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CAMA MAKES IT POSSIBLE FOR PRE-INCORPORATION CONTRACT TO BE RATIFIED

Dictum

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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INCORPORATED LTD. LIABILITY COMPANY IS DISTINCT FROM HER SHAREHOLDERS/DIRECTORS

In NEW NIGERIAN NEWSPAPERS LTD. V. AGBOMABINI (2013) LPELR-20741(CA) held that: “An incorporated limited liability company is always regarded as a separate and distinct entity from its shareholders and directors. The consequence of recognizing the separate personality of a company is to draw the veil of incorporation over the company. No one is entitled to go behind the veil. This corporate shell shall however be cracked in the interest of justice” Per ABIRU, J.C.A. (Pp. 40-41, Paras. F-E).

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RATIONALE BEHIND NULLITY OF PRE-INCORPORATION CONTRACT

In Kelner v. Baxter (1866) L. R. 2 C.P. 174 Erie C.J. explaining the rationale of the principle [pre-incorporation contract] said: “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 defendant personally…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 the responsibility”.

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COMPANY’S DIRECTORS MAY DEAL WITH ASSET OUTSIDE RECEIVERSHIP

The Receivership in the instant case which does not necessarily result in the liquidation or winding up of the company, the right to deal with the assets in the receivership are revived at the termination of the receivership. In all cases the right of the directors of the Company to deal with the assets of the company not in receivership or other matters not suspended are not affected by the appointment of a Receiver/Manager over the assets of the Company. The directors of the company do not by virtue of a receivership become functus afficio for all purposes of the company.

– Karibi-whyte, JSC. Intercontractors v. National Provident (1988)

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SOME FOREIGN CASES ON LIFTING COMPANY VEIL

In Littlewoods Stores Ltd v. I.B.C. (1969)1 W.L.R. 1241 Lord Denning M.R. said: “The doctrine laid down in Salomon’s case has to be watched very carefully. It has been supposed to cast a veil over the personality of a limited liability company through which the Court cannot see. But that is not true. The Court can and often do draw aside the veil. They can and often do pull the mask. They look to see what really lies behind. The legislature has shown the way in group accounts and the rest. And the Court would follow suit.”
The English case of Jones v. Lipman (1962)1 WLR 832 exemplifies the situations in which the corporate veil will be lifted when a company is used as a mere facade concealing the true facts, which essentially means it is formed to avoid pre-existing legal obligations.

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PRE-INCORPORATION CONTRACT NOT BINDING IS A COMMON LAW RULE

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

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FOREIGN COMPANY NOT INCORPORATED IN NIGERIA CAN SUE IN NIGERIA

On this appeal, it was argued by counsel on behalf of the respondent that even though it may be a legal entity in its country of incorporation, it had no artificial personality in Nigeria since the Companies Act is silent on whether a company such as the appellant would be allowed to sue or not. That submission is misconceived. The principle of law that a foreign corporation, duly created according to the laws of a foreign state recognized by Nigeria, may sue or be sued in its corporate name in our courts is part of the common law. The suggestion that a foreign company duly incorporated outside Nigeria should first be registered in Nigeria under the provisions of the Companies Act, 1968 (which was then the applicable statute) dealing with registration of foreign companies, notwithstanding that it does not fall into the category of foreign company” as defined by that Act, is too preposterous and patently inimical to international trade to merit any prolonged or serious consideration. It suffices to say that the appellant company which was admitted by the respondent to be a limited liability company with its registered office in Copenhagen properly sued in its corporate name.

— Ayoola, JSC. Saeby v. Olaogun (1999) – SC.261/1993

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