The Companies and Allied Matters Act, 2020 (“the Act”), repeals and replaces the extant Companies and Allied Matters Act of 1990. The new CAMA, now seen as Nigeria’s most significant business legislation in three decades, introduces new provisions that promote the ease of doing business whilst reducing regulatory hurdles and also bringing the provisions in tangent with the technological realities of the 21st century. This is expected to ultimately promote investments, create more jobs, and promote a friendly business climate in Nigeria.
Some of the provisions of the amended bill and how it will affect businesses are explained below:
Provision of single-member/shareholder companies
S.18 (2) of the new CAMA now makes it possible to establish a private company with only one (1) member or shareholder. This is good news for growing startups and young entrepreneurs because it has totally resolved business registration bottlenecks. A lot of businesses have been forced into unnecessary partnerships because prior to the new CAMA, to legally own a business in Nigeria, you needed to provide at least two or more people as co-owners of the business.
Introduction of Statement of Compliance
Section 40 (1): There is the introduction of Statement of Compliance (SOC) signed by an Applicant (or agent), without the need for a Lawyer or Notary Public to attest to Declaration of Compliance (DOC). SOC is a requirement of the law that indicates that the applicant has complied with the registration and requirements.
Replacement of Authorized Share Capital with Minimum Share Capital
Section 27: This section replaces ‘Authorized Share Capital’ with ‘Minimum Share Capital’. This implies that the promoter(s) of a business is not required to pay for or allocate shares that are not needed at the specific time of incorporation.
Procurement of a Common Seal is no longer a mandatory requirement
The procurement of a Common Seal is no longer a mandatory requirement according to S.98 of the new CAMA. With the amended bill, companies can now authenticate documents by other means other than a common seal. This means you don’t need to stamp seals on documents anymore. The world is digital so who needs those seals.
Provision for electronic filing, electronic share transfer and e-meetings for private companies
The new CAMA makes provision for electronic filing, electronic share transfer and e-meetings for private companies. You can now register your business from anywhere in the country via the e-registration portal. The new CAMA also provides for remote or virtual general meetings, provided that such meetings are conducted in accordance with the Articles of Association of the company. This will facilitate participation at such meetings from any location within and outside the shores of the country, at minimal costs.
Exemption from appointing Auditors
Small companies or any company having a single shareholder are no longer mandated to appoint auditors at the annual general meeting to audit the financial records of the company. S. 402 of the new CAMA provides for the exemption in relation to the audit of accounts in respect of a financial year.
Exemption from the appointment of company secretary
The appointment of a Company Secretary is now optional for private companies. According to S. 330 (1) of the new CAMA, the appointment of a company secretary is only mandatory for public companies.
Creation of Limited Liability Partnerships (LLPs) and Limited Partnerships (LPs)
The new Act, introduces Limited Liability Partnerships and Limited Partnerships, which combines flexibility and tax status of a partnership with the status of limited liability for members of a company. This implies that Startups are not stuck with the option of setting up a Company, but also enjoy the benefits of partnership which a partnership agreement (including vesting agreement, and founders agreements) beyond the regular Articles and Memorandum of Association, whilst still protecting their personal assets from being sold in claims for debts, liability, or creditors.
Reduction of Filing Fees for Registration of Charges
Under Section 223 (12) of the new Act, filing fees for Registration of Charges payable to the CAC (Corporate Affairs Commission) has been reduced to 0.35% of the value of the charge. This is expected to lead to up to 65% reduction in the associated cost payable under the regime
Merger of Incorporated Trustees
The new Act extends merger beyond LLCs to Incorporated Trustees. Section 849 implies that two or more NGOs, social entrepreneurs with different registered organizations, with similar goals can merge to form one (1) single organization.
Disclosure of persons with significant control in companies
Section 119 emphasizes transparency in terms of control in a company. It requires that persons with significant control in a company disclose its shareholding to other shareholders. For example, anyone who has person(s) holding shares on their behalf as trustees or proxies, whilst being shareholders themselves in same company, are expected to disclose such relationship for transparency.
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.
Business Rescue provisions for Insolvent Companies
The new Act introduces a framework for rescuing a company in distress and to keep it alive as against allowing such entity to become 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).
Enhancement of Minority Shareholder Protection and Engagement
- 265 (6) restricts firms from appointing a director to hold the office of the Chairman and Chief Executive Officer of a private company.
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The Act certainly, is one of the biggest business reform bills which impacts the Nigerian business sphere. The amendments to the Act would have the overall effect of making Nigeria’s metrics of doing business more fit for today’s technological realities, encourage young investors to register companies, increase the influx of foreign investment and re-energize the private sector as the engine of growth in Nigeria.