Happy new year! I missed you too and that’s why I come bearing gifts. The President of Nigeria, Muhammadu Buhari signed the Corporate and Allied Matters Act 2020 that will govern the regulation of businesses in Nigeria. This regulation contained several innovations which we hope will aid the ease of doing business in Nigeria. This article seeks to identify the significant changes for you so that you can make smarter decisions in your business.
- Single Member Company S.18(2)
Previously, the minimum number of people that were required to form a company was two (S18 CAMA 1990). However, with the new CAMA, a single individual can have a company, as long as the person is not a minor. What this means for you is that you don’t need to look for a partner or a second person to join your business before you can register it as a company as long as you are an adult.
- Liability of Companies Limited by Guarantee s.26(12)
Companies Limited by Guarantee are a type of company without shares. The liability of its members is limited to the amount they undertake to contribute to the asset of the company at the time of winding up. Previously the minimum of this guarantee was N10000(s.26(7) CAMA 1990) only, however with the new CAMA it is N100000.
- Minimum Issued Capital S.27(2)A
Previously, what was obtainable in the CAMA was the authorized share capital (s.27(2)(a)). Authorized share capital refers to the number of shares that a company can issue as stated in its memorandum or Articles of Association. It is usually not fully used so that the company can issue stocks when it needs to raise capital. However, the new CAMA makes provisions for minimum issued capital which should not be less than N100,000 for private companies and N2, 000, 000 for public companies. So in the new CAMA, only the shares that are needed at the time of incorporation can be paid for.
- Withdrawal and Cancellation of Reserved NamesS.31(3), and (5).
Previously, the CAMA allowed CAC to compel any company using names that were conflicting or that were prohibited under section 30 to change their name (s.31 CAMA 1990). The New CAMA now provides for the withdrawal or cancellation of approval for the reservation of names improperly procured. What this means is that, if the CAC becomes aware before the issuance of a certificate of incorporation that a reserved name was fraudulently procured, the CAC may cancel such a name.
- Model Articles s.33
Previously, the article of association was adopted according to what was contained in Parts I, II, III, and IV (s.34 CAMA 1990), but now, the minister can prescribe different model articles depending on the type of company.
- Statement of Compliance s.40
The CAMA 2020 introduces a statement of compliance that can be signed by the promoter of a business in addition to the declaration of compliance that was previously obtainable. This declaration was usually signed by Lawyers and Accountants S.39 CAMA 1990). The promoter of a business will no longer require lawyers to sign. It is worthy to note that the declaration of compliance is still acceptable S.40(3) and lawyers can sign on behalf of promoters.
- Withdrawal of Certificate of Incorporation S.41(7)
Under this new provision, the CAC can withdraw, revoke, or cancel a fraudulently obtained Certificate of Incorporation. The commission may also publish such information in the federal gazette.
- Re-Registration of a Public Company to Unlimited s.75
This option is available upon the fulfillment of certain conditions as outlined in the CAMA 2020. Previously you could only register an unlimited company to a private company (s.50-53 CAMA 1990).
- Common Seal s.98
Previously the common seal was mandatory for all companies (s.69(d) CAMA 1990). The common seal was important for contract agreements that involved companies. In some decisions of the court, failure to impute the common seal vitiated a contract. However, the new CAMA now makes the use of common seals optional. The authorized signature of a company is now sufficient execution of any contract taken. However, it is worthy to note that a company may have a common seal if it wants to, the use of which would be regulated by its memorandum and articles.
- Authentication of Documents S.101
Previously, company documents had to be signed like a deed for such signatures to be regarded as duly authenticated (s.77 CAMA 1990). However, the new CAMA states that an electronic signature is sufficient authentication of electronic documents and a document is now validly executed as a deed if it has been executed in the presence of a director and secretary or two directors.
- Disclosure of Substantial Shareholdings s. 119 (1) and (3)
Previously, only shareholders of public companies with substantial shareholdings were required to disclose such beneficial interests (s.95 CAMA 1990). In the new CAMA, a shareholder with substantial shareholdings in any type of company (public or private) is required to notify the relevant companies of such significant control within 7 days of obtaining that share. Previously, a substantial shareholder held 10% of the total voting rights, in the new CAMA, it is 5%.
- S.176 (1) Electronic Transfer of shares
Previously a person interested in making a transfer of their shares had to do so manually, with the new CAMA, however, an electronic transfer is possible.
- Prohibition of Financial assistance for the acquisition of shares.183(4)
The new CAMA allows a private company to assist other private companies without having to acquire its shares.
- S. 184 Share Buy Back
By S.184, a company may purchase its shares provided that this is permitted by the articles of association of the company. The shareholders may approve this purchase by special resolution. The company must however publish notice of the purchase in at least two national newspapers.
- Reduction in Filling Fees s.222
This section states that the total fees payable to the commission for filing, registration, or release of a charge shall not exceed 0.35% of the value of the charge or such amount as the minister may specify. This is a significant reduction for private companies who paid up to 65% and public companies who paid up to 165% for registration charges. The commission in this new law is also mandated to state in the register of charges any notice that prohibits a company from creating an additional charge ranking with a charge already created.
- Annual General Meeting S.237
Annual General Meeting is no longer compulsory for small companies or single-member companies.
- S.240 Virtual Meetings
Virtual meetings are now recognized by the Companies and Allied Matters Act as long as they comply with the provisions of the articles. However annual general meetings for public companies must still be held physically.
- S.265 (6) CEO and Chairman
The CEO of a company can no longer double as a chairman. Previously this was not contained in the CAMA although it was recognized as one of the rules of corporate governance and international best practices.
- S.307 Multiple Directors
This provision restricts the number of multiple directors in a public company to 5. This is in line with international best practices. Any person who contravenes this provision is liable to a daily penalty in such amount as the commission may specify.
- S.330 Secretaries.
Previously, all companies were expected to have secretaries, in the new CAMA small companies are not required to appoint a secretary however this does not prohibit small companies from having a secretary if they want to. The register of secretaries also used to be merged with that of directors but now the CAMA makes provision for a separate register for secretaries.
- Audited Accounts s. 374
Audited accounts are now required to be displayed on company websites.
- Small Companies s.394 (3) b
The threshold for small companies has been increased from a turnover of not more than N120,000,000 with a Net Asset Value of not more than N60,000,000. Small companies are also not mandated to have an annual general meeting under section 237.
- Auditors and Small Companies S. 402(1)(b)
Small companies and companies that haven’t carried out any business since incorporation are exempted from audit requirements.
- Rescue of companies in distress (434-549, 718-721)
Companies in distress and companies undergoing voluntary arrangements, administration, and netting may seek help elsewhere. The concept of netting is new in Nigeria but it has been practiced globally.
- Insolvency Practitioners s.705(1)
This a fancy name for all the lawyers and accountants that participate in insolvency proceedings. They are now required to be registered with CAC.
- Limited Liability Partnerships and Limited Partnership in Parts C and D
Limited liability partnerships as a body corporate have been introduced, this makes the legal entity separate from the partners of a partnership. The limited liability partnerships must have at least two partners. A limited partner is one that limits his liability, this ought to be registered with the commission otherwise it will be viewed as a general partnership.
- S.839 Suspension of Trustees and appointment of interim managers
This is the part that most NGO’s are skeptical about because it gives CAC the power to suspend its trustees and appoint interim managers.
- Mergers for Incorporated Trustees. S.849
Associations with similar interests and goals can now be merged under the regulations of the CAC.
- S.851(1) and (4) Administrative Proceedings Committee
This was previously obtainable only in the securities and exchange commission, however, the new CAMA has included it now to resolve disputes or grievances arising from the operation of the act. The general concern that most people have is that the chairman of this committee is the registrar-general of the CAC. This feels like being a judge in your case.
- S.861 Electronic fillings and E meetings
This provision allows promoters to file documents for registration electronically and also use certified true copies of such documents as evidence in court.
- S.845- Biannual Statement of Affairs
The statement of affairs usually tells the company’s assets and liabilities, it is very important for insolvency, previously it was required yearly or within 18 months. However, with the new CAMA, it is required after two years.
Thank you for reading.
Ndam Nander Esmeralda ACIARB(UK)