INTRODUCTION
The New Companies and Allied Matters Act (CAMA) 2019 was signed into law by President Buhari on the 7th of August 2020. The CAMA 2019 repeals the Companies and Allied Matters Act, 1990, and its subsequent amendments. It also introduces new provisions that promote the ease of doing business in the country as well as reduce regulatory hurdles.
Part 1 of this newsletter tries to shed light on the redefinition of small companies, single member companies, single member companies and exemption from appointment from appointment of secretary for small companies under the new CAMA.
REDEFINTION OF SMALL COMPANIES.
Under the new CAMA, qualifications for a small company are listed under Section 394(3) as follows:
- It is a private company.
- Its turnover is not more than N120,000,000 or such amount as may be fixed by the Commission from time to time;
- Its net assets value is not more than N60,000,000 or such amount as may be fixed by the commission from time to time;
- None of its members is an alien
- None of its members is a government, government corporation or agency or its nominee; and
- In the case of a company having share capital, the directors between themselves hold at least 51% of its equity share capital
Whereas under the old CAMA, a company qualifies as a small company if the amount of its turnover for that year is not more than N2,000,000 or such amount as may be fixed by the Commission; if its net assets value is not more than N1,000,000 or such amount as may be fixed by the commission; none of its members is an alien; none of its members is a government, government corporation or agency or its nominee; and in the case of a company having share capital, the directors between themselves hold at least 51% of its equity share capital.
The increase of the yearly turnover from N2,000,000 to N120,000,000 and the net asset value from N1,000,000 to N60,000,000 is geared towards including small and medium scale businesses, to ensure reduction in fees and promote ease of doing business in Nigeria.
By the combined sections of Section 18(2) and Section 271 of CAMA 2019, A single person can now register a company. It must be noted that one member and one director of a company is however only applicable for small companies. This is as opposed to the old CAMA where there was a mandatory requirement of at least 2 (two) members and at least (2) directors. This is a commendable initiative geared towards the promotion of small and medium scale enterprises and to enhance the ease of doing business in Nigeria. The downside however is that such a company will be viewed as a one man show and investors may be skeptical about doing business with a one-man company. Also, there will be absence of checks and balance on the owner of the company. This runs contrary to international best practice which advocates transparency and accountability in every business organization.
EXEMPTION FROM APPOINTMENT OF SECRETARY FOR SMALL COMPANIES
By the provision of Section 330 of the new CAMA 2019, the mandatory requirement for Company Secretary for companies that qualify as small companies has been removed. Consequently, the mandatory requirement for appointment of company secretary is no longer in place. This is advantageous for persons that intend to register a single member company as there will be no compulsion on them to include any other person in their company. They can simply act as the single shareholder and director of the company. The downside of this is that, where there is no company secretary, the company may face compliance issues as there will be no one to advise and properly guide the Company on compliance and new regulations and carry out administrative functions for the Company.
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.