The newly assented Companies and Allied Matters Act, 2020 (“the Act”), replaces the extant Companies and Allied Matters Act of 1990.
For most businesses, the CAMA 2020 Act has been seen as one of Nigeria’s most imperative legislation in three decades introducing new provisions that promote the ease of doing business whilst reducing regulatory hurdles and also bringing the provisions in line with the technological realities of the 21st century.
The Act is expected to eventually promote investments, create more jobs, and promote a friendly business environment in Nigeria.
Some of the provisions of the amended bill and how it will affect businesses are described below:
Provision of single-member/shareholder companies
Section 18.2: of the new CAMA 2020 Act now makes it possible to establish a private company with only one member or shareholder.
This is good news for growing startups and Business owners because it has totally fixed the challenges in business registration. In the past, many businesses were forced into unnecessary partnerships because prior to the new CAMA 2020, to legally own a business in Nigeria, Business owners were required 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 shows 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 suggests that the promoter(s) of a business is not required to pay for or allocate shares that are not needed at the definite time of incorporation.
Procurement of a Common Seal is no longer a mandatory requirement
The procurement of a Common Seal is no longer an obligatory requirement according to Section.98 of the new CAMA 2020. With the amended bill, companies can now authenticate documents by other means other than a common seal. This means Business owners 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 2020 makes provision for electronic filing, electronic share transfer and e-meetings for private companies.
Business owners can now register their business from anywhere in the country via the e-registration portal. The new CAMA 2020 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 required to appoint auditors at the annual general meeting to audit the financial records of the company. Section 402 of the new CAMA 2020 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. With reference to Section 330.1 of the new CAMA, the appointment of a company secretary is only required for public companies.
Creation of Limited Liability Partnerships (LLPs) and Limited Partnerships (LPs)
The new Act, presents 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 suggests that Startups are not trapped 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 Corporate Affairs Commission has been reduced to 0.35% of the value of the charge.
This is probable to lead to up to 65% reduction in the associated cost payable under the regime.
Merger of Incorporated Trustees
The new Act encompasses 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
Section 307.1 of the Act prohibits a person from being a director in more than five public companies at a time.
Business Rescue provisions for Insolvent Companies
The new Act presents 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 (Section434 to Section442), Administration (Section443 to Section549) and Netting (Section718 to Section721).
Enhancement of Minority Shareholder Protection and Engagement
Section 265 (6) restricts firms from appointing a director to hold the office of the Chairman and Chief Executive Officer of a private company.
The Act positively, is one of the biggest business reform bills which impact the Nigerian business circle. 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 Business investors to register companies, increase the influx of foreign investment and re-energize the private sector as the engine of growth in Nigeria.