The President of Nigeria on August 7,2020 signed into law the Companies and Allied Matters Act, 2020 ("CAMA 2020") to replace the 1990 Act. CAMA 2020 which is now the primary legislation governing the formation and management of companies in Nigeria affects all residents and foreigners intending to or doing business in Nigeria. It is geared towards supporting the government initiative to improve ease of doing business in Nigeria1.
Key changes introduced by CAMA 2020 are highlighted below in simple terms.
|KEY CHANGE||WHAT THIS MEANS|
|Single Shareholder for Private Companies.||A company can now be registered with 1 shareholder; and businesses are no longer mandated to have a minimum of 2 shareholders. This makes setting up a business in Nigeria much easier. Section 18 of CAMA 2020.|
|A Company Limited by Guarantee ("CGTE") can be registered without the Attorney General's ("AG") consent.||Obtaining the AG's consent remains part of the registration process for a CGTE. There is, however, now a 30days time limit for the AG to make a decision, failing which the application can progress to the advertisement stage. This should speed up the registration process. Section 26 of CAMA 2020.|
|Introduction of Limited Liability Partnership (LLP) and Limited Partnership (LP).||The LLP and LP are newly introduced business structures by CAMA 2020. These options can now be selected by those who require the benefit of a limited liability structure with the tax status and flexibility of a partnership. Sections 746 to 810 of CAMA 2020.|
|Reduction of Filing Fees for the Registration of Charges.||Previously, filing fees for registration or release of Charges were between 1 to 2% of the value of the charged assets. Now, the total fee payable to the Corporate Affairs Commission is not to exceed 0.35% for both private and public companies. This should result in cost savings for businesses. Section 222(12) of CAMA 2020.|
|Introduction of Electronic signature, electronic transfer of shares and virtual general meeting.||In line with today's world, (i) e-signatures can now be used to sign documents; (ii) companies can now maintain an e-register for share transfers; and (iii) private companies are now permitted by law to hold virtual meetings in accordance with their articles of association. Sections 101, 178(1) and 240(2) of CAMA 2020.|
|Small Companies are exempt from Audit requirements.||Small companies and companies that are yet to commence business since incorporation are exempted from audit requirements under CAMA 2020. This reduces the regulatory burden on small businesses. Section 402 of CAMA 2020.|
|Appointment of a Company Secretary optional for small companies.||Small companies are no longer mandated to appoint a Company Secretary. Although this should help small businesses save costs, small businesses need to weigh the advantages of outsourcing company secretarial tasks to legal professionals against cost savings. Section 330 of CAMA 2020.|
|Restriction on Single Person Holding Position of Chief Executive Officer and Chairman of the Board.||CAMA 2020 states that, the office of Chief Executive Officer and the Chairman of the Board is not to be held by the same person, for public companies. This is in accordance with good corporate governance principles. Section 265(6) of CAMA 2020.|
|Restriction of Multiple Directorship in Public Companies.||The maximum number of director positions that can be held by a person in public companies is now 5. This should encourage good corporate governance. Section 307 of CAMA 2020.|
|Merger of Incorporated Trustees.||Incorporated Trustees with similar aims are now permitted to merge. Note however that the Federal Competition and Consumer Protection Commission (FCCPC) is the apex regulator in matters of mergers and it would be useful to check the requirements of the Federal Competition and Consumer Protection Act 2018 in such cases. Section 849 of CAMA 2020.|
1 See our article on setting up a business in Nigeria on www.pavestoneslegal.com.
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