In a landmark decision, the Supreme Court of Nigeria reaffirmed a critical legal principle: the existence of a company can only be proven through its Certificate of Incorporation.
This decision, delivered in the case of A. Dikko and Sons Ltd. v. Corporate Affairs Commission, has far-reaching implications for businesses operating in Nigeria and underscores the importance of proper documentation in corporate matters.
Background of the Case
The case arose when the Corporate Affairs Commission (CAC) negligently registered a second company, A. Dikko and Sons Nigeria Limited, with a name similar to that of A. Dikko and Sons Ltd..
This error led to financial losses for the original company, as cheques meant for it were diverted to an account controlled by the promoter of the second company.
The aggrieved company, A. Dikko and Sons Ltd., sued the CAC for negligence. However, the claim was dismissed at the trial and appellate courts because the plaintiff failed to produce the Certificate of Incorporation of the second company to prove its existence.
The Supreme Court upheld these decisions, emphasising that the Certificate of Incorporation is the only legal proof of a company’s existence.
Key Legal Takeaways
- Proof of a Company’s Existence
The Supreme Court unequivocally held that a company’s existence can only be established through its Certificate of Incorporation. Without this document, no claim involving the existence or registration of a company can succeed in court. - Statutory Duty of Care by the CAC
Under the Companies and Allied Matters Act (CAMA), the CAC has a statutory duty to avoid registering companies with identical or deceptively similar names. However, for any party to claim negligence against the CAC, they must first prove the existence of the allegedly conflicting company through its Certificate of Incorporation. - Burden of Proof
The Court reiterated that in civil matters, the burden of proof rests on the party asserting a claim. In this case, A. Dikko and Sons Ltd. failed to discharge its burden by not producing the Certificate of Incorporation of the second company.
Implications for Businesses
For Nigerian businesses, this decision highlights the importance of:
- Vigilance in Protecting Company Names
Entrepreneurs and corporate entities must conduct thorough due diligence before and after registering their businesses. Regular checks at the CAC can help identify and address any potential name conflicts. - Maintaining Proper Documentation
The Certificate of Incorporation is not just a formality; it is the foundation of a company’s legal identity. Businesses must ensure that this document is readily available for any legal or regulatory disputes. - Proactive Responses to Name Conflicts
If you suspect that another company has been registered with a name similar to yours, immediately request the Certificate of Incorporation of the conflicting entity from the CAC. This document is crucial if you plan to pursue legal action.
Common Misconceptions Addressed
- Misconception 1: “The CAC is automatically liable for damages in cases of name conflict.”
Reality: While the CAC has a statutory duty, a claimant must first prove the existence of the conflicting company through its Certificate of Incorporation. - Misconception 2: “The court can infer a company’s existence without its Certificate of Incorporation.”
Reality: The Supreme Court has made it clear that the Certificate of Incorporation is the only legally recognised proof of a company’s existence.
Conclusion
The decision in A. Dikko and Sons Ltd. v. CAC is a stark reminder of the importance of corporate compliance and documentation. Businesses must be proactive in protecting their legal identity to avoid costly disputes.
