Business Formation And Types Of Incorporations In Nigeria Under Companies and Allied Matters Act (CAMA) 2020

Business Formation And Types Of Incorporations In Nigeria Under Companies and Allied Matters Act (CAMA) 2020

Author: Margaret Ogbonnah.


The Companies and Allied Matters Act (CAMA) 2020 regulates the activities of businesses in Nigeria. The enactment of CAMA 2020 which was assented to by the President on 7th August 2020 repealed CAMA 1990 which has regulated business activities in Nigeria for over 30 years. This has ushered in a new regime for the activities of businesses in Nigeria with some laudable innovations. The implementation of the Act took effect on January 1, 2021. The government agency in charge of incorporation in Nigeria is the Corporate Affairs Commission (CAC).

This article will identify the types of incorporations possible under CAMA 2020 and the requirements. The following are the forms of incorporation in Nigeria, as provided by the extant law and the Companies Regulations 2021:

1. Company (Private Company Limited by Shares, Public Company Limited by Shares, Company Limited by Guarantee, and Unlimited Company);
2. Limited Liability Partnership;
3. Limited Partnership;
4. Business Name;
5. Incorporated Trustee.

Business Name¹

CAMA 2020, like its predecessor, requires that anyone carrying on a business under a name requires registration to register the business name before commencing business or within 28 days of commencing business.² A Business Name is suitable for small and medium enterprises organized as either a general partnership or sole proprietorship. It is cost-effective for petty business startups, easy to register and operate. The only vice of this enterprise is that the owner(s) is personally liable for the debts and obligations of the business. Not all types of businesses can take advantage of this from of business.


Pursuant to the Companies and Allied Matters Act (CAMA) 2020, the Companies Regulations 2021, the following are the types of companies that can be registered with the CAC³:

Private Company Limited By Shares

This is the most common type of companies in Nigeria. The meaning of “limited by shares” is that such a company has the liability of its member or members limited to any amount unpaid on the shares held by the member. According to Section 22 (1) (a) of CAMA, what makes a company a “private company” is simply the fact that its memorandum of association has stated that the company is a private company and the Commission has registered it as such. The name of a private company limited by shares shall end in either “Ltd” or “Limited.⁴”

Moreso, a private company limited by shares is by law expected to have a Minimum Issued Share Capital (MISC) – this is the minimum amount of capital it must raise from its members who are also known as shareholders. The MISC for private companies limited by shares must not be less than N100,000.00⁵
and this must be divided into shares of a definite value.⁶

Also, a private company differs from a public company in terms of how many legal provisions each one is to comply with and what facilities are open to both under the law. It is pertinent to state that where a private company has only one shareholder, it is further exempted from regulations that bind some other private companies.

The fundamental difference, nonetheless, between a public company and a private company lies in the ability of the former to raise money from the public whether in the primary or secondary capital markets. Some further legal duty of a public company includes holding a statutory meeting within six months from the day of incorporation, having a professionally qualified secretary, and holding its annual general meeting in Nigeria, etc.

Public Companies Limited By Shares⁷

Public companies limited by shares are in the class of the most common type of companies after private companies limited by shares. According to the Act, what makes a company a public company is simply that its memorandum of association states that the company shall be a “public company” and the Commission has registered it as such⁸ The Minimum Issued Share Capital (MISC) of a public company is N2,000,000(Two Million) Naira.⁹
The minimum number of members in a public company limited by shares is 2 and their liability is also limited to any amount unpaid on the shares held by them.

Moreso, unlike a private company, a public company has many legal provisions to comply with, and the reason is that a public company is allowed more facilities than a private company. For example, unlike a private company, a public company is allowed to raise money from the primary or secondary capital markets. In other words, a public company can invite members of the public to buy shares in it.

Finally, amongst other legal obligations vested by the Act on public companies are the holding of a statutory meeting within six months from the day of incorporation, having a professionally qualified secretary and holding annual general meeting in Nigeria. The name of a public company limited by shares shall end in “PLC” or “Public Limited Company”¹⁰

Unlimited Companies¹¹

This type of company is the most uncommon of all types of companies incorporated under Companies and Allied Matters Act (CAMA) 2020 and the reason for that is obvious. Although an unlimited company has corporate personality and is thus an entity separate from its members, the liability of its members is nonetheless unlimited, just as in a sole proprietorship or general partnership¹².

According to the Act, an unlimited company is also incorporated for purposes of carrying on business to make profits for distribution to its members who must be at least two.¹³ As noted earlier, Section 21(2) of CAMA and even Sections 25 & 27(2)(a) all seem to permit registration of the unlimited company as either a private or public company. The name of an unlimited company shall end in “Unlimited” or “Ultd”¹⁴

Company limited by Guarantee¹⁵

According to the Act, when a company is formed for the promotion of commerce, art, science, religion, sports, culture, education, research, charity, or other similar objects, the income and property of the company are to be applied solely towards the promotion of its objects and no portion thereof is to be paid or transferred directly or indirectly to the members of the company except as permitted by this Act, the company may be registered as a company limited by guarantee.

Moreso, notably, the liability of members is limited to the amount they have respectively undertaken to contribute to the assets of the company in the event of it being wound up.

Foreign Exempted Companies¹⁶

A foreign company is a company incorporated in a jurisdiction other than Nigeria. However, if a foreign company wants to carry on business in Nigeria, the ordinary requirement is that such must incorporate a Nigerian company.¹⁷ However, a foreign company may be exempted from this requirement in two ways: one, by a treaty between the company’s country of origin and Nigeria, and two, by seeking exemption from registration under Section 80 of CAMA.
Moreso, where a foreign company is exempted under a treaty, it means the company has been exempted from registering under Companies and Allied Matters Act (CAMA) 2020 by an Act of the National Assembly, because any treaty between Nigeria and any other country must be enacted as an Act by the National Assembly and will be equal to CAMA, if not above it in precedence¹⁸.

Finally, an exempted company has the status of an “unregistered company¹⁹” and must comply with any provision of CAMA relating to an “unregistered company”, such as the duty to file an Annual Report in Form CAC/ with the Commission²⁰

Incorporated Trustee²¹

Part F of CAMA 2020 recognizes the incorporation of an Incorporated Trustee. It is created when two or more trustees are appointed by a community of persons bound by nationality, religion, culture, etc to promote educational, religious, literary, sporting, or any other charitable cause and thus are not business organizations. The Commission reserves the power to determine the classification of an association. It can also decide to make an association part of an already registered one or regarded as two associations having the same trustees.

This is similar to a company limited by guarantee in that it is set up to promote a cause such as education, religion, literature, or any other charitable object. It is an extension of the right to freedom of association, where a group of people with common interests form an association to advance their beliefs or convictions.

Although it is not mandatory for the association to incorporate its trustees, incorporation offers them the ability to execute their affairs. The Incorporated
Trustees acquire a separate legal personality different from themselves. Examples of organizations registered under this part of Companies and Allied Matters Act (CAMA) 2020 are Churches, Mosques, Non Governmental Organizations, and associations of business persons such as professionals or artisans.

Limited Liability Partnership²²

A Limited Liability Partnership is a body corporate created and incorporated under this CAMA and is a legal entity distinct from the Partners according to Section 746(1) of CAMA. A Limited Liability Partnership (LLP) is essentially a hybrid business form that combines the benefits of a Partnership and a Limited Liability company. This is different from a Limited Partnership which is sufficiently distinguished by the Act under Sections 795 – 810 of the CAMA, 2020.

The formation of an LLP must be done by two or more people who are associated with and carrying on a business for profit, as seen in Sections 753 (1) (a) and (b) of CAMA, 2020. The incorporation documents must be filled out in the manner described by the Commission and upon payment of prescribed fees.

Under Section 747 of CAMA, 2020, a person who has been deemed to be of unsound mind by a Court in Nigeria or elsewhere, or who is an undischarged bankrupt is not qualified to join an LLP as a Partner.

There are several restrictions on the registration of names of a Limited Liability Partnership under the Commission during its incorporation or name change. If the Commission considers the name of an LLP to be undesirable, similar, or substantially identical to that of another partnership, business name, limited 22 Section 746 of CAMA liability partnership, body corporate, or registered trademark, the application for registration or change of name of an LLP may be denied.

Furthermore, it is important to know that incorporation is different from registration. Incorporation means forming a new business structure that becomes a recognized person or entity under the law, while registration simply means the process of registering under the government where it operates.

Limited Partnership²³

By definition, a limited partnership has at least one general partner and at least one limited partner. The general partner or partners manage the business on a day-today basis. LPs are usually used by real estate investors, hedge funds and investment partnerships, family partnerships, etc. Usually, the partners provide capital in exchange for interests in the profits and do not take part in the management of the firm or partnership, nor do they have powers to bind the partnership. However, they may inspect the books and examine the prospects of the Firm.

The Act provides that an LP shall consist of one or more persons called general partners, who shall be liable for the debts and obligations of the firm, and one or more persons called limited partners.²⁴ The LP cannot consist of more than 20 persons and each partner shall at the time of entering into the partnership contribute or agree to contribute capital or property valued at a stated amount and shall not be liable for the debts or obligations of the Firm beyond the amount so contributed or agreed to be contributed. LPs are not restricted to individuals, as corporate entities can become Limited Partners and negotiate agreements with general partners on the management of the Partnership.²⁵

It is important to note that unless otherwise agreed in writing by the partners, a limited partner shall not, during the continuance of the partnership, either directly or indirectly, draw out or receive back any part of his contribution, and if he/it draws out or receives back any such part, the limited partner will still be liable for the debts and obligations of the partnership up to the amount so drawn out or received back.

If a limited partner takes part in the management of the partnership business, he is liable for all debts and obligations of the Firm incurred while he takes part in the management, as though he were a general partner. Considering that LPs are regarded as a separate entity from the actual individual partners by the internal revenue service for tax purposes, LPs are not taxed but the partners are taxed as individuals on profits from the Partnership.



The signing of CAMA 2020 into law is part of the Nigerian Government’s effort particularly through the Presidential Enabling Business Environment Council (PEBEC) towards promoting the ease of doing business in Nigeria.

Therefore, all incorporations recognized and made possible under Companies and Allied Matters Act (CAMA) 2020 have been discussed. It is advisable for a person or entity wishing to engage in any business or undertake incorporation in Nigeria to engage the services of a CAC accredited agent or corporate lawyer for advice on the most suitable form of incorporation in Nigeria.


1. SECTION 814 OF CAMA, 2020
2. SECTION 815 OF CAMA, 2020
3. SECTION 21 (1) OF CAMA, 2020
4. SECTION 22(1) OF CAMA, 2020
5. SECTION 29(1) & (5) OF CAMA, 2020
6. SECTION 27(2)(A) OF CAMA, 2020
7. SECTION 37 OF CAMA, 2020
8. SECTION 22(5) OF CAMA, 2020
9. SECTION 24OF CAMA, 2020
10. SECTION 24 OF CAMA, 2020
11. SECTION 27(2)(A) OF CAMA, 2020
12. SECTION 235 OF CAMA, 2020
13. SECTION 332 OF CAMA, 2020
14. SECTION 29(2) & (5) OF CAMA,2020
15. SECTION 25 OF CAMA, 2020
16. SECTIONS 18 OF CAMA, 2020
17. SECTION 118 OF CAMA, 2020
18. SECTION 235 OF CAMA, 2020
19. SECTION 332 OF CAMA, 2020
20. SECTION 240 OF CAMA, 2020
21. SECTION 29(4) & (5) OF CAMA, 2020
22. SECTION 26 OF CAMA, 2020
23. SECTION 78 OF CAMA, 2020
24. SECTION 78 OF CAMA, 2020.
25. SECTION 78(3)(B) OF CAMA, 2020
27. SECTION 795 OF CAMA, 2020
28. SECTION 806 SUB 1 OF CAMA, 2020
29. SECTION 795 OF CAMA, 2020 SECTION 82 OF CAMA 2020
30. SECTION 81 OF CAMA, 2020
31. SECTION 823 OF CAMA, 2020
32. SECTION 746 OF CAMA, 2020
33. SECTION 746(1) OF CAMA, 2020
34. SECTIONS 795 – 810 OF CAMA, 2020
35. Business Formation And Types Of Incorporations In Nigeria- 2021 – Shareholders – Nigeria (
36. An Overview Of Limited Liability Partnerships Under CAMA 2020 – (


DISCLAIMER; This article is for information purposes, it may, or may not reflect the current position of the law and is therefore not intended to provide legal advice or guidance on litigation or provide commentary on any pending case or legislation.




1 Section 814 of CAMA 2020
2 Section 815 of CAMA 2020

3 Section 21 (1) of CAMA
4 Section 29(1) & (5) of CAMA.
5Section 27(2)(a) of CAMA
6 Section 37 of CAMA
7 Section 24of CAMA8 section 24 of CAMA
9 Section 27(2)(a) of CAMA).
10 Section 29(2) & (5) of CAMA.
11 Section 25 of CAMA 2020
13 Sections 18 & 118 of CAMA.
14 Section 29(4) & (5) of CAMA 202015 Section 26 of Cama 2020
16 Section 78 of CAMA 2020
17 Section 78 of CAMA 2020.
18 Section 12 of the Constitution of the Federal Republic of Nigeria (CFRN)).
19 Section 82 of CAMA
20 Section 81 of CAMA
21 Section 823 of CAMA
23 Section 795 of CAMA 2020
24 Section 795 of CAMA 2020
25 Section 796 of CAMA 2020