CHAPTER ONE:

GENERAL INTRODUCTION

1.1       BACKGROUND OF THE STUDY

The Nigerian economy has passed through a series of phases in its history from

the pre and post-colonial stages of boom, recession and depression at various times over

the years to present day. At each of these stages, the various sectors of Nigerian

economy have had to contend with whatever situation or stage, the over-all national

economy might be at that given point in time.

During periods of boom, an economy experiences buoyancy, and citizens have

high standard of living and an era of merriment while during recession or depression,

the situation changes as most sectors of the economy experience a decline and, the

populace, a lowering of the standard of living.

What this means, both, for the private and public business sectors of the

economy, is adjustment and re-adjustment to match the situation. Business operation

and strategies change according to the dictates and tempo of the economy. Both short

and long term objectives of business are reappraised and re-designed in accordance

with any given situation.

The word ‘company’ has been defined by various writers and judicial

authorities. However, all make a references to group, economic or business interests.

Webster’s Dictionary1 describes a ‘company’ as:

a number of people united in an industrial or commercial enterprise, for example a firm of partners.

15

According to Collin’s Dictionary2,

a company is a group of people organized to buy or sell or provide service which has been legally incorporated and so is a legal entity from its individual members.

A ‘company’ according to Osborn’s Concise Law Dictionary3, means

an association of persons formed for the purpose of some business or undertaking carried on in the name of the association, each member having the right of assigning his shares to any other person, subject to the regulation of the company.                                 Companies are either incorporated or unincorporated. An incorporated company is an entity distinct from its members. Companies are incorporated either: (1) by Charter; (2) by Special Act of Parliament; or (3) by registration under one of the public general Acts relating to companies.

In the case of Smith v. Anderson4, the learned Judge, Pace James L.J said that

‘company’ is the result of an arrangement by which parties intend to form a partnership

which is constantly changing,… and with the intention that so far as the partners can by

agreement between themselves bring about such a result, the new partners shall succeed

to the assets and liabilities of the old partnership.

Davies5 states, that, the term is used for people generally associated for

economic purposes, even though not in all cases.

It is statutorily defined in section 567(1) of Companies and Allied Matters Act

20046 as ‘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”.     A company is a legal entity formed for

the purpose of conducting business that is separated from its owners, the shareholders.

In Salomon v. Salomon & Co. Ltd7, Lord McNaghten, held that the company is at

law a different person from the subscribers.

Aniagolu JSC, in the case of Trenco (Nig) Limited v. African Real Estate

Limited8, states inter alia, that, though a company is a legal entity and has an

16

independent legal personality, it is of course, an artificial person or entity and