance on restrictions in the memorandum
(1) Where there is provision in the memorandum of association of a company restricting the powers and capacity of the company to carry on its authorised business or object, the restriction may be relied on and have effect only for the purpose of proceedings—
(a) against the company by a director or member of the company, or where the company has issued debentures secured by a floating charge over all or any of the company’s property, by the holder of any of the debentures or the trustee for the holders of the debentures ;
(b) by the company or a member of the company against the present or former officers of the company for failure to observe any such restriction ;
(c) by the Commission or a member of the company to wind up the company ; or
(d) for the purpose of restraining the company or other person from acting in breach of the memorandum or directing the company or such person to comply with the same.
(2) A person may not in the proceedings referred to in subsection (1) ( (b) or (c), rely on a restriction of the power or capacity of the company contained in the memorandum in any case where he voted in favour of, or expressly or by conduct agreed to the doing of an act by the company or the conveyance by or to the company of property which, it is alleged in the proceedings, was or would be contrary to the restriction.
Section 46. Effect of memorandum and articles
(1) Subject to the provisions of this Act, the memorandum and articles, when registered, shall have the effect of a deed between the company and its members and officers and between the members and officers themselves whereby they agree to observe and perform the provisions of the memorandum and articles, as altered in so far as they relate to the company, its members, or officers.
(2) All money payable by any member to the company under the memorandum or articles shall be a debt due from him to the company and shall be of the nature of a specialty debt.
(3) Where the memorandum or articles empower any person to appoint or remove any director or other officer of the company, such power shall be enforceable by that person notwithstanding that he is not a member or officer of the company.
(4) In any action by any member or officer to enforce any obligation owed under the memorandum or articles to him and any other member or officer, such member or officer may, if any other member or officer is affected by the alleged breach of such obligation, with his consent, sue in a representative capacity on behalf of himself and all other members or officers who may be affected other than any who is a defendant and the provisions of Chapter 13 of this Act shall apply.
Section 47. Member’s right to copies of memorandum, etc.
(1) A company shall, on being so required by any member, send to him a copy of the memorandum and articles, and a copy of any enactment which alters the memorandum, subject to payment, in the case of a copy of the memorandum and of the articles, of the cost of producing the said documents (such cost not to exceed N500 or such other amount that the Commission may prescribe) or such lesser sum as the company may prescribe and, in the case of a copy of an enactment, of such sum not exceeding the published price thereof as the company may require.
(2) If a company defaults in complying with this section, the company and every officer of the company who is in default is liable to such penalty as the Commission shall prescribe by regulation.
Section 48. Copies of memorandum issued to embody alterations
(1) Where an alteration is made in the memorandum of a company, every copy of the memorandum issued after the date of the alteration shall be in accordance with the alteration.
(2) Where any such alteration has been made, the company at any time after the date of the alteration issues any copy of the memorandum which is not in accordance with the alteration, it shall be liable to such penalty as the Commission shall prescribe by regulation for each copy so issued, and every officer of the company who is in default is liable to the like penalty.
What this means
Short answer
A company has all the powers of a natural person of full capacity unless its memorandum or an enactment says otherwise (section 43(1)), but it may not donate to a political party or for a political purpose (section 43(2)). An act is not invalid merely because it went beyond the company’s objects (section 44(3)).
The company’s powers
Under section 43(1), a company has, for the furtherance of its business or objects, all the powers of a natural person of full capacity, except to the extent its memorandum or an enactment provides otherwise.
No political donations
Section 43(2) says a company has no power, directly or indirectly, to give any of its property or funds to a political party or political association, or for any political purpose. If it does, the officers in default and any member who voted for the breach are jointly and severally liable to refund the sum or value to the company. Each of them also commits an offence and is liable to a fine equal to the amount or value of the donation.
Acts beyond the company’s powers
A company must not carry on business that its memorandum expressly prohibits, or exceed the powers the memorandum or the Act gives it (section 44(1)). But no act of the company, and no conveyance or transfer of property to or by it, is invalid because it was not done to further the authorised business or because the company exceeded its objects or powers (section 44(3)).
- A member, or the holder (or trustee for the holders) of debentures secured by a floating charge, can ask the court for an injunction to stop an act in breach of section 44(1) (section 44(4)).
- If the act is being done under a contract and all its parties are before the court, the court can set the contract aside if that is equitable, and can award compensation for loss, but not for lost anticipated profits (section 44(5)).
Relying on restrictions in the memorandum
A restriction in the memorandum on the company’s powers can be relied on only in limited proceedings: against the company by a director, member or floating-charge debenture holder; by the company or a member against present or former officers for failing to observe it; by the Commission or a member to wind up the company; and to restrain a breach of the memorandum. A person who voted for, or agreed by words or conduct to, the act complained of cannot rely on the restriction in the first three kinds of proceedings (section 45).
The memorandum and articles as a contract
Once registered, the memorandum and articles have the effect of a deed between the company and its members and officers, and among the members and officers themselves, binding each to observe them (section 46(1)). Money a member owes under them is a debt due to the company (section 46(2)). A person who is not a member or officer but has a power under them to appoint or remove a director can enforce that power (section 46(3)). A member or officer enforcing an obligation can, with the consent of others affected, sue on behalf of all of them (section 46(4)).
Getting copies of the memorandum and articles
A company must send a member a copy of its memorandum and articles when he asks, on payment of the cost of producing them, which cannot exceed ₦500 or another amount the Commission prescribes. It can charge less (section 47). Every copy issued after an alteration must reflect it, and a company that issues a copy that does not is liable to a penalty set by the Commission for each copy (section 48).
Questions and answers
Can a company make political donations?
No. Section 43(2) denies the power. Officers in default and any member who voted for it must refund the amount and face a fine equal to it.
Is a contract void if it goes beyond the company’s objects?
No. Section 44(3) says no act, conveyance or transfer is invalid for that reason, although a member or floating-charge debenture holder can ask the court for an injunction beforehand (section 44(4)).
Can a member get a copy of the memorandum and articles?
Yes, on request. The charge cannot exceed ₦500 or another amount the Commission prescribes (section 47).
What is the legal effect of the memorandum and articles?
Once registered they have the effect of a deed between the company and its members and officers, and among the members and officers themselves (section 46(1)).
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