INTRODUCTION.
There is a popular saying in motivational books, “start small and start from where you are”. Most businesses and business owners in Nigeria, start off very little and with little as small businesses through business names. As businesses grow, their owners, advisers and image cleaners work to metamorphosis such business names to companies. Also, the urge to apply for government bids and to declare very old registration dates as well as long experiences and achievements fuel the quest for conversion/upgrade of business names into companies in Nigeria.
Business names are trading names for ventures registered at the CAC by at least one proprietor without shares. The owners of business names are different from their business names because business names are not corporate beings. Business names cannot sue or be sued and they cannot be buy, sell or own land. The assets, liabilities, costs, profits, challenges and responsibilities of business names are actually that of their owners. Business names have no registered secretaries or directors. Owners of business names are expected to pay income taxes but business names don’t pay income taxes (to avoid double taxation). However, business names are expected to file annual returns at the CAC. By the way, business names can also bid for government and international contracts and projects.
Companies are business entities registered in CAC by at least two shareholders and two directors. Companies can be public, private, limited, unlimited or limited by guaranty with or without shares. Companies are corporate beings, different from their owners and stakeholders (shareholders, directors and employees). Companies can sue or be sued and can own, buy or sell land. The assets, liabilities, costs, profits, challenges and responsibilities of companies are not that of their owners. Companies pay Company Income Taxes and as expected that are different from that of their owners who pay Personal Income Taxes. Companies are expected to file annual returns to CAC.
OLD TRICKS.
Some years ago, it was possible for business names owners and lawyers to play some tricks and convert business names to companies. Below are approaches that were used then.
1. A business name owner could apply through a lawyer and have his business name converted to a company by adding “Limited” to the business name. Then, the business name certificate is returned to CAC while a new company certificate is issued.
2. In another approach, a business name owner could apply through a lawyer to have his business name upgraded to a company by adding “Limited” to the business name, so far as the owners of the business name are the owners of the proposed company. In this case, the business name still exists side by side with the new company.
Well, all the above tricks are unknown to law and as such illegal. Companies and Business Names are parallel rivers that never meet.
NEW AND LAWFUL APPROACHES.
Corporate Affairs Commission (CAC) will not allow business names and or company names that look or sound similar and that may cause confusing, deceit or passing-off, irrespective of their owners. Business name can be lawfully turned into a company by simply closing the business name’s record in CAC and opening/registering a new company with same name, if available.
1. An option may starts with payment of all outstanding annual returns fees and other fees. Then, original business name certificate will be submitted to CAC, while payment and filing for cessation (removal of business name from register) of business names are made. Once a business name is ceased, the name becomes free for any person to seek, reserve and use. At this point, the lawyer can quickly apply and reserve the former business name and add “LIMITED” to it and any other words suitable for a company. Once approved by CAC, the registration of new company with the name of the former business name continues and can be completed in less than 7 working days.
2. Another option is to continue using a business name while the same business name is tweaked and registered as a new company. Here, the “Two Words Look and Sound Principle” is used to ensure there are at least two words differentiating a new name from existing names.
CONCLUSION.
CAC no longer allow business names to be upgraded or converted to companies. Rather business names can be ceased (closed) and new companies registered with the names of the closed business names. In the alternative, a business name can be added two words and be registered as a company.
However, cost of annual returns and penalties over years as well as other factors may make turning a business name into a company, not desirable. However, the quest for businesses to maintain their old registration dates, long experience and achievements make turning of old business names into companies very attractive.
My authorities are:
1. Sections 18, 19, 20, 21, 22, 24, 25, 26, 29, 32, 36, 37, 38, 567, 573, 574, 578, 583, 584, 587 and 588 of the Companies and Allied Matters Act, 1990.
2. The Supreme Court’s decision (on essence of registration of business name) in the case of DOMINGO v. THE QUEEN (1963) LPELR-15448(SC)
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