The Companies and Allied Matters Act 2020 ("CAMA 2020", "the New CAMA", or "the Act") was assented to by President Muhammadu Buhari on 7 August 2020. In effect, the new CAMA repealed and replaced the CAMA of 1990. The new CAMA which is yet to commence offers a number of legal innovations engendering the ease of doing business in Nigeria. Along with these innovations, the new CAMA has introduced some changes to the requirements for registration of companies in Nigeria. This article aims at providing a guide on registration of a private company limited by shares in Nigeria in light of New CAMA 2020.
Determine the nature of the company.
In registering a company in Nigeria, you must first determine the nature of the company you wish to set up. Is it going to be a private company limited by shares, private company limited by guarantee, a public company, or an incorporated trustee? As pointed out above, the focus here is on the most common form of companies in Nigeria, the private company limited by shares.
Conduct an official name-availability search.
The next practical step is to conduct a search with the Corporate Affairs Commission (CAC), the statutory body responsible for the administration and enforcement of the CAMA in Nigeria. This search is called 'name availability search' and the process typically takes less than 24 hours. If the name is available, the CAC will issue an approval note. The approved name would be exclusively reserved in applicant's favour for a period of sixty days-within which time, any other company proposing to use the name will be barred from doing so on the ground that it is similar or confusing with the already reserved name. But if the name applied for is disapproved, a disapproval note would be issued by the CAC.
Name availability search is important since the CAC reserves the right to disapprove name(s) that are capable of misleading as to its nature or extent of its activities, identical with or similar to the name of a registered company or with a trademark or trade name which may likely confuse unsuspecting members of the public, or names that are restricted or prohibited in Nigeria.
Determine and prepare the objects of the company.
The object of a company is the nature of the business of the company. It is contained in the company's Memorandum of Association (MoA). The memorandum of a company is the document that contains the fundamental conditions upon which a company is formed and allowed to operate in a given jurisdiction.
To register a company in Nigeria, section 36 of the Companies & Allied Matters Act 2020 provides that the MoA shall be delivered to the Commission together with an application for registration of a company, documents required by the Act and a statement of compliance. The application for registration must state the following:
(a) The company's proposed name;
(b) The registered office address and head office address if different from the registered office address;
(c) Whether the liability of the members of the company is to be limited and if so, whether it is to be limited by shares or by guarantee; and
(d) Whether the company is to be a private or a public company.
It is vital that when registering your private company limited by shares, you have your objects properly prepared in compliance with the requirements of CAMA. Also, you want to be sure that the object clauses comprehensively capture the scope of your proposed company's business.
Documents required by the Act for incorporation
Once a proposed name has been confirmed to be available for use by the CAC, the promoters of the proposed company may proceed to register the company. This registration process is completed online via the CAC portal with the following documents:
A. Form CAC 1.1-Application for Registration of Company
In this Form, the applicant is required to complete it with the following information among others:
II. Statement of Capital & Initial Shareholdings
For private companies limited by shares, section 37 requires that the statement of capital and initial shareholdings must be stated as well as the total shares taken by the subscribers on formation of the company. It must also state the number, class, and the aggregate nominal value of the shares as well as the aggregate amount (if any) to be left unpaid on the subscribers' shares.
II. Statement of Proposed Directors
For the purpose of registering the company, the names and details of the directors of the proposed company must be submitted to the CAC. Section 39 of the CAMA 2020 provides that the statement of the company's proposed directors shall contain the particulars of the proposed director(s) and secretary or joint secretaries of the company. The statement shall also contain consent by each of the persons named as a director, as secretary or joint secretaries, to act in the relevant capacity.
III. Statement of Compliance
Section 40 of the Act requires that a Statement of Compliance be delivered to the CAC. A Statement of Compliance is a statement of an applicant or an agent that the requirements of the Act have been complied with. The CAC may accept the compliance as sufficient evidence of compliance. This is a new development under CAMA 2020. It effectively displaces the need for a statutory declaration of compliance which required that only a legal practitioner could attest that the statutory requirements for incorporation have been complied with. In the new Act, the applicant or his or her agent (if he or she so chooses) may deliver the Statement of Compliance to the CAC. Dispensing with the need for the declaration by a legal practitioner merely demonstrates that the framers of the Act no longer reckons with the relevance of a legal practitioner who ordinarily has the legal background and training to attest to statutory compliance of this nature. The idea of dispensing with a legal practitioner's declaration has been welcomed by some but not by many legal practitioners.
After completion, CAC Form 1.1, shall be submitted to the CAC with the Memorandum of Association & Articles of Association of the Company.
B. Memorandum of Association & Articles of Association of the Company (together, the 'MemArt')
The Memorandum of Association and Articles of Association (MemArt) are legal documents that form the constitution of the company. They both regulate the external and internal affairs of the company respectively. The Memorandum of Association, on the one hand, sets out, among other things, the objects of the company (the reason for company formation), situation clause (the jurisdiction or country the company has its registered address), and the liability clause (the extent of liability of members of the company) etc. The Articles of Association, on the other hand, regulates the company's internal workings, powers and rights, duties and management, etc. Be sure to comprehensively review the Articles of Association. Always avoid company-registration agents who simply adopt the template Articles of Association. From our experience at Infusion Lawyers, it is always in your best interest to prepare or review the Articles of Association in accordance with the specific, unique, or peculiar needs of your proposed company. What is good for the goose may not always be good for the gander. With the wrong Articles of Association, you may be buying for yourself a company that is either dead on arrival or a time bomb. Get professional help.
By a combined reading of sections 20(2) and 41(1) of the CAMA 2020, the MemArt must be subscribed to by at least two (2) persons and who may not necessarily be Nigerians. I must mention however, that a one-person company may now be registered under CAMA 2020. At the time of writing this guide, as pointed out earlier, the new CAMA 2020 is yet to commence. According to the Registrar-General of the CAC, the new CAMA 2020 is expected to commence in October 2020.
Determine the share capital of the company.
Section 27(2) of the Act places a minimum issued share capital of not less than N100 thousand for private companies and N2 million in the case of a public company. But under CAMA 1990, section 27 (2) (a), it used to be a minimum of 10,000 for private companies. Take notice of the change from 'Authorized Share Capital' to 'Minimum Share Capital'. This is deliberate as promoter(s) of a business are no longer required to pay for or allocate shares that are not needed at the specific time of incorporation.
For tax-assessment purposes, Nigeria now distinguishes companies-small, medium, and large companies-by the size of their gross turnovers. Respectively, these three sizes of company have the following thresholds: (i) A gross turnover of not more than N25 million per annum for a small company; (ii) A gross turnover of more than N25 million but not more than N100 million per annum for a medium-sized company; and (iii) a large company means any company which is not a small or medium-sized company. We can, by implication, peg the threshold of large companies with a gross turnover of above N100 million per annum. This categorization is by virtue of the new Finance Act 2019. The category a private company falls into has tax implications under Nigeria's various tax laws. It is therefore important for companies to always seek proper advice and guidance in this respect in order to avoid or minimize business and regulatory issues.
The signing of CAMA 2020 into law is part of the Nigerian Government's effort-particularly through the Presidential Enabling Business Environment Council (PEBEC)-towards promoting the ease of doing business in Nigeria. In this guide showing the steps involved in registering a private company limited by shares in Nigeria, some of the new changes introduced by CAMA 2020 in relation to private companies limited by shares have also been highlighted.
Since the establishment of PEBEC, Nigeria continues to gradually witness a number of legal and administrative innovations, including the introduction of an upgraded and fully automated online name-reservation and company-registration portal. With these innovations, private individuals and promoters can find their entrepreneurial journey in registering new private companies in Nigeria easy.
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.