Lesson Note on Company Account: Company Formation and Key Documents for SSS 2

Class: Senior Secondary School 2 (SS2 / SSS2)
Term: 3rd Term
Week: 1
Age: 16 years
Duration: 45 minutes
Subject: Financial Accounting
Curriculum Theme: Company Accounts
Previous Lesson: .
Topic: COMPANY ACCOUNT; FORMATION OF A COMPANY
Subject Matter: Meaning of a company, Companies and Allied Matters Act 1990, terminologies, types of companies, distinction between public and private companies.

Specific Objectives

By the end of the lesson, pupils should be able to:

Cognitive Domain:

• State the requirements of the Companies and Allied Matters Act (CAMA) 1990 for company formation.
• Explain key terminologies related to company formation, such as Memorandum of Association, Articles of Association, and Prospectus.
• List the differences between private and public companies.

Affective Domain:

• Appreciate the legal framework governing company formation in Nigeria.
• Recognise the importance of proper documentation in establishing a company.

Psychomotor Domain:

• Identify specific examples of public and private companies within their locality.
• Differentiate between the features of private and public companies.

Social Domain:

• Participate actively in discussions about company formation.
• Collaborate with peers to understand the complexities of business structures.

Reference Materials

The following resources were used in planning this lesson:

• Senior Secondary Schools Education Curriculum
• State Unified Scheme of Work
• Financial Accounting for Senior Secondary Schools by O. A. Longe
• https://www.cac.gov.ng

Instructional Materials

The teacher will teach this lesson with the aid of:

• A chart illustrating the process of company formation or the differences between company types.
• Daily official list of companies from the Corporate Affairs Commission (CAC).
• Financial Accounting textbook.

Rationale for the Lesson

Understanding company formation is important for pupils to grasp how businesses are legally established and operate. This knowledge provides a foundation for further studies in financial accounting and helps pupils understand the structure of organisations around them.

Prerequisite/Previous Knowledge

Pupils are expected to have basic knowledge of other forms of business organisations like sole proprietorships and partnerships.

Lesson Content/Board Summary

COMPANY ACCOUNT: FORMATION OF A COMPANY

Meaning of a Company

A company is a legal entity formed by a group of individuals to engage in and operate a business enterprise in a commercial or industrial capacity. It is a separate legal entity from its owners, meaning it can own assets, incur debts, and sue or be sued in its own name.

Companies and Allied Matters Act (CAMA) 1990

The Companies and Allied Matters Act (CAMA) 1990, now CAMA 2020, is the principal legislation regulating the formation and operation of companies in Nigeria. It sets out the legal framework and requirements for registering and managing companies.

Requirements for the formation of a company under CAMA:

• Submission of the company’s name for availability check and reservation.
• Submission of the Memorandum of Association.
• Submission of the Articles of Association.
• Statement of share capital.
• Particulars of directors and secretary.
• Declaration of compliance.
• Payment of prescribed fees to the Corporate Affairs Commission (CAC).

Terminologies in Company Formation

• Memorandum of Association: This is the most important document of a company. It defines the company’s constitution, its objects, and its relationship with the outside world. It typically contains:
  • The company’s name with ‘Limited’ or ‘Plc’ at the end.
  • The state where the registered office is located.
  • The objects (purpose) for which the company is formed.
  • A statement that the liability of members is limited.
  • The authorised share capital.
• Articles of Association: This document contains the rules and regulations for the internal management of the company. It governs the relationship between the company and its members, and among the members themselves. It covers areas like:
  • Appointment and powers of directors.
  • Conduct of board meetings.
  • Share transfer procedures.
  • Voting rights of shareholders.
• Prospectus: This is a formal document issued by a public company inviting the general public to subscribe for its shares or debentures. It provides detailed information about the company, its financial performance, and the risks involved in investing.

Types of Companies

Companies are generally classified into two main types:

• Private Company:

  A private company is a company that restricts the transferability of its shares and prohibits invitations to the public to subscribe for its shares or debentures. It typically has a smaller number of shareholders.

  Features of a Private Company:

  • The company name ends with “Limited” (Ltd).
  • It cannot invite the public to subscribe to its shares or debentures.
  • The number of members is usually between 2 and 50.
  • Shares are not freely transferable; they can only be transferred with the consent of existing shareholders or directors.
  • It has a minimum of one director.
• Public Company:

  A public company is a company that can offer its shares and debentures to the general public for subscription. Its shares are usually traded on a stock exchange.

  Features of a Public Company:

  • The company name ends with “Public Limited Company” (Plc).
  • It can invite the public to subscribe to its shares and debentures through a prospectus.
  • There is no maximum limit to the number of members.
  • Shares are freely transferable.
  • It has a minimum of two directors.
  • It is usually listed on a stock exchange.

Distinction Between Public and Private Companies

The following are key differences between public and private companies:

• Name: Private companies end with “Ltd”, while public companies end with “Plc”.
• Invitation to Public: Private companies cannot invite the public to subscribe for shares; public companies can.
• Number of Members: Private companies usually have 2-50 members; public companies have no maximum limit.
• Transferability of Shares: Shares of private companies are not freely transferable; shares of public companies are freely transferable.
• Prospectus: Private companies do not issue a prospectus; public companies issue a prospectus to the public.
• Directors: Private companies need a minimum of one director; public companies need a minimum of two directors.

Teaching Methods/Instructional Techniques

Discussion, Lecture, Demonstration, Question and Answer, Visual Aids

Instructional Procedures

Step 1: Introduction

Time: 5 minutes
Teaching Skill: Set Induction
Teacher’s Activity: The teacher greets the pupils, checks attendance, and reviews the previous lesson on types of business organizations (e.g., sole proprietorship, partnership).
Pupils’ Activity: Pupils respond to greetings and recall previous knowledge.
Learning Point: Pupils connect previous knowledge to the new topic.

Step 2: Meaning of a Company

Time: 7 minutes
Teaching Skill: Explanation
Teacher’s Activity: The teacher explains the meaning of a company as a legal entity separate from its owners, formed to carry on business, and its ability to sue or be sued.
Pupils’ Activity: Pupils listen attentively and ask questions for clarification.
Learning Point: Pupils understand the fundamental concept of a company.

Step 3: Companies and Allied Matters Act (CAMA) 1990

Time: 8 minutes
Teaching Skill: Elaboration
Teacher’s Activity: The teacher introduces the Companies and Allied Matters Act (CAMA) 1990 and states its requirements for company formation, using the chart.
Pupils’ Activity: Pupils highlight the key requirements as presented by the teacher.
Learning Point: Pupils learn about the legal framework governing company formation.

Step 4: Terminologies in Company Formation

Time: 7 minutes
Teaching Skill: Discussion/Definition
Teacher’s Activity: The teacher explains terminologies such as Memorandum of Association, Articles of Association, and Prospectus, describing their contents and purposes.
Pupils’ Activity: Pupils participate in the discussion by asking questions and providing simple explanations.
Learning Point: Pupils understand the meaning and importance of key legal documents in company formation.

Step 5: Types of Companies (Private Company)

Time: 6 minutes
Teaching Skill: Illustration
Teacher’s Activity: The teacher defines a private company and explains its features, giving local examples from the CAC list.
Pupils’ Activity: Pupils state the features of private companies and identify local examples.
Learning Point: Pupils differentiate a private company based on its definition and characteristics.

Step 6: Types of Companies (Public Company)

Time: 5 minutes
Teaching Skill: Comparison
Teacher’s Activity: The teacher defines a public company, explains its features, and gives local examples of public companies.
Pupils’ Activity: Pupils state the features of public companies and identify local examples.
Learning Point: Pupils understand the definition and characteristics of a public company.

Step 7: Evaluation/Review

Time: 5 minutes

Teaching Skill: Questioning/Assessment

Teacher’s Activity: The teacher evaluates the learning by asking the following questions:

1. Define a company.
2. Mention three requirements for the formation of a company under CAMA 1990.
3. Explain the terms: (a) Memorandum of Association, (b) Articles of Association.
4. State two differences between a private company and a public company.

Pupils’ Activity: Pupils answer orally and in writing.

Learning Point: Pupils demonstrate understanding of the lesson.

Step 8: Conclusion

Time: 2 minutes
Teaching Skill: Summarization
Teacher’s Activity: The teacher summarizes the main points of the lesson and assigns homework: “List five private companies and five public companies operating in Nigeria.”
Pupils’ Activity: Pupils copy the homework assignment.
Learning Point: Pupils consolidate their understanding of company formation.

Lesson Keywords

• Company – A legal entity formed to carry on business, separate from its owners.
• CAMA – Companies and Allied Matters Act, the law regulating companies in Nigeria.
• Memorandum of Association – A document defining a company’s constitution and objects.
• Articles of Association – Rules for a company’s internal management.
• Prospectus – A document inviting the public to subscribe for shares in a public company.
• Private Company – A company whose shares are not offered to the public and are not freely transferable.
• Public Company – A company whose shares can be offered to the public and are freely transferable.

Differentiation

For pupils who grasp concepts quickly, the teacher can challenge them to research the role of the Corporate Affairs Commission (CAC) in company formation. For those needing additional support, the teacher will provide simplified explanations and more direct examples, possibly using visual aids extensively.

Note for teachers using this lesson plan

Ensure pupils understand the legal implications of a company being a separate legal entity. Use real-life examples of companies in Nigeria to illustrate the concepts of private and public companies. Emphasise the importance of CAMA in regulating business activities. Encourage interactive discussions to clarify complex terminologies.