What existing and intending Business owners Should Know
The Companies and Allied Matters Act (CAMA) was signed into law by President Muhammadu Buhari on August 7, 2020. This new law is provided to promote ease of doing business and significantly reduce regulatory hurdles associated with establishment and running of business in Nigeria. This therefore means the new CAMA is the most significant business legislation in over 30 years.
Some of the major provision of the Act are as follow:
- Single Shareholder Companies: the new CAMA provides that a private company can now be established with only one (1) member or Shareholder ___18(2)
- Introduction of Statement of Compliance: the new act introduces statement of compliance as an alternative to Declaration of Compliance. The Statement of Compliance can be signed by an applicant or his agent to attest that the requirements of the law as to registration have been met. This is an improvement over the former requirement to submit a Declaration of Compliance signed by a lawyer.
- Introduction of minimum share capital: this was introduced to replace the concept of “authorised share capital”. With this provision, promoters of a business can now choose not to pay for shares that are not needed at a specific time____27
- No mandatory requirement of common seal: under the earlier Act, every company is required to have a common seal which is to be regulated by Articles of Association. This, however, has been abolished by the new Act. Therefore, procurement of a common seal is no longer a mandatory requirement___98
- Provision for E-filing, electronic share transfer and electronic meetings: according to the new Act, certified copies of electronically filed documents are admissible in evidence, with equal validity with the original document. This means that private companies can easily file documents, transfer shares, or hold their meetings electronically___861 & S.176(1)
- Provision for virtual AGMs: the new Act made a provision for companies’ general meeting to be held remotely or virtually provided such meeting is in conformity with the Articles of Association of the company. This simply makes participation in such meeting from any location within and outside the country possible with minimal cost. This will complement the existing corporate governance structure and enhance credibility of public companies in Nigeria.
However, there are some conflicts between the Act and the Principle 7 in the Code of Corporate Governance 2018 (CCG) published by the Financial Reporting Council of Nigeria (FRCN) on the recommended practices bordering on the qualifications for ID. The conflict may otherwise disqualify competent directors from holding the seat of ID. It is hoped that the operations of the Act will align with the established principles in the CCG to ease the breath of confusion as already being perceived.
- Exemption from appointing auditors: according to the act, small companies or any company with a single shareholder are no longer mandated to appoint auditors at their general meeting to audit their financial record___402
- Appointment of Company Secretary: Private companies are no longer mandated to appoint company secretary. The appointment of secretary is only mandated for the public companies___330(1)
- Reduction of filing fees: the provision of the new Act has reduced the total fees payable to the CAC for filing reduced to 0.35% of the value of the charge. This is envisaged to lead to about 65% reduction in the associated cost payable to the commission___223(12)
- Merger of incorporated trustees: the new Act provides for a merger between two or more associations with similar aims and objects under terms and conditions as may be prescribed by the CAC___849
- Restriction on Multiple Directorships in Public Companies: The Act prohibit a person from being a director in more than five (5) public companies at a time___307(1)
- Shareholding Transparency: Under the new Act, it is obligatory for entities to disclose capacities in which shares are held, either as beneficial owner or as a nominee of an interested person___119
- Business Rescue for Insolvent Companies: The new Act made provision for framework for rescuing companies in distress in order to keep them alive instead of allowing them to become insolvent. These provisions were made with respect to Company Voluntary Arrangement, Administration and Netting__ (S.434-442), (S.443-549) and (S.718-721) respectively.
- Improvement on Minority Shareholder Protection: The Act prohibit firms from appointing a director to hold the office of the Chairman and Chief Executive Officer of a private company___265(6)
- Administrative Proceedings Committee: The Act has introduced an administrative tribunal, the Administrative Proceedings Committee (“the APC”), to act as an arbiter of first instance for resolving disputes or grievances arising from the operations of the Act. The APC is also empowered to impose administrative penalties for contraventions of the Act.
What is the Economic Importance of this Act?
- The Act will ensure more business-friendly regulation for Micro, Small and Medium Enterprise
- Reduction in time and cost incurred in opening a new company
- Fewer reporting obligations for small companies
- Increasing investors’ confidence in all sectors of the Nigerian Economy
- The Act promotes the use of technology in the registration of new business which leads to increased efficiency.
- The removal of minimum share capital will encourage more investment which will in turn lead to job creation.
The Act appears to complement the key objectives of the Presidential Enabling Business Environment Council in improving the investment climate and business environment in Nigeria. It is expected that the Act, when fully implemented, would address some of the difficulties faced by businesses (such as administrative bottlenecks, high compliance costs, etc.) and lead to significant improvements in the country’s Ease of Doing Business rankings.
Overall, the provisions of the Act should stimulate increased economic activity which would create employment, generate additional wealth and increase tax revenue for the government.
However, the retention of the requirement for foreign businesses to incorporate entities to do business in Nigeria is unlikely to achieve the desired end of retaining more value in Nigeria. We, therefore hope that reviews will be done to acknowledge the borderless nature of global business and the digital economy by introducing measures such as re-introduction of branch registration of foreign companies, especially the digital giants and technology companies, and addressing cross border insolvencies, among others.