30 Common Terms used in Relation to Companies

General company terms

1. Articles of Association –is an instrument that sets out the rules governing the internal management of the company.
2. Limited Liability – is the restriction on the extent to which members are liable to contribute to the assets of company in case of insolvency.
3. Insolvency – when a company is unable to pay its debts as and when they come due.
4. Member of a Company – a person whose name has been entered into the register of members. It includes; shareholders, subscribers to the memorandum and members of companies limited by guarantee.
5. Director– a person appointed by members of the company to run the company.
6. Dividend – an amount of money paid out to the shareholders from the profits of a company.
7. Corporate Tax – this is a tax levied on the annual income of the company.
8. Annual return – this is a declaration that must be lodged with the company’s registrar yearly. It contains the address of company, details of directors and shareholding.
9. Separate Legal Entity – when a company is registered it becomes a legal person separate and distinct from its members and managers. This provides various advantages:

  1. Perpetual Succession – it can exist for an indefinite amount of time notwithstanding the death or incapacity of its members.
  2. Capacity to contract – a company can contract in its own name.
  3. Common Seal/ Company seal – is an official seal used by companies to execute documents such as share certificates and deeds.
  4. Capacity to sue and be sued –a company can be sued or bring legal proceedings in its own name.

10. Transferability of Shares – shares in a company are moveable property, one may sell them, use them as security for a loan or transmit them in a will.

Terms used in relation to Shares and Capital

11. Share – this is the interest of a shareholder in a company measured by a sum of money for the purpose of determining their rights and liabilities.
12. Ordinary shares – carry one vote per share and are entitled to participate equally in dividends.
13. Preference shares – are shares that have a priority right to receive a fixed dividend before ordinary shares or other classes of shares.
14. Nominal value / par value – is an arbitrary value of a share as stated in a share certificate or statement of nominal capital.
15. Share Premium – is the total amount received by the company for its shares over and above the nominal value of the shares.
16. Share Capital –money a company raises from sale of its shares.
17. Shareholder – is a person that holds shares in a company.
18. Authorized share Capital – this is the maximum amount of capital that a company is allowed to issue to shareholders by its Articles/Constitution.
19. Issued capital – this is the part of the authorized capital that has been offered and/ or taken up by shareholders. It may be fully paid up or partially paid up.
20. Paid up share Capital –this is the amount of money that has already been paid by shareholders in exchange for the shares.
21. Called up Share Capital – this is the amount of money shareholders owe and have not paid for shares they have been issued.
22. Allotment – is the apportionment of the unissued shares of the company to existing shareholders or third parties.

Terms in relation to Meetings

23. General meeting – is a meeting of the members of the company.
24. AGM (Annual General Meeting) is a statutory meeting of the members of a company that is held annually.
25. EOGM (Extraordinary General Meeting) is a general meeting of the company held for any urgent or serious matter that cannot wait till the AGM
26. Board Meeting – This is a meeting of the Board of Directors of the company and is held periodically.
27. Resolution – this is a firmed-up decision made at a general/board meeting of the company.
28. Ordinary resolution – is a resolution passed by a by a simple majority (most of members) of members entitled to vote at a general meeting.
29. Special Resolution – is a resolution passed by a majority of at least 75% of members entitled to vote at a general meeting.
30. Board resolution – this is a resolution passed in a board meeting.

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