The formalization of Group of Company.
One of the restricted words or phrase requiring consent before its use, under the Companies and Allied Matters Act is the use of the word “Group” or “Group of Companies” except and until the requisite consent has been sought obtained from the Registrar General of the Corporate Affairs Commission.
To formalize and incorporate a group of company in Nigeria, every corporate intending to have such a union or amalgamation must as a matter of statute (Companies and allied matters Act) have 3 or more related companies, the relationship being common shareholding in the 3 or more companies.
How to get started?
- Ensure all outstanding annual return obligations by the subsidiary companies are made up to date.
- Obtain consent from the registrar General, by way of name availability entry and reservation.
- Present evidence of the existence of 3 or more existing subsidiaries.
- Present resolution by each individual company consenting to or sanctioning the union.
- Statement that the share capital of the group shall not be less than the highest capital or any of the subsidiary company seeking to form the group.
- Compliance with section 733 of Companies and Allied Matters Act, 2020 (requiring certain companies to publish statement in prescribed form as in Fourteenth Schedule), these kind of companies only include banks, insurance companies, deposit provident companies, benefit societies.
- Upon, getting the nod from the Registrar General (RG), by way of consent, an accredited agent can then proceed to register the company as with every other LLC.
The Formalization of a Holding Company.
What Is a Holding Company?
A holding company is a business entity—usually a corporation or limited liability company (LLC). Typically, a holding company doesn’t manufacture anything, sell any products or services, or conduct any other business operations. Rather, holding companies hold the controlling stock in other companies.
Although a holding company owns the assets of other companies, it often maintains only oversight capacities. So while it may oversee the company’s management decisions, it does not actively participate in running a business’s day-to-day operations of these subsidiaries.
A holding company is also sometimes called an “umbrella” or parent company.
KEY TAKEAWAYS
- A holding company is a type of financial organization that owns a controlling interest in other companies, which are called subsidiaries.
- The parent corporation can control the subsidiary’s policies and oversee management decisions but doesn’t run day-to-day operations.
- Holding companies are protected from losses accrued by subsidiaries—so if a subsidiary goes bankrupt, its creditors can’t go after the holding company.
Understanding Holding Companies
A holding company typically exists for the sole purpose of controlling other companies. Holding companies may also own property, such as real estate, patents, trademarks, stocks, and other assets.
Businesses that are completely owned by a holding company are referred to as “wholly-owned subsidiaries.” Although a holding company can hire and fire managers of the companies it owns, those managers are ultimately responsible for their own operations.
Benefits of Holding Companies
Holding companies enjoy the benefit of protection from losses. If a subsidiary company goes bankrupt, the holding company may experience a capital loss and a decline in net worth. However, the bankrupt company’s creditors cannot legally pursue the holding company for remuneration.
Consequently, as an asset protection strategy, a parent corporation might structure itself as a holding company, while creating subsidiaries for each of its business lines. For example, one subsidiary may own the parent corporation’s brand name and trademarks, while another subsidiary may own its real estate.
This tactic serves to limit the financial and legal liability exposure of the holding company (and of its various subsidiaries). It may also depress a corporation’s overall tax liability by strategically basing certain parts of its business in jurisdictions that have lower tax rates.
If a holding company is set up correctly, the debt liability of one subsidiary won’t impact any others; if one subsidiary were to declare bankruptcy, it would not impact the others.
How to get started?
One of the restricted words or phrase requiring consent before its use, under the Companies and Allied Matters Act is the use of the word “Holding” “Holdings” or “Holding Company” except and until the requisite consent has been sought obtained from the Registrar General of the Corporate Affairs Commission.
To form a holding company
- Ensure all outstanding annual return obligations by the subsidiary companies are made up to date.
- Obtain consent from the registrar General, by way of name availability entry and reservation.
- Present evidence of the existence of 2 or more existing subsidiaries.
- Statement by the majority of directors of the proposed holding company, stating that the company shall take up more than 50% shares of the nominal value of share capital of each of the subsidiaries within 90 days of incorporation.
- Compliance with section 733 of Companies and Allied Matters Act, 2020 (requiring certain companies to publish statement in prescribed form as in Fourteenth Schedule), these kind of companies only include banks, insurance companies, deposit provident companies, benefit societies.
- Upon, getting the nod from the RG, by way of consent, an accredited agent can then proceed to register the company as with every other LLC.
The formalization of a consortium
A consortium is a union or amalgamation of different corporate entities, pulling their resources together to achieving a common goal, typically coming together for a specific project or joint venture, and most times as a special purpose vehicle (SPV) to delivering a project.
One of the restricted words or phrase requiring consent before its use, under the Companies and Allied Matters Act is the use of the word “Consortium” except and until the requisite consent has been sought obtained from the Registrar General of the Corporate Affairs Commission.
How to get started?
- Obtain consent from the registrar General, by way of name availability entry and reservation.
- Present evidence of not less than 3 companies forming the consortium.
- Evidence of registration in the home country, in the case of foreign companies.
- A resolution by each of the companies, consenting to forming the consortium.
- A statutory declaration to wind up the consortium in accordance with the provisions of the Company and Allied Matters Act upon completion of business objects creating it.
- Inclusion of winding up clause in the article.
- Statement of the object clause in its memorandum and articles of association.
- Evidence of annual return filing up to date of the component companies.
- Evidence of Compliance with section 733 of Companies and Allied Matters Act, 2020 (requiring certain companies to publish statement in prescribed form as in Fourteenth Schedule), these kind of companies only include banks, insurance companies, deposit provident companies, benefit societies.
- Upon, getting the nod from the Registrar General (RG), by way of consent, an accredited agent can then proceed to register the company as with every other LLC.
Note, that, business names, Limited partnerships, Limited liability partnerships cannot form a group, consortium or holding companies, it is only a Limited liability company that can so do.
Ref: https://www.investopedia.com/terms/h/holdingcompany.asp
This is by no means and exhaustive article on the above corporate structures, contact us at starlionlegal@yahoo.com or 07057663782 for extensive legal opinion
Written By
Ehis Kelly Osagiede
Corporate Law Practice Team Lead at Starlion Legal
STARLION LEGAL 