All that has now changed in this country for section 72(1) of CAMA makes it possible for a pre-incorporation contract to be ratified by a company after its incorporation and thereby becoming bound by it and entitled to the benefit thereof. There seems to be no dispute in this appeal about this conclusion.
— Ogundare, JSC. Societe Favouriser v. Societe Generale (1997) – SC.126/1994
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The rule that the company is not bound by a pre-incorporation contract purportedly made by it on its behalf, even if ratified by it after incorporation, is a rule of common law and not a statutory provision.
— Ogundare, JSC. Societe Favouriser v. Societe Generale (1997) – SC.126/1994
The effect of non-compliance with the provisions of section 94 is quite grave. Non-registration at the Companies Registry of charges created by the company, as opposed to existing charges acquired by the company, destroys the validity of the charge. Unless the prescribed particulars are delivered to the Registrar within 30 days of the creation of the charge, it will, so far as any security on the company’s assets is conferred thereby, “be void against the liquidator and any creditor of the company”. But this is “without prejudice to any contract or obligation for repayment of the money thereby secured, and when a charge becomes void under this section the money secured thereby shall immediately become payable”.
– Augie JSC. Bank v. TEE (2003)
The intention of the legislature in enacting sections 72(i), 624(i), and 626 of CAMA is quite clear. It is relevant to re-emphasis that the rule of construction of statute is to adhere to the ordinary meaning of the words used according to the intent of the legislature. The provisions of sections 624(1) and 626 make it abundantly clear that existing companies who wish to ratify pre-incorporation contract agreements could do so because the Act (CAMA) applied to them. In section 650(i), the interpretation of words used in part A of CAMA, “Company or existing company means: a company formed and registered under this Act or, as the case may be, formed and registered in Nigeria before and in existence on the commencement of this Act”.
— U. Mohammed, JSC. Societe Favouriser v. Societe Generale (1997) – SC.126/1994
Jenkins, L.J. in Edwards Vs Halliwell (1950) 2 ALL ER 1084 @ 1066, where His Lordship held inter alia: “The rule in Foss Vs Harbottle, as I understand it, comes to no more than this. First, the proper plaintiff in an action in respect of a wrong alleged to be done to a company or association of persons is prima facie the company or the association of persons itself. Secondly, where the alleged wrong is a transaction which might be made binding on the company or association and or all its members by a simple majority of the members, no individual member of the company is allowed to maintain an action in respect of that matter for the simple reason that if a mere majority of the company or association is in favour of what has been done, then cadit quaestio. Thus, the company or association is the proper plaintiff in all actions in respect of injuries done to it. No individual will be allowed to bring actions in respect of acts done to the company which could be ratified by a simple majority of its members. Hence the rule does not apply where the act complained of was ultra vires the company, or illegal or constituted a fraud on the minority and the wrongdoers are in the majority and in control of the company.”
The object clauses are no more than a list of the objects the company may lawfully carry out. They are certainly not objects that the company must execute. It is fairly common knowledge that most companies in drawing up the objects clauses of the memorandum of association cover a spectrum far wider than what they can accomplish immediately. It seems to me that the inclusion of the terms of the preincorporation agreement in the memorandum of association of a company is an indication of a strong desire by the contracting shareholders that the proposed company after its incorporation should execute the terms of the agreement so included. This can be taken together with the acts of the company after incorporation in determining whether a new contract has come into existence.
— Nnamani, JSC. Edokpolo v. Sem-Edo & Ors. (1984) – SC.89/1983
At common law a company before its incorporation has no capacity to contract. Consequently, nobody can contract for it as Agent nor can a pre-incorporation contract be ratified by the company after its incorporation -Transbridge Co. Ltd. v. Survey International Co. Ltd. (1986) 17 NSCC 1084; (1986) 4 NWLR (Pt. 37) 576; Edokpolo & Co. Ltd. v. Sem-EdoWire Industries Ltd. & Ors. (1984) 7 SC 119; Sparks Electrics (Nig.) Ltd. v. Ponmile (1986) 2 NWLR 579; Enahoro v.I.B.WA. Ltd. (1971) 1 NCLR 180; Kelner v. Baxter (1867) LR 2CP 174; Natal Land and Colonisation Co. v. Pauline Syndicate (1904) AC 120. The rationale for this rule was stated at page 183 of the report by Erle, C.J. in Kelner v. Baxter in these words: “………………….as there was no company in existence at the time, the agreement would be wholly inoperative unless it were held to be binding on the defendants personally. The cases referred to in the course of the argument fully bear out the proposition that, where a contract is signed by one who professes to be signing ‘as agent’, but who has no principal existing at the time, and the contract would be altogether inoperative unless binding upon the person who signed it, he is bound thereby: and a stranger cannot by a subsequent ratification relieve him from that responsibility. When the company came afterwards into existence it was a totally new creature, having rights and obligations from that time, but no rights or obligations by reason of anything which might have been done before.” The company can, however, after its incorporation, enter into a new contract to put into effect the terms of the pre-incorporation contract – Touche v. Metropolitan Railway Warehousing Co. (1871) 6 Ch. App 671; Howard v. Patent Ivory Manufacturing Co. (1888) 38 Ch D 156.
— Ogundare, JSC. Societe Favouriser v. Societe Generale (1997) – SC.126/1994
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