Pre-Incorporation Contracts in Nigeria: The Need for Progressive, Expansive, and Less Restrictive Statutory Provisions

Abstract

With the August 7, 2020 introduction of the Companies and Allied Matters Act of 2020  (CAMA 2020) in Nigeria, the tension between preserving confidentiality of the company as opposed to protecting innocent third parties, that has dominated the focus of laws regulating “Pre-Incorporation Contracts” under contemporary company law regimes, remains unresolved—necessitating further elaboration. Therefore, this paper discusses the goal of protecting innocent third parties who may not know that they are contracting with a corporation that either does not exist or may not come into existence at all.  Further, along with the need to protect the company, the paper also critiques the legal effect of standard disclaimers and jurisdictional issues, e.g. under section 21(4) of the Ontario Business Corporations Act, or section 14(4) of the Canada Business Corporations Act, respectively, which provides some protection against personal liability in favour of the promoters. The paper submits that section 96 of CAMA 2020 is “dead on arrival” as it is outdated, restrictive, and archaic in light of the progress made under other commonwealth regimes. Using current jurisprudence and statutes on pre-incorporation contracts, the paper identifies areas which require reform under Nigerian law and provides appropriate suggestions.