On 7th August, 2020, President Muhammadu Buhari signed the Companies and Allied Matters Bill, which was recently passed by the National Assembly, into law. The new Companies and Allied Matter Act ("CAMA 2020" or "the Act") introduces new provisions to reflect modern commercial realities as well as reduce compliance costs and regulatory hurdles for businesses in Nigeria.
The CAMA 2020 repeals the CAMA 1990 and amongst other provisions introduces the following changes:
- Provisions for a single member/shareholder companies whereby, under the CAMA 2020, a private company can be established with only one member or shareholder;
- Authorized Share Capital has now been replaced with Minimum Share Capital. Thus, the promoters of a business do not need to pay for shares that are not needed at a specific time with the introduction of minimum share capital provision;
- Filing, share transfer and meetings can now be done electronically by private companies;
- Annual General Meetings can now be held virtually for all companies;
- Introduction of Statement of Compliance which can be signed by an applicant or his agent, confirming that the legal requirements with respect to registration have been complied with. This serves as an alternative to the requirement to submit a Declaration of Compliance, which required the signature of a lawyer or attestation before a notary public;
- Exemption of small companies or companies with single shareholders from the requirement to appoint Auditors;
- The requirement for appointment of a company secretary is now optional for private companies;
- Introduction of Limited Partnerships and Limited Liability Partnerships in Nigeria which provides the organizational flexibility and tax status of a partnership with the limited liability of members of a company for partnerships;
- Reduction of filing fees for registration of charges;
- Merger of Incorporated Trustees ;
- Restriction on multiple directorship in public companies, this prohibits a person from being a director in more than five public companies at the same time;
- Business rescue provisions for Insolvent Companies;
- Enhancement of Minority Shareholder Protection and Engagement - The Act restricts private companies from appointing a director to hold the office of the Chairman and Chief Executive Officer.
The signing of the Companies and Allied Matters Bill into law is a welcome development as it is expected to improve the ease of registration, commencement and operation of businesses in Nigeria by providing simpler processes and lessening regulatory compliance burden.
For example, the provision of single member companies as well as the removal of requirement to appoint statutory auditors for small companies will reduce cost and compliance processes for such companies. The provision for Limited Liability Partnerships, is in line with modern trends in corporate law and means such entities will have more flexibility in doing business and their proprietors, will enjoy the same protection that Limited Liability Companies enjoy.
The provisions for electronic filing and virtual meetings is in line with the realities brought to the fore by COVID-19 and will also improve the use of technology in corporate governance and compliance, likewise, other provisions that seek to enhance transparency in the operations of companies such as the requirement for disclosure of persons with signi?cant control in companies (Section 119 of the new Act) and the restriction on multiple directorship in public companies, along with the enhanced provisions for minority shareholder protection.
Overall, the repeal of CAMA 1990 and the enactment of this Act is a welcome development for businesses in Nigeria, especially coming 30 years apart, when business practices, commercial transactions and the laws and practices governing them have significantly changed globally. It is hoped that in implementing the law, the Corporate Affairs Commission and other relevant government agencies will keep to the spirit of the amendment, which is to enhance the overall ease of doing business in Nigeria and minimise the compliance burden for companies. Companies, individuals and anyone doing business or intending to do business in Nigeria is advised to seek more detailed and professional analysis of the impact of the amendment to their business operations. Andersen Tax will monitor subsequent developments and issue a more detailed analysis of the CAMA 2020 in a subsequent newsletter.
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