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 18. Right to form a company
(1) As from the commencement of this Act, any two or more persons may form and incorporate a company by complying with the requirements of this Act in respect of registration of the company.
(2) Notwithstanding subsection (1), one person may form and incorporate a private company by complying with the requirements of this Act in respect of private companies.
(3) A company may not be formed or incorporated for an unlawful purpose.
Section 19. Association and partnership of more than 20 members when permitted
(1) No association, or partnership consisting of more than 20 persons shall be formed for the purpose of carrying on any business for profit or gain by the association, or partnership, or by the individual members thereof, unless it is registered as a company under this Act, or is formed in pursuance of some other enactments in force in Nigeria.
(2) Nothing in this section shall apply to—
(a) any co-operative society registered under the provisions of any enactment in force in Nigeria ; or
(b) any partnership for the purpose of carrying on practice—
(i) as legal practitioners, by persons each of whom is a legal practitioner, or
(ii) as accountants by persons each of whom is entitled by law to practise as an accountant.
(3) If at any time the number of members of an association or partnership exceeds 20 in contravention of this section and it carries on business for more than 14 days while the contravention continues, each person who is a member of the company, association or partnership during the time it so carries on business is liable to a fine as prescribed by the Commission for every day during which the default continues.
Section 20. Capacity of individual to form company
(1) Subject to subsection (2), an individual shall not join in the formation of a company under this Act if he is—
(a) less than 18 years of age ;
(b) of unsound mind and has been so found by a court in Nigeria or elsewhere ;
(c) an undischarged bankrupt ; or
(d) disqualified under sections 281 and 283 of this Act from being a director of a company.
(2) A person shall not be disqualified under subsection (1) ( other persons not disqualified under that subsection have subscribed to the memorandum.
(3) A corporate body in liquidation shall not join in the formation of a company under this Act.
(4) Subject to the provisions of any enactment regulating the rights and capacity of aliens to undertake or participate in trade or business, an alien or a foreign company may join in forming a company.
What this means
Short answer
Any two or more people can form a company, and one person can form a private company (section 18). A company cannot be formed for an unlawful purpose. You cannot join in forming a company if you are under 18, of unsound mind, an undischarged bankrupt or disqualified from being a director (section 20).
Who may form a company
Section 18(1) says any two or more persons may form and incorporate a company by meeting the registration requirements of the Act. Section 18(2) adds that one person may form and incorporate a private company by meeting the requirements for private companies. Under section 18(3), a company may not be formed or incorporated for an unlawful purpose.
When a group of more than 20 must register
Section 19 says no association or partnership of more than 20 persons may be formed to carry on business for profit unless it is registered as a company or formed under another enactment in force in Nigeria. Co-operative societies are outside the rule, and so are partnerships of legal practitioners, or of accountants entitled by law to practise, where every partner is qualified. If an association or partnership goes above 20 members and carries on business for more than 14 days, each member is liable to a fine, set by the Commission, for every day the default continues.
Who cannot join in forming a company
Section 20(1) says an individual cannot join in forming a company if he is:
- under 18 years of age;
- of unsound mind and so found by a court in Nigeria or elsewhere;
- an undischarged bankrupt; or
- disqualified from being a director under sections 281 and 283.
There is a safeguard for the first case. A person under 18 is not barred if two other people who are not disqualified have also subscribed to the memorandum (section 20(2)). A corporate body in liquidation cannot join in forming a company (section 20(3)).
Foreign founders
An alien or a foreign company may join in forming a company, subject to any enactment regulating the rights and capacity of aliens to undertake or take part in trade or business (section 20(4)).
Choosing the type of company
Once you know who the founders are, choose the type. A company may be limited by shares, limited by guarantee, or unlimited, and any of these may be private or public (section 21). See the guide on minimum share capital for the figures that follow from that choice.
Questions and answers
Can one person form a company in Nigeria?
Yes, a private company. Section 18(2) allows one person to form and incorporate a private company.
Can a person under 18 be a founder?
Not on their own. Section 20(1) bars an individual under 18, but section 20(2) says he is not disqualified if two other people who are not disqualified have subscribed to the memorandum.
Can a foreigner form a company in Nigeria?
An alien or foreign company may join in forming a company, subject to any enactment regulating the rights and capacity of aliens to take part in trade or business (section 20(4)).
Must a partnership of more than 20 people register as a company?
Generally yes, if it carries on business for profit, unless it is formed under another enactment. Co-operative societies and partnerships of legal practitioners or accountants are excepted (section 19).
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