The President of the Federal Republic of Nigeria, Muhammadu Buhari signed into law the Companies and Allied Matters Act (CAMA) 2020 on August 7, 2020. The new Act introduces some key amendments which include:
- The Provision of single member private companies – S.18 (2) of the new Act provides that one person may form and incorporate a private company. This is different from a sole proprietorship as the single member of the company will have a distinct legal identity from the company.
- The Introduction of a Statement of Compliance – S.40 (1) of the new Act introduces a Statement of Compliance required to be delivered to CAC by the applicant or his agent stating that the requirements of the Act with regards to registration have been complied with. This is different from the s. 35(3) of the old Act which requires that a statutory declaration in the prescribed form (signed by a legal practitioner and attested before the commissioner of oaths or notary public), confirming that the requirements of the Act for the registration of a company be provided to CAC as evidence of compliance. A Statement of Compliance must not be signed by a lawyer, however, the new Act does not dispense with CAC accepting a declaration of compliance as evidence.
- The Replacement of the term Authorized Share Capital – The term “authorised share capital” has been replaced in S.124 of the new Act with the term “minimum issued share capital”. The change allows for companies to issue more shares at any given time but not below the minimum issued share capital specified by the Act in s. 27(2)(a).
- The Amendment of the requirements on Share Capital – S. 27(2)(a) replaces the authorized share capital in the old CAMA from not less than N10, 000 in the case of a private company and N500, 000 in the case of a public company to a minimum issued share capital of not less than N100, 000 in private companies and N2, 000,000 in the case of public companies. S. 124(3) gives any company operating with a share capital below the newly specified minimum share capital, a period of 6 months to issue shares to an amount not less than the minimum share capital or incur a fine for everyday of default as the commission specifies.
- The Common Seal is no longer a mandatory requirement – The mandatory requirement of a common seal in s. 74 of the old CAMA has been removed. Under s.98 of the new Act, a company may have a common seal but need not have one.
- The Provision for electronic filing – The new CAMA provides for electronic filing, electronic share transfer and e-meetings for private companies. S.860 (1) of the new CAMA provides that any document required to be filed by the commission for registration may be filed electronically and such documents shall be admissible in evidence with equal validity with the original documents. This makes it easier for companies to file documents for company registration.
- The Provision for electronic share transfer and electronically held meetings for private companies – 175 (1) also provides that instruments of transfer of shares shall include electronic instruments of transfer. S. 240(2) allows for a private company to hold its general meetings electronically in accordance with the articles of the company. This allows for the participation of members in such meetings irrespective of their location at minimal costs.
- The Reduction of Filing Fees for the Registration of Charges – The new CAMA includes a new sub-section under S. 222 (formerly s. 197 CAMA 2004). Section 222 (12) provides that the total fees payable to the Corporate Affairs Commission (CAC) for filing, registration or the release of a charge with CAC shall not exceed 0.35% of the value of the charge. This may lead to a significant reduction in the costs associated with the registration of charges process making it easier for small to medium sized firms to register their business.
- The Creation of a Limited Liability Partnership (LLP) and a Limited Partnership (LP) – The new CAMA in S. 746 creates new types of partnership: Limited Liability Partnership and Limited Partnerships which limits the liability of the members of the partnership. This is a special provision that was inserted under Part B of CAMA giving the members of a company the opportunity to enjoy perpetual succession; Even if one partner dies, the partnership continues to live on as long as the other partner wants it that way. It also provides foreign investors with an alternative form of carrying out business in Nigeria with limited liability.
- The Exemption of small companies from the appointment of Auditors – 402 of the new Act also provides for the exemption of small companies in relation to audit of accounts in respect of a financial year. Small companies are no longer mandated to appoint auditors at the annual general meeting to audit the financial records of the company.
- The Exemption from the appointment of a Company Secretary – According to S. 330 (1) of the new CAMA, the appointment of a company secretary is now optional for small and private companies. However, it still remains mandatory for public companies.
- The Penalty for a Default in sending particulars of charge for Registration – the company and every officer of the company who is in default shall still be guilty of an offence as was provided under S. 199 of the old CAMA, however, they will no longer be liable to pay a fine of N500 only under S.224 (3) of the new Act but any of such penalty as may be prescribed by CAC. There is a possibility that the penalty could be more than N500 and therefore, such change may cause companies to send in the particulars for registration on time.
- The Merger of Incorporated Trustees – Under S. 849 of the new Act, two or more associations with similar aims and objects may merge under terms and conditions as may be prescribed by the CAC.
- The Disclosure of persons with significant control in companies – S.119 of the new Act provides for every person with significant control over a company to within 7 days of becoming such a person indicate in writing to the CAC the capacity in which shares are held, either as beneficial owner or as a nominee of an interested person.
- The Restriction on Multiple Directorship in Public Companies – S.307 (1) of the Act prohibits a person from being a director in more than five (5) public companies at a time.
- The Business Rescue provisions for Insolvent Companies – The new Act introduces a framework for rescuing a company in distress and to keep the company from becoming insolvent. Provisions were made with respect to Company Voluntary Arrangements (S.434 to S.442), Administration (S.443 to S.549) and Netting (S.718 to S.721).
