FEATURES OF PRIVATE LIMITED LIABILITY COMPANY IN NIGERIA
company limited by shares is a legally separate business entity. It has an
authorized shareholding which defines the shareholding liability. This means
that the directors and shareholders of the company have limited liability in
Most often times many that want to register their business with the Corporate Affairs Commission (CAC) are confused on the option to register between a business name and private limited liability company.
The difference between a business name and a private limited liability company is that a business name is registered, owned and operated by an individual(s) only. There is no separate legal entity like the private company and such an individual is legally liable for all losses accrued to the business.
Features of a private limited company
private limited liability company is one incorporated with the CAC as one. It
is a company limited by shares, which its shares not offered to the general
incorporate a company limited by shares in Nigeria, the minimum number of 2
members are required and a maximum of 50 members.
private limited liability company must be composed of a minimum of 2 directors.
liability of each member or shareholder is limited in accordance of the share
accrued to each shareholder.
private company enjoys perpetual succession. The company exists in the eyes of
the law in the event of death and insolvency except there is a decision to wind
up the company.
private company restricts the right of its members to transfer shares and does
not send the invitation to the public for subscription of its shares.
are several advantages of operating a private company limited by shares from a
business name in Nigeria, a few of which are illustrated below:
private limited company is a separate legal entity and it is a separate person
in the eyes of the law.
are laws that govern the internal affairs and contain the objectives of a
private company limited by shares, which is enshrined in the articles of
association of the company. Unlike the business name which has no laws guiding
its activities, all decisions are taken the by proprietor(s) of the business.
private company is a legal entity that can sue and be sued in its name. This
means that the company is held separately for any wrongdoing. Any legal action
is filed against the company and not its directors.
private company uses the word Limited (LTD) after the name of the company,
which is mandatory for all private companies to use.
private company has the advantage of giving the opportunity to an investor who
does not wish to be actively involved in the running of the business to invest
capital into the business.
a business name whose powers and functions are performed by an individual, a
private company limited by shares has checks and balances. Hence, the control
of a company is in the hands of the board of directors or by shareholders in
their shareholding capacity.
great advantage is that for a business name, upon the demise of the sole
proprietor or proprietors, the business dies and ceases to exist. But for a
private company limited by shares, the company enjoys perpetuity and can
outlive the directors upon their death.
conclusion, a private company limited by shares must be incorporated with the
CAC in accordance with the Companies and Allied Matters Act LFN 2004. If any
private limited company deviates from any of the above-mentioned features, it
ceases to be a private limited liability company.
By Corporate & Commercial Law Department at Resolution Law Firm