Introduction
On August 7, 2020, President Muhammadu Buhari will sign the Companies and Allied Matters Act, 2020 (“CAMA, 2020”) into law. This action depends on the passage of the Finance Act, which fundamentally reforms Nigeria’s tax laws, and the Federal Competition and Consumer Protection Act of 2019, which is Nigeria’s first comprehensive consumer protection and anti-competition law. Unquestionably, the CAMA’s most recent amendment has altered the overall landscape of conducting business in Nigeria. Hopefully, the practicality of its provisions will further simplify company operations, particularly for Nigeria’s micro, small, and medium-sized firms. Despite the fact that the new Act lacks a commencement date, it is presumed to enter into force on the day it was signed into law by the requirements of Section 2 of the Interpretation Act.
In this article, the changes to the Companies and Allied Matters Act, 2020 are examined.
CHANGES IMPLEMENTED BY CAMA 2020
Significant changes were made to both the management of the Corporate Affairs Commission (“CAC”) and the management of corporations in Nigeria as a result of the repeal of CAMA 2004 by CAMA 2020. from the method of incorporation to a company’s post-incorporation concerns. Important adjustments made in accordance with the Act include the following:
- ELECTRONIC MEANS OF APPLICATION AND FILING: The CAMA 2020 permits the use of electronic signatures and the electronic submission/filing of papers relating to incorporation and other matters. This clause complies with both the Evidence Act and modern technological realities. Additionally, it fully implements the CAC’s current online registration system.
- SHARES AND SHARE CERTIFICATE ALLOTMENT: The Federal Competition and Consumer Protection Act (“FCCP, Act”), the Investment and Securities Act (“ISA”), and CAMA’s regulations all control the distribution of shares to public enterprises. In the event that a malicious attempt is made to take control of the business, this will safeguard the company’s interests. On the other hand, CAMA 2020 now includes explicit clauses on the transfer of the authority to distribute shares to private firms. The corporation’s general meeting has the authority to distribute shares. Now that CAMA 2020 is in effect, directors of private enterprises may distribute shares. However, this authority is only granted to the directors in accordance with any limitations imposed by the business’s articles of association and general meetings of the company. The power to allocate shares must be delegated during the company’s general meeting and may only be awarded under the terms set forth by the company in a general meeting.
- AUDIT OBLIGATION: Generally speaking, each company is required to name an auditor or auditors to audit its financial records and statements in respect of a financial year during such companies’ annual general meetings. This is no longer the case because, with the exception of insurance firms and banks, small businesses or businesses that have not operated since formation are now free from this requirement. The audited financial statements of publicly traded corporations must now be posted on the website of the company.
- ENTITIES CONTROLLED BY CAC: Until this, all businesses registered under CAMA and with the CAC had to be either private or publicly traded. Since the most recent revision, limited liability partnerships and limited partnerships have been created. Although the Partnership Act of 1890 governs Limited Partnerships, CAMA 2020’s provisions supersede the Partnership Act’s provisions. Limited Liability Partnerships will likewise be subject to CAC regulation. In addition, CAMA 2020 introduced what is sometimes referred to as a one-person company (OPC). In contrast to the previous rule, which stated that only two people with the legal ability to form a corporation could incorporate a company, this simply indicates that such a firm may be held by one person.
- MINIMUM SHARE CAPITAL: Significant changes were made to what was possible in terms of share capital under CAMA 2004 by CAMA 2020. Prior to formation, companies were required to have a minimum authorised share capital of N10,000 for private firms and N500,000 for public companies. This is no longer the case as CAMA 2020 has changed the minimum issued share capital for both private and public enterprises and adopted the minimum issued share capital in place of the authorised share capital. According to the revised interpretation of the legislation, private firms must have initial issued share capital of at least N100,000 in nominal value from its share capital at the time of incorporation, while public companies must have initial issued share capital of N2,000,000 in nominal value. In other words, the number of shares allotted, rather than the share capital of a firm, is now what matters. Only shares that have already been issued are subject to stamp duties. In addition, a firm is required to maintain a paid-up share capital ratio of 25% at all times.
- BUSINESSES LIMITED BY GUARANTEE: The requirement that the Attorney General of the Federation’s (“AGF”) authorization be sought prior to incorporation presents a significant obstacle to the creation of businesses limited by guarantee. People have adopted the incorporation of trustee in an effort to avoid the laborious process of creating firms limited by guarantee (or “GTE”) due to the administrative difficulties associated with this. The new stance is that the AGF’s consent must be obtained, and the AGF is required to provide his consent within thirty (30) days after receiving the application for consent or to raise objections or provide grounds for withholding approval. The AGF is presumed not to have an objection to the application if it does not react within 30 days. This new provision implies that the argument of AGF’s protracted approval of GTE has been settled. The announcement of an application for incorporation of a company limited by guarantee soliciting objections to such incorporations is one of the additional provisions.
- RESTRICTION ON THE ROLE OF CHAIRMAN/CEO OF A PRIVATE COMPANY: The CAMA 2020 prohibits private firms from appointing a director to hold the office of the Chairman and Chief Executive Officer of the Company in order to improve the protection of a company’s minority shareholders.
- RESTRICTIONS ON MULTIPLE DIRECTORSHIP: According to the Act, no one may serve as a director of more than five publicly traded firms at once.
- RESERVED NAME WITHDRAWAL AND CANCELLATION: CAMA 2020 explicitly allows the CAC to withdraw and cancel a reserved name where it is identical to or very similar to the name of a registered company. Additionally, CAMA 2020 gives the CAC the authority to revoke or cancel a reserved name in cases where it was obtained unjustly. A name that becomes available as a result of a name change by another company may also be approved for use by CAC.
- MEETINGS: The new provision of CAMA, 2020 now acknowledges the use of electronic means in having meetings, albeit this concession is limited to simply private enterprises as all public companies are still required to carry out their meetings physically. This change is in step with contemporary circumstances.
- COMPANY SECRETARY: Prior to the repeal of CAMA in 2004, all firms were required to hire a company secretary. This statement has since been changed to clarify that small businesses are no longer required by law to name a company secretary. In light of the fact that the CAMA, 2020 only makes it an option for small businesses, it should be noted that the value of a company secretary cannot be understated because it assures the efficient administrative management of the business.
- DIRECTORS: In accordance with the code of corporate governance, directors of publicly traded businesses are now required to disclose both their age at appointment and any other directorships they have had in publicly traded companies. Additionally, CAMA, 2020 now requires businesses to always have three (3) independent directors. While the aforementioned is only applicable to publicly traded firms, small businesses are now permitted to have one director instead of the two (2) required by CAMA, 2004.
We shall look at more features of the new Act in the part two of this article.