On 15th May 2018, the Senate of the Federal Republic of Nigeria passed the Bill for an Act to Repeal the Companies and Allied Matters Act 1990 and enact the Companies and Allied Matters Act 2018 (the "Bill"). The Bill seeks to cure the existing shortcomings of the existing Companies and Allied Matters Act (CAMA) and bring it in line with global best practices. The major substantive amendments to CAMA are highlighted below:

Current Provisions Amendment
Single Member Companies There must be a minimum of two members in a company at all times. It is possible for a company to have only one member.
Substitution of Authorised Share Capital with Issued Share Capital There is a requirement for every company to have a minimum authorised share capital. A company cannot issue shares above the minimum authorised share capital. Stamp duties are therefore, paid on the minimum authorised share capital whether the shares are finally issued or not.

The minimum authorised share capital for a private Company is ₦10,000 while that of a public company is ₦500, 000.
The requirement for minimum authorised share capital has been replaced with a minimum issued share capital. Once a company allots shares to the tune of the minimum issued share capital, it has complied with the provisions of the Bill. Stamp duties are only paid on shares which have been issued.

The minimum issued share capital for a private company is ₦100,000 while that of a public company is N 2,000,000.
Paid-Up Capital CAMA currently does not provide for any percentage of the share capital of a company to be paid up. The Bill mandates 25% of the issued share capital of a company to be paid up at all times.
Reduction in Share Capital A public or private company that wishes to reduce its share capital must pass a special resolution for the reduction and thereafter apply to the Federal High Court for an Order confirming the reduction. The Bill allows a private company to reduce its share capital by passing a special resolution to that effect without the added burden of applying to court for confirmation. A public company still requires a court order to reduce its share capital.
Submission of Incorporation Documents Currently, physical copies of incorporation documents must be delivered to the Corporate Affairs Commission (CAC) before a company is registered. The Bill provides for electronic submission/filing of incorporation and other documents. This gives full effect to the current online registration regime by the CAC.
Limited Liability Partnerships and Limited Partnerships There is no provision for this under the current CAMA. The Bill creates new forms of legal entities known as limited liability partnerships (LLP) and limited partnerships (LP). The LP and LLP must have a minimum number of two partners. A limited liability partnership must have at least two designated partners who would oversee the day-to-day activities of the partnership. In the case of a limited partnership, there must be at least one limited partner and one general partner; the general partner is tasked with the day-to-day management of the partnership. The maximum number of persons that can join a limited partnership is 20 (twenty) while that of a limited liability partnership is unlimited.

The Bill also provides that the provisions of the Partnership Act 1890 shall govern limited partnerships; this is not applicable to limited liability partnerships as detailed provisions for its operations are specified under the Bill. In addition, where there are inconsistencies between the provisions of the Bill and the provisions of the Partnership Act, the provisions of the Bill will prevail.
Redefinition of Small Companies and Concessions Under CAMA, a small company is a private company which:
  1. Has a turnover of not more than ₦2 Million.
  2. Has net assets of not more than ₦1 Million.
  3. None of its members is an alien or government agency.
  4. The directors between themselves hold not less than 51% of the share capital of the company.
The Bill has included most SMEs under the small company category by increasing the turnover and net asset threshold for a small company.

Thus, a small company is a private company with a turnover of not more than ₦120 Million and net assets of not more than ₦65 Million.

The Bill also accords certain privileges to small companies including:
  1. Exemption from external audit if it has not carried on any business since its incorporation; or its turnover in that year is not more than ₦10 Million and the balance sheet total is not more than ₦5 Million.
  2. Exemption from the requirement to hold Annual General Meetings (AGMs).
  3. Exemption from the requirement to appoint a Company Secretary.
  4. Exemption from the requirement to have at least two directors.
Companies Limited by Guarantee Currently, the permission of the Attorney General of the Federation is required before the incorporation of a company limited by guarantee.

Also, the minimum total liability to be guaranteed by members is ₦10,000.
The Bill abolishes the need for approval of the Attorney General and instead places a duty on the CAC to cause the application for registration to be advertised in three national newspapers.

The minimum total liability to be guaranteed by members has been increased to ₦100,000.

In addition, the Bill stipulates a framework for conversion of a company limited by guarantee to a company limited by shares.
Disclosure of Beneficial Ownership of Shares There is no obligation under the current CAMA to disclose beneficial ownership of shares. The Bill mandates persons holding nominal interest in shares on behalf of other persons to disclose the identity of the persons who hold the beneficial interest in those shares. Punitive measures apply where such disclosures are not made.
Disclosure of Significant Control Currently, CAMA provides for disclosure to be made by a person who has acquired 10% of the share capital of a public company. Under the Bill, both private and public companies are to be notified of the acquisition or divestment of shares amounting to 5% of their share capital.
Acquisition of Own Shares by a Company Acquisition of own shares by a company is prohibited. The Bill makes provisions for public and private companies to buy back own shares subject to fulfilling certain conditions.
Irredeemable Preference Shares Currently, a company can issue irredeemable preference shares. The Bill places a ban on the issuance of irredeemable preference shares.
Issue of Shares at a Discount CAMA currently permits a company to issue shares at a discount as long as certain conditions have been met. The Bill places a ban on the issuance of a company's shares at a discount.
Company Rescue Regime These provisions are not available under the current law. The Bill introduces Company's Voluntary Arrangement and Administration in Nigerian corporate law.

Company Administration is meant to serve as a rescue mechanism for insolvent entities, allowing such entities to carry on the running of their businesses.

Corporate Voluntary Arrangement is a procedure that allows a company to settle its debts by paying only a proportion of the amount that it owes to creditors. It also allows a company to come to some other arrangement with its creditors over the payment of its debts.
Electronic Meetings, Voting, and Notices. CAMA currently provides that all Annual General Meetings (AGM's) of both public and private companies must be held physically in Nigeria.

There are no provisions accommodating electronic service of notices and electronic voting.
While the physical venue for an AGM is still required to be in Nigeria, under the Bill, private companies can hold AGMs through electronic means in accordance with regulations issued by the Corporate Affairs Commission (CAC). The Bill also provides for electronic service of notice of meetings and electronic voting at meetings.

CAC may at any time suspend, prevent, or stop the convening or holding of the AGM of a company if in its opinion any provisions of the Act relating to the convening or holding of such AGM has not been complied with. Where a public company fails to comply with any directive of CAC issued pursuant to this section, the CAC shall have the power to suspend or remove from office, the directors of such a company, and direct the shareholders to convene an extraordinary general meeting within a period of 90 days for the purpose of electing directors.

In addition to the provisions of CAMA, the choice of venue of the next AGM has been included as an ordinary business at an AGM.
Ordinary Business at AGM Ordinary business at an AGM includes declaring a dividend, the presentation of the financial statements and the reports of the directors and auditors, the election of directors in the place of those retiring, the appointment, and the fixing of the remuneration of the auditors and appointment of the members of the audit committee.
Common Seal Currently, CAMA mandates every company to have a common seal. Ownership of a common seal under the Bill is optional.

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.