COMMERCE

SS 2 SCHEME OF WORK
WEEK TOPICS
1 Consumer protection
2 Instruments of consumer protection
3 Business Organizations
4 Holdings/Trust (Limited Liability Companies)
5 “
6 Cooperative Societies
7 Public Enterprises
8 “
9 Trade Association
10 Chamber of Commerce
11 Insurance
12 “
13 Business and its Environment
BUSINESS ORGANISATIONS

Objectives of the lesson:

a. Explain the meaning of Business organizations

b. State the Types
c. Explain the procedures of Formation of Limited Companies

BUSINESS ORGANISATIONS

A Company is a legal person or entity created by the association of a

number of people in accordance with the law for purpose of a defined
object. A company can also be defined as an artificial person and it is more
than an association of individuals. Examples of Companies in Nigeria are:
Nestle foods Plc., Cadbury Plc. etc.

KINDS OF COMPANIES

1. Companies Limited by Shares: These are companies that usually sell

shares to the members of the public. The Liability of the members are
limited to the full value of the shares they have acquired and in the
case of liquidation the members should be liable to only the money
invested. They engage in business activities because they have been
credited for profit making. Section 21 (1) of the company and Allied
Matters Acts of 1990 defined a company limited by shares as a
company having the liability of its members limited by the
memorandum to the amount, if any unpaid on the shares held by
them.

2. Company Limited by Guarantee: These are companies that are not

formed with the intension of engaging in trading activities. They are
often formed by societies to promote and develop certain interest or
profession. The liabilities of members are limited by the memorandum
of association. Guarantee companies are usually formed for the
furtherance of art, religion, charity and so on.

3. The unlimited companies: in an unlimited company, the liability of a

company is usually unlimited and he or she may be liable to the full
amount of the company’s debt in case of liquidation. The members
will contribute more money including their capital to settle the debt of
the company. Section 21(1) of the company and Allied Matters
defines an unlimited company as one not having any limit on the
liability of its members.

Types of Limited liability company

There are two types of limited liability company

1. Private limited liability company and
2. Public limited liability company
 1. Private liability company: this is formed by an association.
Company and Allied Matters (CAMA) defines it as a company
that limits the number of its members to 50. It restricts the right
to transfer its shares.

Features of Private Companies

1. It restricts the transfer of its shares

2. The number of members is between 2-50
3. It does not invite the members of the public to subscribe to its shares
4. The company’s name must be abbreviated to LTD.

2. Public Liability Company PLC: Sections of CAMA 1968 defines

it as a company which allows the public to subscribe to its
shares and whose shares are transferable.

Features of Public Limited Companies

1. It allows the members of the public to subscribe to its shares
2. It ends with PLC
3. It must be formed by at least seven people but no maximum
number is prescribed
4. It allows shares to be transferred

CHARACTERISTICS OF LIMITED LIABILITY COMPANY

1. Legal Entity/Personality: it means that it has legal capacity to

enter into agreements or contracts, assume obligations, incur
and pay debts, sue and be sued in its own rights and to be held
responsible for its actions

2. Limited Liability: their liability is limited to the amount

contributed in the business. In case of liquidation their personal
belongings will not be affected.

3. Perpetual Succession: The business enjoys continuous

existence even when a shareholder dies.
4. Formation: The limited Liability Company must follow some
special formalities before registration. In order to be
incorporated, they must fill the Article and Memorandum of
Association with the registrar of companies.

5. Ownership and Control: The management of the business is in

the hands of the board of directors while the shareholders are
regarded as the owners of the company, so ownership is
separated from management.

6. Specific Line of Business: they are authorized by law to carry

on business specified in the object clause of the provision in a
company’s constitution stating the purpose and range of
activities for which the company is carried on)

7. Preparation/Publication of Annual Accounts: the government

compels it (Limited liability company) to audit and publish in
Newspapers and make a copy available to the registrar of
companies.

DISTINCTION BETWEEN PRIVATE AND PUBLIC LIMITED

LIABILITY COMPANY

S/N PRIVATE PUBLIC

1. NUMBER: of people to form
it, is 2-50
2. APPEAL TO PUBLIC: The
public is not allowed to
subscribe to its shares
3. TRANSFERABILITY OF
SHARES: Shares are not
transferable without the
consent of members
4. PUBLICITY: Their Annual
Accounts are not publicized
but must Lodge a copy with
the registrar of companies
5. SIZE: They are small or
7- infinity
The public is allowed to
subscribe to its shares
Members of the public are
allowed to subscribe to its
shares, so shares are
transferable
They are bound to publish
their accounts and to
register a copy with the
registrar of companies.
They are large in size with
 medium in size and have Large capital too
limited capital
6. OWNERSHIP AND It is owned by the
CONTROL: owned and shareholders and
controlled by those who controlled by the board of
contribute the capital directors selected by them
7. STOCK EXCHANGE Their shares can be
MARKET: Their shares bought and sold in the
cannot be bought and sold stock exchange market
in the stock exchange
market

FORMATION OF A LIMITED LIABILITY COMPANY

STEPS IN THE FORMATION:

Step 1. The promoters (a person who carries out the necessary

preliminary work in the formation of a company) or founders would devise a
scheme of capitalization (investing funds that enable your business to
operate) bearing in mind the cost of formation, Assets to be bought and
working capital (capital that is used in the day to day trading operation).

Step 2: The promoters are required to secure the services of a solicitor to

prepare certain documents to be filed with the registrar of companies.
The documents are:

1. The Memorandum of Association

2. The Article of Association
3. Statement of Nominal Capital (the amount of capital in
shares a company is legally authorized to make available
to shareholders)

Step 3: The documents are signed and lodged with the registrar of
companies.

MEMORANDUM OF ASSOCIATION: The Memorandum of Association is a

document forming the constitution of a company defining its objectives and
the powers with regards to its dealing with the outside world. It is the
document containing rules and regulations which govern the external
relationship of a company with outsiders, once registered the Memorandum
becomes a public document.

A Memorandum of Association contains the following information:

1. The name of the company which must end with the word limited
2. The registered office of the company
3. The object of the company
4. The amount of authorized capital (the maximum amount of share
capital that the company is authorized by its constitutional documents
to issue or allocate to shareholders) and the various shares into
which it is divided
5. A declaration that the liability of the members are limited
6. The names of the founders /promoters of the company and the
number of shares taken up by them
7. Status of the company, it can either be private or public
8. The restriction, if any, on the power of the company.

ARTICLES OF ASSOCIATION: The Article of Association is a document in

which the regulations which govern the internal management of the
company’s affairs, duties, rights and powers of the members are stated.it
compliments the Memorandum of Association.

Contents of the Article of Association

1. Method of issue of capital

2. Method of holding meetings
3. Defined powers and duties of directors
4. The rights of shareholders
5. How directors are to be elected
6. How auditors are to be remunerated
7. Method of sharing dividend
8. Transfer and forfeiture of shares
9. Method of audit.

PROSPECTUS: A Prospectus is a document issued by the public

companies inviting the members of the public to subscribe to the shares of
a company. A copy of the prospectus will be signed by the directors in
writing and approved by the registrar of companies.

Section 650 of company Act defines a prospectus as any notice,

Advertisement, circular which invites the members of the public for
subscription or for the purchase of the shares of the company. It contains:

1. Company’s past history

2. Information about the company and future prospects
3. Amount of the capital offered for subscription
4. Particulars of directors
5. Promoters remuneration
6. Date of opening the lists
7. Nature of capital offered for subscription
8. Amount payable on allotment of each share
9. The amount of founders shares

Step 4: After going through the documents, the registrar of companies then
issues a certificate of incorporation to the company. This gives the
company power to commence business.

Step 5: A private company can commence business after receiving the

certificate of incorporation, but a public liability company cannot commence
until it receives the certificate of trading.

Certificate of Incorporation:

Certificate of incorporation which confers legal status on the company to

commence business is issued by the registrar of the companies, i.e. the
company has put on a veil of incorporation. The certificate is given out as
evidence that all the requirements of the Act in respect of registration have
been complied with by the company and is therefore duly registered under
the Act. It contains the name of the company, registration number and the
signature of the registrar.

Section 37 of the company Act contains the effects of incorporation as:

 1. Right of the Company to own properties which are separated from the
members
2. Right of perpetual existence
3. Right to sue and be sued
4. Right to transfer shares
5. Limited liability
6. Right to borrow

Certificate of Trading
Certificate of trading is the document which allows the company to
commence business activities. It is issued to the public liability Company to
commence operation after the company had been given the certificate of
incorporation. If it is a private Company, it is at liberty to commence
business forthwith without the certificate of trading.

ADVANTAGES OF LIMITED LIABILITY COMPANY

1. Legal Entity: Limited liability companies have legal existence. They

have distinct personality from the owners; hence it can sue and be
sued in its own name.
2. Perpetual Existence: There is continuity in a limited liability company.
The death or withdrawal of a member cannot put an end to the
business.
3. Limited Liability: Their liability is limited to the amount invested as
capital in the business. Private properties will not be affected.
4. Large Capital: They can raise enough capital by selling more shares
or debentures to the public
5. Transferability of Capital: shares of a public limited company can be
easily transferred without having an effect on the business operation.
6. Loan Facilities: Many banks prefers to grant loan to limited liability
companies than other forms of business units because there is no
likelihood of default in payment
7. Economies of Large Scale Production: Limited liability company have
sufficient capital for expansion which can lead to mass production
8. Democratic in Nature: In choosing the board of directors.
Shareholders have the right to vote or be voted for at the Annual
General Meeting.
 9. Specialization in Management: There is greater specialization
because the owners are shareholders while the control and
management of the business is vested in the hands of board of
directors who have technical abilities than the owners.

Disadvantages of Limited Liability Company

1.Lack of Privacy: Public Limited Liability Company lacks privacy
because they are mandated by the registrar of companies to
publish its annual audited account to the public. This made it
possible to maintain secrecy
2.Conflict of Interest between Shareholders and Management:
There is the conflict of possibility between the shareholders,
directors and staff which may affect the efficiency of operations of
the business
3.Slow Decision-making: Decision-making is slow because of
wider consultations and discussions in the management hierarchy.
4.. Ownership is Separated from Management: The owners of the
business have little or no say in the affairs of the business and the
people in the helm of affairs who are not the owners may not put in
their best

5. Hard to Establish: The procedures and formalities involved in

registration is very hard and complicated.

6. Payment of Large Corporation Tax: They are saddled with the

heavy tax burden arising from profit declared.

7. Non-flexibility: It is not Flexible, that is it cannot venture into

any other kind of business except the one stated in the
Memorandum of Association.

8. Too much capital for formation: it requires a lot of capital for

establishment.

SOURCES OF CAPITAL FOR LIMITED LIABILITY COMPANY

1. Sale of Shares
2. Bank loan and overdrafts
 3. Issuance of Debenture for subscription
4. Retained profit: This is the profit that is not distributed as
dividend which can be used for expansion of the business.
5. Trade credit: limited liability companies can obtain credits from
suppliers then pay later.
6. Equipment leasing: this is when asset is purchased by
arrangement for a finance company to finance it or a leasing
company. That is the equipment is lent to the company for a
particular period of time in return for regular payments.

SHARES

A Share is a part of a company which a member of the public had acquired

at a price. It is the interest which a shareholder has in a company. Section
650 of the company’s act of 1968 defines a share as the interest in a
company’s share capital of a member who is entitled to share in the income
of such a company.

RIGHTS OF SHAREHOLDERS

1. Right to vote at meetings

2. Rights to dividends
3. Right to receive notice of general meetings
4. Right to appoint proxy to represent them at meeting(authority to
represent someone else in voting)
5. Right to participate in the distribution of Assets in the event of winding
up

CLASSES OF SHARES

 Preference Shares
 Ordinary Shares
 1. PREFERENCE SHARES: it is a share that has the priority,
(more important) in terms of dividend payment and repayment
of capital in the event of winding up. They have a fixed rate of
dividends. It is a share which entitles the holder to a fixed
dividend whose payment takes priority over that of ordinary
share dividend. They are classified into:

a. Cumulative preference shares

b. Participating preference shares
c. Redeemable preference shares
d. Non- cumulative preference shares
e. Non- participating preference shares

FEATURES OF PREFERENCE SHARES

1. They have no voting rights

2. Priority in terms of dividends(holders receive dividends before others)
3. Fixed rate of dividends
4. Repayment of capital(they are entitled to capital first when the
business is winding up)

1. Cumulative preference shares: they receive arrears of

dividends not paid before other preference shares would
receive them. That is when no profit is declared their
dividends will be carried forward to the next year.

Features of Cumulative Preference Shares

1.They receive arrears of dividends
2. Fixed rate of dividends
3. They have no voting right

2. Participating Preference Shares: these are Shares which are

entitled to further percentage of dividends (shares) after the
ordinary shares have received a specified percentage of profit.

Features of Participating Preference Shares

 a. They usually receive dividends before ordinary shares
b. Fixed rate of dividends
c. They participate in further dividends after all others have been paid
alongside ordinary shares.

3. Redeemable Preference Shares: the owners of the business

can buy back these shares after some time. They are issued to
finance a particular project. They are shares which have prior
claims to the dividends before all other preference shares. The
redemption of preference shares must not be regarded as
amounting to reduction of capital.

Features of Redeemable Preference Shares

1. They are shares which have prior claim

2. The owners of the business can buy back the shares after
some time
3. They are used to finance a particular project

4. Non – Cumulative Preference Shares: No dividend will be paid

that year or carried forward, the dividends do not accumulate
from one year to another. If a company fails to pay dividends in
a particular year, no dividend will be paid for that year.

Features of Non-Cumulative Preference Shares

1. The dividends can’t be carried forward

5. Non–participating preference Shares: it is the opposite of

participating preference shares. They are not entitled to further
dividends after the ordinary shares have been paid.
 2.ORDINARY SHARES: Ordinary Shares is also called
Equities. The Ordinary shareholders are the real owners of the
business. The shareholders are the risk bearers and they
receive their dividends after all other shares have been paid.
They can vote and be voted for. They have no fixed rate of
dividend.

Features of Ordinary Shares

1. They receive their dividends after all dividends have been

shared
2. They have no fixed rate of interest
3. They are the risk bearers
4. They have voting rights
5. They are the real owners of the business

They can be divided into:

1. Deferred or Founders’ Shares

2. Preferred Ordinary Shares

1. Deferred or Founders’ Shares: Deferred or Founders’ Shares are the

shares which are entitled to the remainder of the profit after all other
shares (preference and ordinary) have been made. They are usually
issued to the founders or promoters of the business.

Features of Deferred Shares:

6. They have more voting rights

7. They are issued to the founders of the business
8. The holders are entitled to the remainder of the dividends
after all others have been paid.

2. Preferred Ordinary Shares: they receive dividend after the

preference shares have been paid. They have preference over other
classes of ordinary shares.
RAISING OF CAPITAL (SHARES): Companies can issue its share through
the following:

1. By Prospectus:

2. By offer for sale: the whole issue of shares is allotted to an issuing

house (merchant bank, finance house) which offers them to the public
by means of a document known as, offer for sale.

3. By placing: this is a method of issuing securities through an

intermediary such as a firm of stock brokers. The intermediary will
endeavor to place the issue among its institutional investors.

4. By a right issue: here a company is selling to existing shareholders

only and they buy at favorable terms.

5. By introduction: the company concerned can apply to the stock

exchange for a new issue of shares.

HOLDING COMPANY: A Holding Company is a business

organization that own so much stock in another company that
it controls the other company. The Holding company can
consist of partnership, a limited liability company or other
form. A holding company exist to hold other companies shares.
It usually doesn’t produce goods and services. Its purpose is to
hold assets. First bank Holding Company Nigeria plc.
CARTEL AND TRUST
A Cartel is usually a monopolistic type of enterprise established
originally by producers of similar products for the main purpose
of restricting output of members in order to keep up the price
of their products. Cartel is an association of independent
producers, who are given certain quotas of the commodities to
produce; it can be increased or decreased depending on the
market situation. Prices can be increased by cutting output
while an increase in the output will force the price down. Cartel
originated from Germany. Example of Cartel is: Organization of
Petroleum Exporting Countries (OPEC) regulates oil prices;
International Air Transport Association etc.
OPEC members meet regularly to decide how much oil each
member of the cartel will be allowed to produce. Once a cartel
is formed, prices can be fixed for members so that competition
on prices is avoided, in this case, cartels are also called price
rings.
FEATURES OF A CARTEL
1. It is monopolistic in nature
2. It is established by independent producers of similar
products
3. They allocate quotas to members
4. They restrict output so as to force the price up
5. Competition is completely removed
REASONS FOR FORMING A CARTEL
 1. To keep up the price of their products
2. To ensure higher profit for members
3. To regulate output ( no excess production)
4. To reduce waste by eliminating completion: (members
come together to agree on output and common price
which reduces the fear of competition).
5. The need to increase profit: when output is restricted in
order to increase price.

TRUST

A trust is an amalgamation (combining or merging) of

different competing firms in different lines of businesses
under a single control. In trust, the companies will still
retain their identities but the trustee (the individual or
member of a board that is given control or power of
administration of property) will take over the management
and control. A trust is vertically integrated in nature and
the amalgamated firms are brought under a central
control. Certificate will be issued to all members. It
originated in America.
Example of Trust is Iron and Steel Trust. The major aim is
to maximize profit and ensure efficiency in production.

Vertical integration simply means firms in different lines of

business combining in order to maximize profit. E.g. a tyre
manufacturing company combining with the source that
gives them raw materials. Integration can be forward or
backward. e.g. when a car manufacturing company
acquires a tyre manufacturer it is said to be backward
integration and vice versa

DIFFERENCES BETWEEN A CARTEL AND A TRUST

Cartel
1 It is voluntary
2 Cartel is horizontal,
because similar companies
are coming together to
maximize profit.
3 No certificates are issued
to members
4 The producers are given
quotas
Trust
Trust is a complete merger
Trust is vertically
integrated since
companies in different line
of business are coming
together to benefit from
each other
Certificates are issued to
members
There is no quota system
CONSORTIUM
A Consortium is a group of independent firms formed to work
on a particular project which requires large resources and is too
complex for a single firm to undertake. It is an association of
firms that pool their resources together to finance a project
they cannot embark upon individually because of its complexity
or the capital outlay.
]
REASON FOR FORMING A CONSORTIUM
1. To finance a project which requires large capital outlay
2. When the project is complex in nature.

STOCK
Stock is a bundle of shares or mass of capital which can be
transferred in fractional amount (small amount). Stocks are
always fully paid. A stock is a collection of shares into a bundle.
Stocks are not issued but converted from shares issued.
DIFFERENCE BETWEEN SHARES AND STOCKS

SHARES STOCK
1 A share is a unit of capital A stock is a mass of capital,
transferable only in their any of which is transferable.
entity
2 Shares are issued Stocks are converted from
issued shares
3 Shares are numbered serially Stocks are not numbered
serially
4 Shares may be partly paid Stocks are always fully paid

DEBENTURES (Loan Capital)

A Debenture is a bond acknowledging a loan generally under
the company’s seal, undertaking to repay the stated sum on or
before a certain date and bearing a fixed rate of interest.
Debenture holders do not usually collect dividends. In other
words, a Debenture is a document setting out the terms of a
loan to a company. That is a certificate of indebtedness.
Holders of debenture cannot share from the profit of the
company. A company may borrow by issue of debentures, this
can form the loan capital and the holders of debenture are
creditors to the company.

TYPES OF DEBENTURES
1. Mortgage Debenture: it is a debenture secured on the
property of an organization, if the company fails to pay on
 the agreed date; it entitles the holder to take over the
assets.
2. Simple or naked Debenture: Where there is no charge on
the company’s assets or properties then the debenture is
described as naked or simple.
3. Redeemable Debenture: they are repayable at a date
which has been fixed or determined.
4. Irredeemable Debenture: this is payable only in the event
of some specified contingency such as winding up of the
company. The irredeemable debenture cannot be cashed
at any time and it is bought solely for only the interest
payment.

RIGHTS OF A DEBENTURE HOLDER

1. Right to interest: A Debenture holder can sue for the
principal and any interest which is accruable.
2. The debenture holder can present a winding up petition to
the company or case against the company.
3. It can show proof in the debt of the winding up
4. The debenture holder may appoint a receiver.

DIFFERENCES BETWEEN DEBENTURES AND SHARES

DEBENTURES SHARES
1 Debenture is a certificate of
indebtedness
2 It is a loan
3 The debenture holder is a
creditor
4 The holder receives interest
before profit distribution.
Share is a unit of capital
It is not a loan
A shareholder is one of the
owners
The holder receives dividends
and waits for the distribution
of the profit.

MERGER
Merger is the coming together or amalgamation of two or more
firms or companies to form a new company by merging; the
new company will grow in size and maintain large scale
production.
REASONS FOR MERGER
1. it eliminates competition
2. To lessen the rigors/difficulties of competition.
3. Acquisition of Technical knowhow
4. Opportunity of raising capital
5. Large scale production
6. Guaranteed supply or outlets
7. Opportunity to acquire larger share of the market
8. To prevent liquidation of a failing company
9. Tax saving
 10. Diversification: when a corporation
merges with another in a totally unrelated line of business
just to diversify and reduce risk.

PROCEDURE FOR MERGER

1. The board of each firm is required to adopt a resolution
approving the merger. This will set out the following:
a. Names of the combining firms
b. New name of the company
c. Methods and basis for converting securities
2. The merge plan must be approved by a two-third
shareholders of both firms
3. All necessary documents are to be submitted to the
appropriate office
4. If all the papers or documents are in other, the registrar
will issue a certificate of merger.

THE EFFECTS OF MERGER

1. The firm becomes a single one.
2. All the combining parties cease to exist
3. The new corporation will possess all the rights, privileges
and assets of all the combining corporations.
4. The new company acquires all the properties (Assets)
 5. The new company acquires all the Debts (liabilities) and
obligations.

LIQUIDATION AND WINDING UP

Liquidation is the process of winding up or bringing a company
to an end. It can be as a result of completing the business for
which it was created or when it is unable to meet its obligation.
It is synonymous to public limited liability companies.
VARIOUS FORMS OF LIQUIDATION
1. Voluntary Liquidation: this is the winding up of a company
by a resolution of its shareholders. They can wind up if the
purpose has been completed or if the company continues
to run at a loss.
2. Voluntary winding up, subject to the court: this is a
voluntary winding up when the shareholders ask the court
to do so or supervise the winding up.
3. Compulsory winding up: it is involuntary. It is the
liquidation of a company as a result of a court order. As a
result of not being able to raise capital or pay its debts.
4. By order of the court without winding up: A court can
order a company to stop operating if the company was
formed for illegal purpose.
 5. Name is removed from the Register: This is when a
company’s name is struck out of the register by the
Registrar of companies.
6. Insufficient shareholders: if the number of shareholders
falls below the statutory minimum.
7. Failure to commence operation on time: if the business
does not commence business within a year of its being
incorporated.

CO-OPERATIVE SOCIETY
A Cooperative society is a voluntary organization in which
individuals, businessmen, and traders with common interest
pool their resources together to promote the economic and
welfare interest of their members. It is owned and controlled
by the members.
CHARACTERISTICS OF CO-OPERATIVE SOCIETY
1. Perpetual Existence: There is continuity in cooperative
societies. Death of a member cannot bring the
organization to an end.
2. Registered as a Limited Liability: The Liability of members
is limited to the amount contributed or shares held by
individual shareholders.
3. Profit is shared based on patronage
 4. The objective is to promote members interest
5. Managed by a committee
6. Capital is provided by members
7. Owned by people with common interest
8. Democratic in nature: each member is entitled to one
vote, irrespective of the total shares

HISTORY OF COOPERATIVE MOVEMENT

The history of cooperative movement cannot be completed
without mentioning Robert Owen, 1771-1858. He established
the first cooperative society at New Lonark, England. The
producer cooperative only had little success in England at that
period.
The success of retail cooperative society is dated back to the
one started by Rochdole pioneers in 1844. A group of twenty
eight weavers launched it for their benefit. The objective was to
raise capital to fund a provision and clothing store and to
provide employment to members. The first attempt at
cooperation in production in Nigeria was in 1922 when a
producer cooperative was established by cocoa farmers, the
objective was to get reasonable price for their products. In
recent years there has been tremendous growth in the society
with the aim of providing constant food supply at reduced
prices.
Presently, cooperative societies can be found in virtually all
commercial activities, which has contributed to the
development of the Nigerian economy by increasing people’s
standard of living.

TYPES AND FORMATION OF COOPERATIVE SOCIETY

1. Wholesale cooperative
2. Retail cooperative
3. Producer cooperative
4. Credit and thrift cooperative
5. Multipurpose cooperative
6. Consumers cooperative

1. Wholesale cooperative: it is formed by small scale

wholesalers who purchase goods in bulk from the
manufactures at a reasonable price and sell in small
quantities to retail cooperatives. They also settle disputes
among the members.
2. Retail cooperative Society: it is a contractual organization
formed by many small independent retailers. They pool
their resources together, buy in bulk and sell at lower
prices to their members.
3. Producer cooperative society: It is formed by producers of
similar products who organize cooperative production and
undertake joint marketing of the products on wholesale or
retail basis. They share useful information. e.g. Farmers
can buy implements such as equipment’s, cutlass,
fertilizers etc. in bulk and sell at a cheaper rate to
members.
4. Credit and thrift society: it is an association of low-income
earners who jointly pool large resources or funds together
by contributing on a weekly or monthly basis. This type of
society encourages savings habits among their members
and grant loans to the members out of the accumulated
fund.
5. Multi-purpose cooperative society: it is a society formed
by existing cooperative societies. They undertake any form
of cooperative activity that is profitable to the society.
6. Consumer cooperative society: Consumer cooperative
society is owned and operated by a group of ultimate
consumers who pool their resources together to purchase
goods and services in large quantity and distributes
primarily to its members.
ADVANTAGES OF COOERATIVE SOCIETIES
1. Encouragement of savings
2. It is democratic in nature i.e. each member has equal say
in the organization
3. Settlement of disputes among members
4. Perpetual existence: they are registered under relevant
laws so, death of a member cannot bring the society to an
end
5. Ensure low price of goods
6. Renders financial assistance to members
7. Improves members living standard by providing goods
which they cannot buy on their own
8. They educate their members
9. They can receive loan facilities from cooperative banks

DISADVANTAGES OF COOPERATIVE SOCIETY

1. Problem of loan recovery: loan might be difficult to
recover from members
2. Opportunity for embezzlement of fund: the elected
member can misappropriate the funds of the society.
 3. Financial problem: They lack adequate capital to run the
society, thereby relying on the members contributions
which may not be enough.
4. Low Dividend: People invest in other areas instead of
cooperative societies because of low level of dividends.
5. High level of illiteracy: Training and education of members
is difficult due to high level of illiteracy.
6. Weak unspecialized management since the management
consists of non-specialist and part-time managers.

SIMILARITIES BETWEEN COOPERATIVE AND COMPANY

1. Both are legal Entities
2. Members buy shares
3. They hold Annual General meetings (AGM)
4. Both are registered
5. The shareholders receive dividend.

DIFFERENCE BETWEEN COOPERATIVE SOCIETY AND LIMITED

LIABILITY COMPANY
COOPERATIVE SOCIETY LIMITED LIABILITY COMPANY
1 Formation: may only be Must be registered and
registered under incorporated under the
 cooperative laws. company Act
2 Management and control: The shareholders elect the
Elected committee manages board of directors.
the affairs of the movement.
3 Registration: Members pay Registration fees are not
registration fees apart from paid after paying fully for the
shares shares held.
4 Profit distribution: Surplus Profit sharing is based on
is divided on patronage shareholding
basis. Profit is not subject to Surplus is divided in
income tax proportion to shareholding.
Profit is subject to income
tax.
5 Aim: To promote members To make profit
welfare
6 Rights of members: Members have controlling
Members have equal voting effects on the basis of their
rights. shares

Ministry of Cooperative society.

CREDIT UNIONS AND THRIFT SOCIETIES

Credit unions and thrift societies may be referred to as the
coming together of a group of people with common interest
who have agreed to pool their resources together from which
loan facilities are made available to members at an agreed rate
of interest. The contributions or savings of members may be
weekly, monthly or quarterly.
AIM OF CREDIT UNION AND THRIFT SOCIETIES
1. To encourage saving habit among members
2. To provide loan at very low interest rate
3. To assist in asset acquisition by members
4. To ensure payment of dividends to members
5. To assist members who are in need.

SOURCES OF FUNDS TO CREDIT UNIONS AND THRIFT SOCIETIES

1. Shares purchased by members
2. Registration fee paid by incoming members
3. Fines imposed by defaulting members e.g. Absence from
the meeting attracts fine
4. Loan obtained from financial institutions
5. Part of dividends call retained earnings or profit
6. Interest of loan given to members.
PUBLIC ENTERPRISES
Public enterprise may be defined as a large scale business
organization set up, owned and financed by the government of
a country mainly to provide services to the members of the
public. It can also be referred to as: public corporation or
statutory corporation. e.g. Nigerian Ports Authority, Nigerian
Telecommunications limited (NITEL) etc. it is ran by government
through the Tax paid by the people.
FEATURES OR CHARACTERISTICS OF PUBLIC
CORPORATION/ENTERPRISE
1. It is owned and financed by government
2. It is established by the act of parliament or decree
3. They are established to provide essential services to the
general public
4. It is not profit oriented
5. Controlled and managed by the government
 6. Monopolistic in nature: that is they are the sole provider
of certain services
7. Employees are public servants
8. Requires large capital to set up
9. It is a legal entity

ADVANTAGES OF PUBLIC CORPORATION

1. Provision of infrastructural facilities: e.g. roads, school,
Railway, electricity etc.
2. Availability of large capital for Expansion
3. There is continuity: perpetual existence
4. Provision of employment opportunities
5. Legal entity: It can sue and be sued
6. Ensure avoidance of Exploitation of consumers
7. Accountable to the public: since they submit their annual
reports
8. Generation of revenue from electricity bills, water rates
which can be used to finance other projects.
9. Enjoyment of large scale production through the
availability of large capital, production can be enhanced
and increased.

DISADVANTAGES OF PUBLIC CORPORATION

1. Requires large capital to establish
2. Government interference: Government can appoint
unqualified and incompetent people as members of the
board.
3. Inefficiency in operation: This can be caused by lack of
competition
4. Danger of Monopoly: They can abuse the privilege given to
them. Rail services.
5. Bureaucratic Tendencies and Red Tapism: It may be
difficult to make decision since it has to pass through many
people before approval.
Bureaucratic: is a system of government in which most of
the important decisions are taken by state officials rather
than by elected representatives. Red tapism refers to
excessive regulation or rigid conformity to rules that is
considered redundant or bureaucratic and hinders or
prevents actions or decision making.
6. Corruption and Mismanagement: bribery/ embezzlement
of the nation’s resources.
7. Not profitable: since they are too large and complex to
manage.
8. Lack of sense of responsibility: employees treat
government work with levity or carefree and not
committed.
 9. Lack of privacy: due to publication of annual reports to the
public.
10. It is wasteful.

REASONS FOR THE ESTABLISHMENT/ OWNERSHIP OF PUBLIC

CORPORATION/ ENTERPRISE
1. High capital requirement
2. Generation of revenue
3. To provide infrastructural facilities
4. To prevent monopolistic tendencies
5. Provision of essential services e.g. Roads, schools etc.
6. To prevent or reduce foreign dominance of the economy
7. For strategic (deliberate) and security reasons they cannot
be left in the hands of private individuals e.g. Port (Air and
Sea)
8. To provide employment opportunities.

TYPES AND FORMATION OF PUBLIC ENTERPRISES

1. Public Corporations: They are owned and established to
manage state owned businesses and they are also
established by an act of parliament or decree. They are
controlled by board of directors and a minister, the overall
controller, appointed by the government. e.g. NITEL
 2. Quasi Government Owned Enterprises: They are
government departments which perform some
commercial functions. They are responsible to the
government through the minister. e.g. Hospitals

3. State Government Owned Enterprises: They are

enterprises established and controlled by the state. The
enterprises run businesses which are best suited for
particular area or on a small scale. e.g. Lagos state
transport corporation and Lagos state Water Corporation.
State Government owned Enterprise are established by
edicts or decree/order/command (an official order or
proclamation by a person in authority.

4. Local Enterprises: They are established by bylaws (bylaws

are local laws made by a company or society to control the
actions of its members e.g. A bylaw banning public
smoking) and managed by local government to provide
and administer some services like: Health, Recreation,
Education, Abattoirs etc. some are located in rural areas to
facilitate development of such areas.

SPECIFIC PROBLEMS ASSOCIATED WITH PUBLIC CORPORATIONS

 1. Political instability
2. Frequent Government interference
3. Lack of qualified personnel
4. Negative attitude of workers
5. Mismanagement of finance
6. Poor salary structure

DIFFERENCE BETWEEN PUBLIC CORPORATIONS AND PUBLIC

LIMITED COMPANIES
Public Corporation Public Limited
Company
Ownership The government Shareholders
:
Formation: Act of Parliament or Incorporation
Decree /by law/legislation
Control: The Minister will appoint Board of directors are
board of directors elected by
shareholders
Capital: Government and through Provided through
grants (a grant is a sum of shares and debentures
money given by a
government or other
organization for a
particular purpose e.g. a
research grant. It can be
in form of donation,
 contribution or award etc.
Aim: Provision of essential To make profit
services

SOURCES OF FINANCE/CAPITAL TO PUBLIC ENTERPRISES

1. Loans and overdrafts to expand their operations
2. Internally generated revenue: for instance, Lagos state
university teaching hospital generates a lot of money from
patients.
3. Grant from government: They receive budgetary allocation
from the government
4. Grants from international financial institutions: financial
institutions established by more than one country thus
subject to international laws. Its owners / shareholders are
generally national government e.g. world bank Group,
European investment bank, or
5. Grants from foreign countries.
6. Interest on fixed deposit with banks

TRADE ASSOCIATION
It is a voluntary association of traders, producers and they
are in the same line of business/trade. They come
together and the main aim is to protect and safeguard the
interest of the members as well as their occupation. It is
also a group of firms in the same trade. It is usually
regionally based to provide services for their members and
to advance their interest. They are usually funded by the
subscription made by the members. Examples of trade
associations are: Garri sellers Association, Tailors
Association, Yam sellers Association, Idumota spear part
dealers Association etc.

AIMS AND OBJECTIVES

1. To ensure their members provide good quality service
2. To promote interest of their members
3. To maintain professional ethics/principle, rule of
conduct/rights and wrong of their line of trade
4. To create uniformity in the way their members deal with
people
5. To act as pressure groups (a group that tries to influence
public policy in the interest of a particular cause) in
order to influence some government policies e.g.
Nigerian medical Association, Nigerian union of
Teachers, Nigerian union of Road Transport Workers
etc.
6. They assist members who are in need
7. To supply members with information about
developments in their line of trade.
FUNCTIONS OF TRADE ASSOCIATIONS
1. They promote members welfare
2. Provision of technical information regarding their trade:
e.g. Laws affecting their trade
3. Promote and safeguard members interest
4. Settling of disputes among members
5. Ensure uniformity in their mode of operation
6. Advertise on behalf of their members
7. Ensure maintenance of standard: it draws up standards for
members which must be followed
8. To educate members about latest developments in their
line of trade
9. Promotion of research work on ways of improving their
trade operations which cannot be individually afforded by
members.
10. To supply their members information
about credit facilities
CHAMBER OF COMMERCE
It is an association of merchants, manufacturers and
businessmen from various line of businesses. They come
together in a city or town with the aim of representing and
protecting their business interest. It is not restricted to a
particular trade, and so the members come together to have
trade connections as well as further their business interest.
There is national and international Chamber of Commerce.
Examples of Chamber of Commerce are:
1. Lagos Chamber of Commerce
2. Ijebu Chamber of Commerce
3. London Chamber of Commerce
4. Nigeria-American Chamber of Commerce
5. Owerri Chamber of commerce etc.
AIMS OF THE CHAMBER OF COMMERCE
1. They promote commercial activities in a community, town
or country to further business interest of the area.
2. They liaise with other chambers of commerce in relation
to their business interest.
 3. To influence the policies of government relating to
commercial activities in an area.
4. To further business interest of the area they are in.
FUNCTIONS OF CHAMBER OF COMMERCE
1. To organize trade fairs and exhibitions in order to promote
their business to the customers.
2. To promote home and foreign trade
3. To cooperate with other chambers of commerce in the
country and outside the country.
4. They disseminate information to members
5. Settlement of disputes among members
6. They also act as watchdogs in the administration of
government laws
7. To educate members on the conditions of trade and
industry in a country.

DIFFERENCE BETWEEN CHAMBER OF COMMERCE AND TRADE

ASSOCIATIONS
Chamber of Commerce
1 It is not restricted to a line
of business
2 They have national and
international outlook
Trade Association
It is restricted to members
who are engaged in the
same line of business/trade
They are regionally based
e.g. Idumota spare parts
 dealers Association.

INSURANCE
Insurance is making provisions for risks or unforeseen
circumstances that can happen in the future. It is an agreement
whereby one party promises to indemnify or pay another party
a sum of money in the event of his suffering a specific loss or
damage. It is also a system of providing financial compensation
for the effects of loss, the payment being made from
accumulated contributions of all parties in the fund or scheme.
The main principle of insurance is the pooling of risks. The
insurer will collect premium from the insured or a group of
people who suffer similar risk to create a common fund out of
which compensation will be paid to those who suffer losses. An
insurer is the insurance company who undertakes to indemnify
another against a specific loss insured against. The insured is
the person who has insurable interest in the subject matter of
the policy. He pays premium to the insurer. Insurance is one of
the aids to trade.
ASSURANCE
Assurance is the provision of cover against some eventualities
which must occur at some time in the future e.g. death of a
person. It deals with events that must happen, hence it is based
on possibilities.

DIFFERENCE BETWEEN INSURANCE AND ASSURANCE

Insurance
1 The risk insured may not
occur
2 It hinges on probability
3 It is a provision of cover
against eventualities which
may never occur
Assurance
The risk is certain to occur
It hinges on possibility
It is a provision of cover
against some eventualities
which are certain to occur at
 some time in the future.
4 Examples are fire, marine, Example is life Assurance.
burglary

HISTORY OF INSURANCE IN NIGERIA

Some forms of insurance schemes existed in Nigeria before the
coming of Western civilization. The predominant system during
this period was the organized social scheme which included the
extended family system, association of age grade and other
unions. In the 20th Century, the British merchants introduced
modern commercial insurance into West Africa. In 1921, the
Royal Exchange Insurance established the first insurance
company with a branch in Lagos. This company dominated the
scene for 30 years, until 1949 when other companies like
General Assurance Society and Tobacco Insurance Company
Limited were established.
By the time Nigeria got independence there were 25 insurance
companies mostly owned by Nigerians. The National Insurance
Corporation of Nigeria (NICON) was established in 1969 to
check the operations of insurance business in the country. In
the 1980’s, the insurance companies were over 100 and over
150 insurance brokers were registered. NICON is the leading
insurance Company in Nigeria and was formerly owned by
Federal government. Insurance companies Act 1961, Marine
insurance Act 1961, and Insurance Decree 1976, the current
legislation is Insurance Decree 1991, have been promulgated to
control and regulate the insurance industry.
INSURABLE AND NON-INSURABLE RISKS
Insurable risks are the type of risks which the insurance
company can make provision for or insure against because it is
possible for the insurance company to collect, calculate and
estimate the likely future losses. They have previous statistics
which can be used as a basis for determining premium.
Insurable risks looks at loss and not gain. Examples of insurable
risks are: motor vehicle risk, marine insurance etc. They can be
forecasted and measured.
Non-insurable risks are risks which an insurance company is not
ready to insure against because the likely future losses cannot
be calculated and estimated. They hold the prospect of gain as
well as loss. The risk cannot be forecasted and measured.
Examples are gambling, loss of profit through competition,
opening of a new shop, risks due to war, launching of a new
product, change in fashion, poor location of business, loss
incurred as a result of bad management etc.

INDEMNITY AND NON-INDEMNITY INSURANCE

The word “Indemnity” simply means restoring. Indemnity
insurance is a type of insurance in which the insured is restored
to his/her former position before the incident occurred by
receiving compensation. Here, loss is equal to compensation.
Examples are: insurance against fire, marine, burglary and so
on.
Non-indemnity insurance: The insured cannot be restored to
his/her former position before the incident occurred. This
insurance is not purposely for equating the loss with the
compensation e.g. when a person dies, he cannot be brought
back to life. An example is Life Assurance.

PRINCIPLE OF INSURANCE
The Principle of Insurance refer to the basic principles which
must be fulfilled in insurance. They are:
1. Indemnity: Indemnity is the compensation given to the
insured by the insurer in the event of his suffering a loss.
Under this principle, the insured will be given
compensation for loss suffered.
2. Insurable Interest: This is one of the principle of insurance
which states that one can only insure properties that will
bring loss or liabilities to him upon destruction. Any
insurance without this principle is void and destitute of
 any legal effect. e.g. you cannot insure the motor car of
your friend.
3. Utmost Good faith (Uberrimae Fides): this principle states
that in any insurance contract, all relevant information
that will affect the validity of the agreement must be
disclosed by the parties involved. The parties must disclose
all material facts truthfully so as not to render the contract
void. The true value of the property must not be under or
overstated. For instance, in life Assurance, If the insured
did not disclose information that he has a terminal disease
before signing the contract, when he dies, the insurer may
refuse to honor its own part of the contract.
4. Contribution: The principle states that where a person has
insured a certain risk with many insurance companies, he
cannot claim compensation in full from each of the
insurance companies. This means that each of the
insurance companies will pay a certain proportion of the
loss. The insured cannot make gain or profit. If he has been
settled by one insurance company, he is not entitled to
receive contributions from other insurance firms.
5. Proximate cause: the principle states that only the losses
or liabilities which arise from the direct and immediate
cause of the event insured against are indemnified. E.g.
Mr. Emeka insured his car against fire but the car had
 accident, the insurance company can only compensate if it
is fire and not accident.
6. Subrogation: under this principle, once the insurer has
given an indemnity for loss, he can take over the subject
matter of the insurance and the rights relating to it. Once
the insured has been compensated for instance,
replacement of a car due to accident, the insurance
company will take over the scrap; sell it in other to reduce
their liabilities.
7. Abandonment: This principle states that property that has
been insured may be abandoned in certain cases if, its
actual loss appears to be unavoidable or if the cost of
repairing the damaged property will exceed their value.
The insured party is entitled to a full settlement of
amount. e.g. in a marine property insurance, such as boats
or watercraft. If a ship is sunk or lost at sea, the
abandonment clause affords the owner the right to
essentially give upon finding or recovering his or her lost
property and subsequently collect a full insurance
settlement from the insurer.
INSURANCE FRUAD
This is any act to defraud an insurance process. This occurs
when a claimant attempts to obtain some benefits or
advantage they are not entitled to, or when an insurer
knowingly denies some benefit that is due.
TYPES OF INSURANCE
There are various risks which a business should insure against.
These constitute the various types of insurance, namely: bad
debt, goods in transit, group insurance, cash in transit, fidelity
guarantee, export credit guarantee, plate glass, Agricultural
insurance, burglary, theft, robbery, consequential loss,
contractor all risk, employer liability, Aviation insurance,
Accident glass, Motor vehicle, marine, Life Assurance and Fire.
1. Bad Debt: Bad debts are debts that are difficult to collect
therefore, bad debt insurance covers debt that may not be
paid by the debtors to the business. The risk of non-
payment is the subject matter. The insurance company will
guarantee to protect the business against irrecoverable
debts.
2. Goods- in- transit Insurance: it is a type of insurance which
covers against accidental damage or loss to goods in
transit. It provides compensation to the owner if the goods
are lost, damaged or stolen in transit. Parcels, letters and
luggage’s can also be insured under this policy.
3. Group insurance: Group insurance is taken to cover a
group of people or owners. These are policies on a
collective basis assuring members of a particular group
 such as football team or group of employees of a firm. The
insurer is liable for everyone covered by the single policy.
This policy saves or reduces the cost of administration and
it encourages employees to remain in employment.
4. Cash- in- transit: It provides compensation to the insured
in the event of cash being stolen either from the business
premises, home or while it is being carried to or from the
bank. It covers cash taken outside to purchase goods and
cash brought into the office for workers’ salaries. It also
covers employees who may be injured during a robbery
operation.
5. Fidelity Guarantee insurance: it is a type of policy effected
by an employer insuring him against the possibility of the
dishonesty of an employee. The object is to provide cover
against loss by reason of dishonesty by people holding a
position of trust. It helps the firm guard against
misappropriation of money by cashiers and accountants.
6. Export Credit Guarantee Insurance: This policy provides
cover for exporters against the major risk of exporting. It
guarantees to cover exporters of goods against the risk of
bad debts as a result of goods sold to foreign buyers. Some
uncertainties in international trade such as: insolvency
(liquidation, bankruptcy, collapse, failure) of buyers
actions of some foreign governments are also covered by
this policy. Its functions are:
 a. It indemnifies the exporter in the event of nonpayment
b. It encourages sales of goods on credit in the
international trade
7. Plate Glass Insurance: this insurance policy covers
accidental damage to glass plates, windows, doors, and
shelves. The policy guarantees to cover for replacement of
plate glass or glass plate in the event of damage.
8. Agricultural insurance: This is a type of policy /insurance
that provide relief to farmers for losses suffered as a result
of losses to their crops as a result of pest, disease and
drought (a prolonged period of abnormally low rainfall,
leading to shortage of water.
9. Burglary, Theft and Robbery Insurance: This policy
provides compensation for losses which may arise from
goods or assets stolen or damaged through the breaking
into a shop or business premises. An individual can also
take this policy against the risk of losing his/her properties
or assets to thieves. As a matter of necessity, it must be
proved that thieves have forcefully or broken into the
house and carted away the properties or assets under
consideration.
10. Consequential Loss Insurance:
Consequential loss policy losses to commercial firms after
a fire accident resulting in interruption of business
activities and stoppage of production. This policy covers
 loss of profit arising from the stoppage of production
processes.
11. Contractor all Risk: This policy
provides for contractors in the event of any damage being
done to the construction work from a wide range of perils.
The risk is that the project may sustain severe damage and
this will delay the completion of the project.
12. Employers Liability: This is an
insurance policy that ensures that the employers does not
suffer financially but is compensated for any money he
may have to pay in respect of a claim to provide
compensation if any employee was injured or killed. The
policy provides cover for employers in the event of liability
to employees arising from industrial fatality, disease or
injury. This gives the employees some protection.
13. Aviation Insurance: These are all risks
associated with the use of Aircraft as a means of transport
are covered by the Aviation insurance policy. The owners
of commercial activities, aircraft users and private owners
are usually covered under the aviation insurance policy; it
also covers the Aircraft and liability to passengers.
14. Accident insurance: this policy
guarantees the payment of compensation in the event of
an accident causing either death or injury arising from
 accidental, violent, external and visible means. It can cover
personal accident, sickness and so on.
15. Motor Vehicle Insurance: the motor
vehicle insurance policy provides for liability for death or
bodily injury to any person arising from the use of vehicles
on the road. Compensation would be paid to victims
injured in road accidents. The insurance company base
their premium on the types of cover provided, the size,
value of the vehicle and so on. There are two types:
a. Third party vehicle insurance: This covers the risk of
damages to a third party in case of accidents with a
third party. It entitles a third party who is not a party to
the contract to be compensated when he suffers injury.
It involves all the passengers and even the non-
passengers of the vehicle.
b. Fire and theft insurance: The policy holder is
protected against damage to the vehicle through theft
and fire. It covers all the attributes of third party vehicle
insurance.
c. Comprehensive Insurance: The policy covers the driver,
the insured vehicle, the third parties and sometimes the
content of the insured vehicles. it covers virtually all
accidental damages to the insured vehicle and losses
arising from fire and theft. It attracts high premiums.
16. Fire insurance: it is a type of insurance
which provides cover for loss or damage caused by
burning. A person can insure himself or business against
any loss as a result of fire, lighting, wiring, lightening, and
explosion. It covers all risk associated with fire. However,
the insured can only be compensated if the fault was not
caused by him/her. The compensation covers possible
damages to building, factories, goods and shops, through
the structure of the building and some inflammable items
kept inside will be taken into consideration. Fire insurance
may be taken with average clause and without average
clause.

a. Fire Insurance with average clause: if the fire insurance

policy contains “average clause” the compensation will
be based on the actual value of the building, the
amount for which it was insured and the total loss
suffered. The compensation would be calculated thus:
Amount insured x loss suffered (Actual loss)
Value of the property

Example:
Insured amount = N10, 000
Actual value = N30, 000
 Actual Loss = N15, 000

Amount insured x loss suffered (Actual Loss)

Value of the property

10,000 x 15,000
30,000

= N5,000

b. Fire insurance without average clause: The insured will

only be liable for the estimated amount of the loss. If a
property is valued at N25, 000 and the insured amount
is N13, 000 and the loss is assumed to be N10, 000.
What is the amount of compensation?
17. Life Assurance: Life Assurance is one
important branch of insurance which is taken as a
protection against loss caused by the death of a person.
This policy covers human beings and not properties. The
risk covered here will inevitably occurred but the time of
occurrence is what is not known. If the life assured is
suffering from a serious sickness at the time of taking out a
policy unknown to the assurance company, the latter may
disclaim liability. There are four main types of life
assurance, namely:
 a. Term Assurance
b. Annuities
c. Endowment policy
d. Whole Life Assurance
a. Term Assurance: This is the oldest form of Assurance
policy. In this policy, payment will be made to the assurer
if the life assured dies within the specified period. It
provides coverage for a certain period of time or a
specified term or years. If the insured dies during the time
period specified in the policy and the policy is active- or in
force, then a death benefit will be paid.

b. Annuities: this is a form of pension in which an insurance

company, in return for a certain sum of money (paid in a
lump sum or by instalments), agrees to repay this money
plus the investment income that it is able to earn over the
expected life time of the investor or for a specified period.
The contribution which can be a large sum earn a rate of
return, which can be for a life time.

c. Endowment policy: this is a type of policy which provides

for the sum assured to be paid either after a fixed number
of years or at death depending on which one occurs first.
d. Whole Life assurance: this type of life Assurance will last
for the life time of the life assured and the sum assured is
payable only at death. The assured will pay premium
throughout the duration of his life.