Preem & Partners | 23rd February, 2024
There are basic rules that guide the establishment and running of anything, including a business organisation. A business structure is created to accomplish specific purposes for ideal benefits and this holds true whether it involves a public company or a holding company, and a group of companies is no exception. Like other business structures, the registration and operation of a group of companies is regulated by the Companies and Allied Matters Act, 2020 [CAMA – “the Act”], and compliance is essential.
A ‘Group of Companies’ [or simply ‘Group Company’], as the term may suggest, constitutes multiple business entities under a single umbrella. However, because the term, by itself, may be misleading, it is important to clarify that mere ownership of multiple companies does not automatically qualify them as a ‘Group’. The CAMA regulates the use of the term ‘Group’ in company names. It is, in fact, unlawful and illegal to incorporate ‘Group’ into a company name without prior consent from the Registrar General of the Corporate Affairs Commission [CAC – “the Commission”] and without registration as such.
A Group Company is a company that is part of a larger corporate group structure. In such a structure, there are typically multiple companies that are related to each other through ownership or control. The Group may be a holding or a subsidiary company of the associated companies or a subsidiary of one of the associated company’s holding company.
A Group Company is a distinct legal entity that must undergo registration before they can be so called. To qualify for registration as a ‘Group’, two preliminary criteria must first be met. Firstly, the proposed Group must comprise a minimum of three associated companies. Secondly, these associated companies must share common shareholders and bear similar names.
After ticking these checklists internally, the stakeholders or directors of the intended ‘Group’ company can proceed to engage an agent for the incorporation process. For the incorporation proper, the following steps and checklists must be met.
1. A formal application must be made to the Registrar General of the Commission for consent for the use of the word “Group”, with a maximum of three and a minimum of one proposed name. For the application to the considered and a name reserved for registration, however, in addition to the two preliminary criteria already stated:
c) There must be a resolution of the associate companies indicating consent to the “Group” relationship.
d) There must be evidence of the updated annual returns of all associate companies.
e) There must be evidence of company secretary of all associate companies.
f) There must be a formal statement by the proposed Group Company that the share capital of the Group Company shall not be less than the highest share capital amongst the associate companies.
g) If the proposed Group company is banking company, an insurance company or a deposit, provident or benefit society, the Group company must submit to the Commission a Statement in accordance with section 733 of the Act.
h) Payment of the applicable fee.
2. Upon obtaining the Consent, the Group Company can then be registered as a new company, with the same procedure with which a new company is registered.
A ‘Group’ company can be incorporated as a public or private company, limited or unlimited company, depending on the legal, financial, and strategic considerations of the stakeholders involved. As always, it is important to consider the legal and financial implications carefully before choosing the appropriate structure for incorporation. Consulting with legal and financial consultants can help in making informed decisions regarding the incorporation of a ‘Group’ company as public, private, limited or unlimited company.
Lookups
