CHAPTER ONE

GENERAL INTRODUCTION

1.1 Introduction

The Corporate Affairs Commission hereinafter referred to as “the

Commission” or CAC for short, is one of the major regulatory bodies of companies in

Nigeria. The body is a creation that came into being by virtue of the Companies and

Allied Matters Act (hereinafter referred to as CAMA) Cap 50, Laws of the

Federation of Nigeria, now Cap C20 of the Laws of the Federation, 2004.

Principally, the Commission is one of the innovations of CAMA that gives the

Commission the responsibility of incorporation of companies, registration of Business

Names, Incorporation of Trustee of certain committees, bodies, associations and other

regulations. CAMA also introduced Corporate audit Committee, insider trading,

codified the duties of directors, the fundamental principles emanated in the rules of

Fossal Foss V Harbottle, the rule in Royal British Bank V Turguard.

Before the advent of CAC, the Companies Act of 1968 was the Act that

regulated the activities of companies in Nigeria. The present CAMA was borne out of

draft documents prepared by the Nigerian Law Reform Commission in an effort to

reform and improve on the Companies Act of 1968, which could no longer address

the various challenges associated with the regulation and supervision of Companies in

Nigeria.

In the pre-oil boom era of the Nigerian Economy (1970-1979), the then

company legislation was severally criticized. “…One of the major criticism of the Act

is that, it is little more than the putting together of some Sections of the repealed

Companies Act Cap 37 and some Sections of the U.K Companies Act 1948, instead of

taking the bold step of codifying both the statutory and case law on companies…”1

The preparation of such a code would have provided the opportunity for reviewing

and modifying some of the more inconvenient common law rules.

In its Report on the reform of Nigeria Company Law 1988, the Nigerian Law

Reform Commission commentary on the above inadequacy and some others

observed that “with paucity of Nigerian cases on Company Law and the present heavy

cost of obtaining English Law reports and textbooks, that difficulty in finding the law

in this country can be well imagined…”2

As a result of these numerous problems in our company laws as hitherto

mentioned, the Nigerian Law Reform Commission was set up among other reasons

“to evolve a comprehensive body of Legal Principles and Rules governing Companies

and suitable for the circumstances of the country. These rules was to facilitate

business activities in the country and protect the interest of the investors, the public

and of the nation as a whole”3

After extensive consideration and submissions of papers by various

stakeholders, the Commission came out with a draft copy which was forwarded to the

then Attorney General of the Federation and Ministry of Justice, who set up a

Consultative Assembly wh