Nigeria’s business and economic landscape Is dynamic, and companies can take various forms, including private and public entities.
Understanding these categories before registration is very vital, because each of these corporate structures comes with its unique characteristics, advantages, and challenges.
In this blog post, we shall be discussing in an elaborate way, the distinction between a public limited company and a private limited company in Nigeria.
we hope that by the end of the article, you would have been able to find the difference between public limited companies and private limited companies in Nigeria.
The provisions of Cama 2020 shall aid us in this respect. the provisions of cama 2020, did highlight the key difference between the two categories of company in Nigeria.
At the end of this post, we hope to educate the entrepreneurs, investors, business strategists on making informed decisions about the corporate structure a business should take.
we are not here to bother you with the sections of cama 2020, however we can extract some sections.
in sections 21 of Cama 2020, it says that private company is a company that the memorandum and articles of association says to be private company. the same scenario is witnessed in section 24 of cama 2020, as the ACT goes ahead to define a public company, to mean a company that the memorandum and articles of association says to be public company..
we can now see that the definition of the two categories of company is found in cama 2020, and while we have noted the definition, the distinction between the two is found by going through their memorandum of association, where the memo of association of a company says it is public, the commission will treat it as such.
1.MEMORANDUM OF ASSOCIATION OF COMPANY: Under section 27(1) of CAMA 2020, it states that the memorandum of association of company shall state that the following:—
(a) the name of the company ;
(b) that the registered office of the company shall be situated in
(c) the nature of the business or businesses which the company is
authorized to carry on, or, if the company is not formed for the purpose of
carrying on business, the nature of the object or objects for which it is
(d) the restriction, if any, on the powers of the company ;
(e) that the company is a private or public company, as the case may
(f ) that the liability of its members is limited by shares, by guarantee or
unlimited, as the case may be.
(2) If the company has a share capital—
(a) the memorandum of association shall also state the amount of the
minimum issued share capital which shall not be less than N100,000.00 in
the case of a private company and N2,000,000.00, in the case of a public
company, with which the company proposes to be registered, and the division.
thereof into shares of a fixed amount; and
2.MINIMUM AND MAXIMUM NUMBER OF MEMBER– Under the provisions of cama 2020, we now see that one person can register a company and own all the shares in it, the provision of cama restricts the number of private limited company to only fifty persons as members, while public limited companies has no such retirctions.
3.APPOINTMENT OF COMPANY SECRETARY– Under cama 2020, we glean that it is a major requirement for a public limited company to have a company secretary, a person designated as company secretary must meet the requirements of cama 2020, before being appointed so, whereas a private limited company does not have to, and at such it is not a requirement. persons capable of being appointed as company secretaries are lawyers.
4. NAME ENDS WITH SUFFIX LTD ,AND PLC.: We also noted that under the provisions of cama 2020, names of private limited companies must end with the suffix “LTD” While aa Public limited company must end with the suffix “PLC”.
5.RESTRICTION ON TRANSFER OF SHARES: A public limited company does not have any restriction on the transfer of its shares under the provisions of cama 2020, while in a private limited company, there is generally rule restricting the transfer of its shares, except the memo of associations states otherwise.
6.UNLIMITED NUMBER OF INVESTORS AND SHAREHOLDERS: A public limited company has the right platform to carry a lot of investors, and shareholders on it, both local and foreign , this feature is missing in a private limited company, whereas a public limited company can list ,and sell its shares on the floor of Nigerian stock exchange , a private company is restricted from having more than fifty members, whereas a public limited company needs to have more than fifty one members as public shareholders in most categories. check out the other requirements to list on Nigerian stock exchange here.
7.MINIMUM OF THREE INDEPENDENT DIRECTORS: Under the provisions of Cama 2020,it is mandatory to appoint at least three independent directors in a public company, an independent director is a person whose relative either separately or together with him during the two years before the time of registration of the company or during the lifetime in question was not an employee of the company, did not receive payment from the company of more than N20,000,000 (Twenty Million Naira) or own more than 30% shares or other ownership interest directly or indirectly in equity made or received from the company. this requirement is n0ot needed in a private limited company.
8.FUND RAISING : A public limited company can raise funds from the public by offering its shares and or through debentures, this is usually not a feature for a private limited company. private limited companies cannot raise funds through public share offering or debenture holding. the initial public offering and other funds raised by a public limited companies are usually lacking under a private limited company.
9. MINIMUM SHARE CAPITAL: The minimum share capital for a private limited company is one hundred thousand Naira (N100,000) while a public limited company minimum share capital is two million naira (2,000,000), note that minimum share capital is different from an authorized share capital of a company.
10. STATUTORY MEETING WITHIN SIX MONTHS OF INCORPORATION OF COMPANY: A private company does not have the mandatory requirement to hold its statutory meeting within its first six months of incorporation, but this is a major requirement for a public limited company under the provisions of Cama 2020. we wish to state that such meeting must be well published in a national newspaper and all the shareholders must be put on notice and invited to such meeting.
These differences we highlighted above should act as a guide in deciding which type of business entity to form or incorporate in Nigeria. However, it is noteworthy to state that you can start your company in little way and grow it to the status you want. the success of your company depends on your network and business strategy..