Nigeria: The Companies And Allied Matters Bill (2018): Implications For Businesses In Nigeria

Last Updated: 9 November 2018
Article by Ogechukwu Obi

Simplicity is the ultimate sophistication, nothing distinguishes more than the ability to simplify highly complicated situations. This is what the new Companies and Allied Matters Bill (the Bill) aims to achieve. The Bill has reduced to the barest minimum, the herculean processes encountered by small and medium enterprises with respect to giving their business outfits legal identity. Although the bill is yet to come into existence, its provisions shall be examined briefly.

The first thing the Bill seeks to achieve is to repeal the existing Companies and Allied Matters Act 1990 (the Act). Whilst the Bill did not completely do away with the provisions of the Act, it occasioned significant changes in order to align the Nigerian corporate practice with international standards. In this article, particular reference will be made to the new provisions on electronic registration, new requirements for private companies and annual returns.

E-REGISTRATION

Under the existing order, only certain categories of persons can accredit with the Commission and thereafter deal directly with the Commission, there is however no express provision in the Act to this effect but the power is derived pursuant to Section 7 which empowers the Commission to make regulations as it deems fit. Persons eligible to get accredited with the Commission are legal practitioners or their firm; accountants or their firm; chartered secretaries or their firm. This created monopoly of the registration process and inflation in billing of clients desirous of having their entities registered. Further to this, the Commission by a memo restricted entrance into its premises to just these accredited persons (upon the presentation of their accreditation cards) and persons intending to get accredited with the commission (upon the presentation of their original degree and proficiency certificates).

Of significance is the incorporation of electronic registration and removal of the various hurdles to the ease of doing business in Nigeria. Prior to the Bill, The Corporate Affairs Commission introduced E-Registration of Business names, Companies and Incorporated Trustees in 6 major States: Lagos, Abuja, Port Harcourt, Kano, Kaduna and Enugu. But this was a mere regulation that had no legal backing. The e-registration system was introduced to allow for a seamless and smooth registration and transmission of incorporation documents via the Commission's online registration portal which reduced the human traffic witnessed on a regular basis at the Commission's various offices by 90%.

'Businesses' for the purposes of this article shall include: Business Name; Companies and Incorporated Trustees.

The Bill, in line with the Companies Regulation 2012, the Regulation that birthed the online registration system has done-away with this monopoly, now, anybody can access the portal and register his business. This is cost effective for anyone who cannot afford the services of persons accredited with the Commission. It is also very convenient as registration can be done without having to be physically present at the Commission or Federal Inland Revenue Service (FIRS).

Further to this, by a notice dated the 19th of May 2018 and published on the Commission's Website, the requirement for proficiency certificate was removed. Erstwhile, proficiency certificates were mandatory requirements for certain industry-specific businesses, to be produced in addition to the incorporation documents upon registration, without which, the business will not be registered.

REQUIREMENT OF TWO SUBSCRIBERS FOR PRIVATE COMPANIES

Prior to the Bill, no fewer than two persons can form a company as it is an offence to carry on business when a company's membership is less than two. The Bill has eliminated the statutory requirement of a minimum of 2 members in the formation of a private company.   Section 18(2) of the Bill provides that any person may form and incorporate a private company. This is to bring the Nigerian corporate practice in conformity with international standards. However, this applies only to private companies.

ANNUAL RETURNS

Annual return under the Act were transmitted physically to the Commission but under the Bill, electronic filing is permissible. Under the Act, only companies and incorporated trustees transmits their annual reports to the Commission, however, the Bill has extended the duty to transmit annual return accompanied by a financial statement to Business names. See Section 578 of the Bill.

PROCEDURAL STEP BY STEP GUIDE ON ELECTRONIC REGISTRATION OF BUSINESS NAMES AND COMPANIES

  1. Visit the website: https://services.cac.gov.ng/
  2. Create a user account. You will be notified via email once the account is successful created.
  3. With your user account details, visit www.cac.gov.ng.
  4. Reserve a name. You will be required to provide 2 preferred names, one of which will be approved by the commission within 24 hours of reservation.
  5. Once approved, download the Approval note. The approval note shall contain the availability code.
  6. Commence registration on the portal. Enter the particulars of the business and persons desirous of forming the company (Proprietors/Subscribers/Directors) as the case may be.
  7. Submit the details and make payment using your debit card. For companies, you will be required to pay for Stamp Duty, for ease, the commission liaised with the Federal Inland Revenue Service (FIRS) to provide e-stamp portal.
  8. Download the incorporation documents.
  9. Date and sign the documents. Then take the documents before a notary public or a commissioner for oaths to sign where provided.
  10. Visit www.cac.gov.ng and click on Document Upload.
  11. Enter the availability code contained in the approval note to gain access to the interface.
  12. Specify and attach the necessary documents, then submit. Note, the only accepted means of identification are: driver's licence, international passport, national identity card and voters' card.
  13. Await registration. If the application is not queried, the business/ company will be registered and the certificate ready for collection within 3 days. If queried, you will be notified on the nature of the query, address it and re-submit the document via the document upload interface.
  14. Go to the commission with the original incorporation documents uploaded on the interface which will be exchanged for the certificate of registration.

Another innovation of the Bill is the introduction of Pre-action Notice and Administrative Proceedings Committee. The Committee is empowered to impose administrative penalties, address complaints, disputes and grievances arising from the operation of the Act or its regulations. Hence before an action can be commenced against the Commission, the aggrieved party must ensure that he has exhausted all local remedies. This indeed will decongest the numerous applications before the courts and promote in house dispute resolution mechanism. See Section 17 and 607 of the Bill.

In conclusion, we must applaud the laudable provisions of the Bill and if it transcends from a Bill to an Act, it will encourage investment and trade within and outside the country. Nigeria will also witness an increase in foreign investment as foreigners desirous of doing business in Nigeria can easily registered sister companies without the bottlenecks of over-the-counter filing. The innovation will encourage healthy competition amongst businesses within the ambit of law. Furthermore, with the introduction of filing annual returns by business name, it will be difficult for enterprises to evade tax payment. While the Bill will bring the operation of the Companies and Allied Matters Act, it could mean that the era of monopoly of skills by certain professional is gradually coming to an end.

* LL.B (Lagos), BL (Bayelsa). Email: chris@johnsonbryant.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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