A founder is defined as one who undertakes to form a company with reference to a given project and to set it going. Companies and Allied Matters Act defines such a person as a “promoter”. He is regarded as a person who takes part in forming a company… who takes the necessary steps to set it going… except a person acting in professional capacity e.g. lawyer, solicitor, secretary, etc.
DUTIES OF A FOUNDER / PROMOTER.
He is placed in a fiduciary position and must act with utmost good faith.
– A promoter should not allow his interest to conflict with that of the (proposed) company-
– All secret profits must be disclosed to an independent board of the company.
CONSEQUENCES OF INCORPORATION.
Once a promoter / founder incorporates his / her company, it becomes separate from him / her It confers corporate personality to make it a body corporate with power to own property, perpetual succession and common seal…” The company can sue and be sued
This “corporate personality” gives the company a legal personality which is separate and different from that of its members. The Company is also regarded as having perpetual succession and can live beyond the life of its members. The company comes to life on the date of incorporation and dies when it has been finally wound up and dissolved in accordance with the law.
Note however, that in deserving circumstances, the Court may go beyond this separate personality and make the Shareholders liable where there fraud, illegality or unjustified conduct – and other circumstances listed under the law. This is called “lifting the veil”.
Since the Company is a separate entity, how can we identify it’s status and performance?
Usually the financial statements of a company will display the financial position of the company. As at the point of incorporation, the “Capital” will be the relevant legal concern.
Capital has been defined as money that can be used to produce further wealth Capital is the net-worth of a business . The company needs funds to further the purpose for which it was incorporated. Capital/property may be tangible , intangible , fixed or circulating or moveable. These demarcations are not water-tight. For this topic, our main aim is to “put a monetary value” on all such properties. This monetary value represents the “company capital”. The Company may also decide to take a loan from the bank (debt). Under the general Accounting equation, the total Assets of a company is made up if its Equity (share capital) plus Liability.
For legal purposes, a company is to have a Nominal Capital (the Authorized capital amount stated by the company during the registration process) a part of which will then be issued to shareholders (kindly note that other persons may join the company by buying the shares of the company after incorporation). The Paid-Up Capital is then the part of the issued capital that has actually been paid for by the people that subscribed to it. The part that has not been paid for referred to as uncalled capital.