WELCOME TO ENTERPRENEURIAL

DEVELOPMENT STUDIES (EDS)

LAW FOR THE ENTREPRENUER AND

MANAGER
by
EBE ONI-OJO (MRS)

Today we shall be examining a few of the

various laws that regulate the activities of

the Entrepreneurs and Business Managers
in Nigeria.
Owing to time constraints we shall only
examine some aspect of these laws such
as Company Law, Law of Partnership, Law
of Agency, Sole Proprietorship, Contracts
and Intellectual Property Law in little
details.

TYPES OF BUSINESS
ORGANISATIONS
Sole Proprietorship, Partnership, Co-operative

Societies, Statutory Corporations ,QuasiCorporations, Incorporation of Trustees,

Incorporated or Registered Company.
SOLE PROPRITORSHIP
One man owns and manages the business. Goes
with other names as one-man business, sole
trader etc.
Starts business with his own capital and labour
or sometimes borrows from friends or relatives.
Organises business and takes all profit or loss.

The sole proprietor represents many things at

the same time.

He is a capitalist because he owns the business
and receives the profit
He is a labourer because he performs most or all
the work in the business
He is an entrepreneur because he takes on his
stride the risk of financial loss
He is also a manager because he takes
decisions and controls the operation of the
business.

Features of a Sole Proprietorship

Ownership
Liability
Sources of Capital or Finance
Legal Entity
Motive
Method of Withdrawing Capital
Its Nature

SOURCES OF FUND OF A SOLE

PROPRIETOR
Personal savings
borrowing particularly from friends and Relatives
credit purchase from manufactures or Whole

sales
donations from friends and relatives
Advantages of a Sole proprietorship
It requires small capital
Easy to establish
Ownership of all profit
Quick decision-making

Easy to withdraw his assets

Single handedly formulates all policies
Boss
It is flexible
Personal Satisfaction
Cordial Relationship, with workers and

customers
Tax saving
Privacy

Disadvantages of a Sole

Proprietorship
Bear All Losses and Risks Alone
Limited Financial Resources
Unlimited Liability
Lack of Continuity
Absence of Specialization
Limitation on Expansion

PARTNERSHIP
An association of two to twenty persons carrying on a

business in common with the view of making profit.

Partners contribute both funds and efforts to set up
and manage the business sharing profit or loss on an
agreed basis.
Features of Partnership
Ownership: It is formed by 2-20 people and 2-10

people in case of banks

Initial capital contributed by partners
Liability is unlimited except for limited partner.
Formation motives: formed for profit reasons

Sources of capital: contribution from the

partners ploughing back profit, loans from banks

Method of withdrawing capital must be
approved by other partners as laid down in their
partnership deed.
Has no separate legal entity
Has no board of directors.
Types of Partnership (2)
Ordinary Partnership: Partners take active
part in the management of the business


Have equal liability of loss or risk, equal

powers, unlimited liabilities; take active

part and profits are shared equally.
Limited Partnership: members debts are
restricted to the amount of money
contributed in running the business.
Not all partners take equal part in the
management of the business there must
be at least one ordinary partner who has
unlimited liability.

TYPES OF PARTNERS
Five types:
Active Partner: Takes active part in the formation, financing

and management of the business and receives salary as spelt

out in the partnership deed.
Dormant/Sleeping Partner Contributes only the money
needed for formation of the business or for running of the
business. Entitled to profit sharing and losses as agreed upon.
Normal/Passive Partner actually not a partner but allows his
name to be used in the partnership .Usually appointed because
of his experience, fame or wealthy position.
Silent Partners is known to the public as a partner but take
no active part in firms management.
Secret Partner. Active in the affairs of the business but not
known to the public as a partner.

Article of Partnership or Deed of Partnership

Document that regulates the activities of the partnership

business. It is the constitution of the partnership business

aimed at guiding against, or resolving disagreements.
The partners agree and sign the document.
The deed of partnership is not legally required but essential.
Style and contents vary from partnership to partnership.
include all or some of the following:
Name of the partners
The place of business
The description of the nature of business
The amount of capital that each partner is to contribute
The role of each partner in the business
The method of profits and losses sharing

Compensation, if any, partners are to receive for services

rendered to the business

The right of partners in the business
Duration of the business
How matters are to be determined whether by majority vote or not
Provision for the admission of new members
Arrangements concerning withdrawals or additional investment
Arrangement for the dissolution of the firm in the event of death,
incompetence or other causes of withdrawal of one or more of its
members
Once signed the document becomes a legal document that is

enforceable in a court of law.


ADVANTAGES OF PARTNERSHIP
Greater financial resources
Combined Abilities and Skills
Greater Continuity
Ease of Formation
Joint and better decision
Creation of employment opportunities
Employment of valued employees
Tax advantage
Application of Division of Labour
Privacy

DISADVANTAGES OF PARTNERSHIP
Unlimited Liability
The business is not a legal entity
Disagreement and Resignation
Decline in pride of ownership
Bureaucracy leads to slow decision

and policy making

Limited capital
Restriction on sale of interest

A COMPANY
An association formed for the purpose of carrying on business or activities

aimed at making profit or maximum returns.

Once incorporated, becomes a legal entity capable of having rights and
liabilities.
TYPES OF COMPANIES
Basically three types registered under Section 21 of the CAMA.
Companies limited by shares, Companies limited by guarantee and
Unlimited companies. Which maybe a private company or a public
company.
Companies limited by shares: Liability in this company is limited by the
memorandum to the amount, if any, unpaid on the shares respectively held
by the members.
Companies limited by guarantee : for promotion of science, religion,
arts, education and not for profit making. Members liabilities are limited by
the memorandum to such amount as they respectively undertake to
contribute to the assets of the company in the event of it being wound up
which should not be less than N10, 000.

Memorandum cannot be registered without the

authority of the Attorney General of the federation.

Unlimited Companies: not common, being
limited in its usefulness.
Like Partnership members personally liable for the
debts of the company.
Used by professionals who assume personal
liability for their obligations; e.g, section 27(3)(b)
of the Insurance Act 1976 provides that an
insurance broker will not be registered unless the
applicant has unlimited liability.

The following different types of companies can

be identified under the Act.

Public company limited by shares
Private company limited by shares
Public company limited by guarantee
Private company limited by guarantee
Public unlimited company
private unlimited company

Features of a Private Limited Company

Membership: a minimum of 2 and a maximum of 50
Issuance of Shares: cannot sell shares to the public
Transferability of Shares: can only be transferred with

the consent of other shareholders

Quotation: not quoted on the floor of the stock
exchange
Publication of Accounts: not required to publish annual
account but must send a copy of audited account to
the registrar of companies each year.
Limited Liability: each shareholder possesses limited
liability.

Features of a Public Limited Company

Membership: Minimum of seven and no maximum,

Article of Association could specify maximum.

Issuance of Shares: can sell share to the public
Transferability of Shares: shares can be transferred
without the consent of other share holders.
Quotation as Public Companies: are quoted on the
floor of the stock exchange
Publication of Accounts: required by law to publish
account and send a copy of audited account to the
registrar of companies each year.
Limited Liability: each shareholder possess limited
liability

FORMATION OF A REGISTERED COMPANY

By S. 18 any two or more persons may form an

incorporated company whether private or public.

S. 20 provide that an individual shall not join in the
formation of the company if:
He is less than 18 years of age, unless there are other
two persons of full age and capacity who have already
subscribed the memorandum.
He is of unsound mind and has been so found by a
court of competent jurisdiction.
He is an undischarged bankrupt or
He is disqualified under S. 254 from being a director
of a company.


Formation

starts with the following steps:

Ascertaining the particulars of the proposed company

Preparation of the incorporation documents

Filing of the incorporation documents

Registration of the company

Documents needed for incorporation includes:

The memorandum and article of association.

The notice of the address of the registered office.

List, particulars and consent of the first directors.

Statement of the authorised share capital.

Any other document.

statutory declaration of compliance in terms of S. 35(3).

MEMORANDUM OF ASSOCIATION:
States companys relationship with the outside world.
S. 27 (1) provides that the memorandum should state

the following:
Name of the company.
That the registered office of the company will be
situated in Nigeria.
Nature of business or objects for which it is established.
Restriction if any on the powers of the company.
That the company is a private or public company.
That the liability of it members is limited by shares or by
guarantee or is unlimited.
The capital clause.

ARTICLE OF ASSOCIATION
States the internal regulation of a company.
governs the rights of members among themselves and

with the company.

states the manner in which a company conduct it affairs
contains the following:
Duties, rights and position of member of the company
Method of appointment of the directors
Sharing of dividends
Procedure for holding general meeting
Method of electing directors and the voting rights at
such election
Method of auditing the companys account

 Filing of incorporated documents

When the documents have been prepared and

stamped, they are presented to the commission for

filing along with the payment of appropriate fees.
Certificate of Incorporation
A certificate is issued by the registrar of CAC to show
that a business is legally incorporated and
recognised by the government.
The certificate is issued under the seal of the
commission and dated. The date on which the
registrar signed the certificate is stated as the date
of incorporation.

AGENCY
Agency is a legal and fiduciary relationship that exists

between 2 persons when one called the agent is

considered in law to represent the other called the
principal such that he affects the principals legal
position in respect of 3rd parties to the relationship by
the making of contracts or the disposition of property.
Legal Implications of the Definition of Agency
Privity of contract
Characteristics Of Agency Relationship
Creates 2 types of relationships: One between the
principal and agent and the other between the
principal, agent and the 3rd party

RIGHTS AND DUTIES BETWEEN AGENT AND

PRINCIPAL

Duties

of an Agent

Faithful Performance:

Not to sub-delegate. Except where it is customary

Duty of care and skill in executing his responsibilities.

Loyalty, i.e. no conflict between his personal interest and

his principals business

Fiduciary: Must act with utmost good faith.

Confidentiality, must be discrete

Proper accounts of the principals money

Duty to keep principals money and property from his own

Duty to pay over to the principal all money received for,

and held on his behalf .

TYPES OF AGENTS
Universal agent: an agent who acts for his principal
without a limit to his authority. He has authority to do all
that the principal could do in all aspects of the principals
activities.
Auctioneer: a person licensed under the law to sell goods
at a public auction. He may or may not have possession of
the goods. He does not warrant the sellers right to the
property. He is an agent of the owner until sale and
thereafter, agent to the purchaser. Where there is a reserve
price, he cannot sell below that price and if he does, the
owner will not be bound.
Mercantile Agents or Factor: a person who is entrusted
with possession of goods with an implied authority to sell in
his own name.
Broker: an agent who is employed to negotiate contracts
on behalf of another for the sale or purchase of property or

Partner : each member of a partnership is an agent of the other

partners to the partnership.

Banker: a banker is the agent of a customer of the bank with
regard to a bankers duty to pay money to the amounts specified by
a customer of the bank in favour of indorsees.
Estate Agent : a person engaged by an estate owner or land
speculators for the purpose of buying or selling houses or pieces of
land in consideration of payment of commission
Advertising and patent agents. These are also special agents
employed in relation to advertising and patents
Legal Practitioners: Lawyers are special agents for their clients,
especially during negotiation or litigation.
Del Credere Agent. a special agent paid high commission. He
sells goods for his principal but also undertakes to pay his principal
the price of the goods sold when the buyer defaults.

CONTRACT
A contract is an agreement which is legally

binding on the parties to it and which, if broken,

may be enforced by civil action in court against
the defaulting party.
Classification of Contracts
Contract under Seal (Formal Contracts)
Simple Contract
Express Contract
Implied Contract
Bilateral Contract / Multilateral Contract
Severable Contract

REQUIREMENTS FOR THE FORMATION OF A VALID

CONTRACT
OFFER: A proposition made by one party, called the

offeror, to another party, called the offeree, clearly and

precisely indicating the terms under which the offeror
is willing to enter into a contract with the offeree.
For a proposition to amount to an offer capable of
acceptance, it must satisfy three conditions:
Must be definite, certain and unequivocal.
Must emanate from the person liable to be bound if
the terms are accepted.
Must be communicated to the offeree.
Can be made to a particular person, or to a group or
class of persons, or to the public at large..

Termination of an Offer
Revocation. to be effective, must be

communicated to the offeree.

Rejection. occurs in two ways: by a direct
intentional refusal of the offer and (ii) by a
counter-offer
Lapse of time. where a period of time is
stipulated, but the offer is not accepted
within that time.
Occurrence or non-occurrence of condition.
Death before Acceptance

ACCEPTANCE
Final expression of assent to the terms of an offer

without variation, qualification or addition.

The general rule is that acceptance of an offer is
not complete until it has been communicated to
the offeror either by the offeree himself or by his
authorized agent.
CONSIDERATION
defined in Currie v Misa as some right, interest,
profit, or benefit accruing to one party, or some
forbearance, detriment, loss or responsibility
given, suffered or undertaken by the other.


INTENTION TO CREATE LEGAL RELATIONS

An agreement will not be binding unless it is

intended to give rise to legal relations.

The cases that have arisen in relation to the
existence of an intention fall into three
categories:
Where the parties expressly exclude the
intention
Where the agreement relates to a commercial or
business transaction
Where the agreement relates to purely
domestic, family or social affairs

LAWFUL OBJECT: ILLEGALITY

A contract is void and unactionable if its object is

illegal. E.g
if it violates the law of the land
if it is contrary to public policy
Where a contract is illegal, the following results
follow:
the contract is void ab initio and no action can lie
on it.
Money paid or property transferred by one guilty
party to the other under the contract is
irrecoverable.

CONTRACTUAL CAPACITY
For a contract to have any validity in

law, the parties making it must have full

capacity to do so.
The following dont have full capacity
Infants
persons of unsound mind
drunken persons
illiterates
Corporations.

INTELLECTUAL PROPERTY

Intellectual property rights are rights conferred by

statutes on an individual or a corporate body with

respect to the product of his or her intellect,
guaranteeing the exclusive control of the exploitation of
his work for a limited period.
Legal Framework for Intellectual Property Right
In Nigeria, Intellectual Property Rights is governed by
the Trademarks Act, the Patents and Designs Act, and
the Copyright Act.
The Trademarks, Patents and Designs laws are currently
implemented by the Trademarks, Patents and Designs
Registry under the Federal Ministry of Commerce.

COPYRIGHT
This is the right which the law gives an author or

other originator of an intellectual production

whereby he is invested with the sole and exclusive
privilege of reproducing and selling copies of his
work.
Usually expressed in warnings like the example
below in books and phonographic recordings:
All rights reserved. No part of this work may be
reproduced in a retrieval system or transmitted in
any form or by any means, electronic, mechanical,
photocopying, recording or otherwise without the
prior written permission of the publisher/author

 The Purpose of Copyright Law:

Protection of an intellectual property under law.

Who Is a Copyright Owner
This is a person who has any of the exclusive rights which
comprise copyright in respect of an intellectual property
Works Eligible For Copyright In Nigeria
works of copyright which the law will protect and include:
a) Literary works
b) Musical works
c) Artistic works
d) Cinematographic works
e) Sound recording
f) Broadcast

COPYRIGHT OWNERSHIP

copyright ownership is not automatic. The following may claim

copyright:
Nigerian citizens or those domiciled in Nigeria.
Persons whose work is first published in Nigeria or being sound

recording made in Nigeria.

Those employed to make a work in the course of their

employment.
Persons commissioned to make a work under a contract of service

or apprenticeship
Persons to who copyright work are assigned
Persons to whom a license of the work has been granted.
Fed or State government where it has commissioned someone to

make a work.
Nigerian registered Companies which produce work of copyright.
Citizens or those domiciled in a country that is a party to an

obligation in a treaty to or other international organisation to which

TRANSMISSION OF COPYRIGHT
Copyright is a personal property and as such can be

transmitted or given away as movable property by:

Assignment of the whole or part, for or for no consideration.
By disposal under a will.
By operation of law upon death or intestacy.
By license, which need not be in writing, unless it is an
exclusive licence or by different kinds of agreement or
licence.
Infringement Of Copyright
Copyright is infringed by any person who, without the
licence or authorisation of the owner of the copyright does
or causes another person to do anything that is prohibited
by law see S. 14.

DURATION OF COPYRIGHT
For literary, musical and artistic works, copyright lasts

the lifetime of the author, plus 70 years after his

death.
for cinematograph films, photographs, sound
recordings and broadcasts, the copyright lasts for 50
years from the end of the calendar year in which the
work was first published or broadcast.
Remedies For Copyright in civil and criminal law.
Remedies in civil law include:
Award of damages, that is, monetary compensation
Injunction restraining the commission or continuation
of the infringing act.

Accounts for profit and payment of it to the copyright

owner as profit.
Delivery up of all the copyright work
Remedies in criminal law include:
Fine upon conviction
Imprisonment upon conviction
Impoundment or seizure of the infringing item, and its
forfeiture
Order for surrender, or forfeiture of the infringing work
to the copyright owner;
Destruction of the infringing article or the making of
such order as the court may think fit.