Nigeria: Recognition Of Nigerian Single Member Companies: How Does This Really Work?

1. INTRODUCTION

The Companies and Allied Matters Act, 2020, came into force in August 2020, repealing the Companies and Allied Matters Act, Cap. C20, Laws of the Federation of Nigeria, 2004 (CAMA 2020). CAMA 2020 introduced several changes into the company/corporate ecosystem in Nigeria, which have been thought to significantly increase the ease of doing business activities in Nigeria. One of the key introductions is the concept single member companies.

A single member company can be defined as a company formed with only one shareholder¹ in distinction to the pre- CAMA 2020 position where every Nigerian company is required to have at least two shareholders/members.

2. We have set out below highlights of provisions of the CAMA 2020 that impact on the governance structure and corporate actions of a single member company.         
   2.1 General Meetings
   We note that previously, all companies were required to hold a general meeting in each year as its annual general meeting (AGM) in addition to any other meeting in that year (Extra-ordinary General Meeting - EGM). The AGM for newly incorporated companies is to be held within 18 months of incorporation and subsequently in each year. Under the CAMA 2020, single member companies are not required to hold any form of general meetings as a sole shareholder cannot 'meet' with itself.
   Flowing from the above, companies with a single member are exempted from keeping minute books of meetings neither do they comply with the requirement on place of meetings in Nigeria.² Further to the exemption of single member companies from holding general meetings, decisions which may be made in a general meeting are made in sole member companies, simply by such a member providing the board of directors with details of its decision (probably in form of a letter), and this has the same effect as if agreed by the members in general meeting.
   It is worthy of mention that failure to comply with the notification requirement does not affect the validity of any decision taken by that single member, it is only necessary for record purposes and to prevent penalty prescribed by the Corporate Affairs Commission (CAC) which will accrue for each day of default, in respect of filings..
   2.2 Filing of Annual Returns Every company is required by CAMA 2020 to make and deliver to the CAC, annual return, once in every year, in the form, and containing the matters specified therein, and which is expected to be completed, signed by a director and the secretary, and delivered to the CAC not later than 42 days after the AGM for the year. However, single members companies are exempt from compliance with the 42 days statutory period required for filing of annual returns after a company's AGM³. This is logical since such entities are not required to hold general meetings. In practice, there seems to be lacunas in the application of the provisions for the time of filing of annual returns for single member companies, some of which are as follows:

   • While filing annual returns for companies as prescribed by Form CAC 19 (Annual Returns Form), there is a requirement to fill the date of the AGM. Since single member companies are not required to hold AGMs, what date should be provided during the filing process? This suggests that the exemption of single member companies from holding meetings was not contemplated in drafting Form CAC 19. We, however, suggest that the date of the notification to the board may suffice for this purpose.
   • The status of companies on the CAC portal is now automatically being inactivated upon default in payment of annual returns up to date. The status of single member companies is also being inactivated, not taking into consideration the fact that they are not mandated to comply with the 42 days statutory timeline for filing annual returns. This indirectly requires them to still comply with the statutory timeline, despite being exempted.

   2.3 Conversion to Single Member Companies

   On another note, Section 571 of CAMA provides for circumstances in which companies may be wound up by the Court. One of the reasons, as provided for in Section 571 (c) is if 'the number of members is reduced below two in the case of companies with more than one member.' The implication of this provision is that companies that were registered prior to the implementation of CAMA 2020 are not given the opportunity to now become single member companies. Additionally, if a single shareholder company becomes a multiple member company, section 571 (c) prevents it from reverting to a single shareholder company. This invariably leaves an implicit rule that a single shareholding company must always remain a single shareholding company. We cannot ascertain if this was the intent of the draftsmen of CAMA, or there was an oversight in this regard.