By Eloghene Adaka, Esq.
On Thursday 7th August, 2020,the President signed into law a new Companies and Allied Matters Act (CAMA) introducing business friendly provisions which promote ease of doing business in Nigeria.The new CAMAreflectseconomic best practices in Nigeria and brings about new innovations to address majority of the loopholes in the old Act. It is meant to foster development in the Nigerian market sector and ensure proper regulations of companies and allied organizationsin Nigeria. We would, however, analyze some of the innovations of the new CAMAin today’s column.
- The Introduction of a Single Member Private Company:
Section 18(2) of the CAMA2020 now provides that one person can own and incorporate a company as opposed to the repealed CAMA which that provided a minimum of two personswere needed in the incorporation of a company. This means that a person who wishes to register his company tomake it a separate legal entity can go ahead with such as the present provision favors this idea.
- Electronic Signature:
Section 101 of the newly enacted CAMA provides for the use of an electronic signature. It states that electronic signatures can now be used in authentication of a document.
- Substitution of Authorized Share Capital with Minimum Issued Share Capital:
Section 27(2) of the newly enacted CAMAhas completely repealed authorized share capital and replaced it with minimum issued share capital. The requirement of issuing 25% of the authorized share capital at incorporation has also been repealed. Section 27(2)(a) states that the amount of the minimum issued share capital shall not be less than ₦100,000.00 (one hundred thousand naira) only, in the case of a private company and ₦2,000,000.00 (two million naira) only,in the case of a public company.
- Virtual Annual Meetings for Private Companies:
In Section 240(2), this innovation applies to private companies.Private companies can now carry out their Annual Meeting electronically but in accordance with the Articles of Association of the Company.
- Reduction of Filing Fees for Registration of Charges:
Under Section 222 (12) of the Act, the total fees payable to the Corporate Affairs Commission (“CAC”) for filing, registration, or release of a charge shall not exceed 0.35% of the value of the charge.
- Increase in The Minimum Liability for Companies Limited by Guarantee:
Section (26)12 of the Act, however, repealed the former total minimum liability for a company limited by guarantee from ₦10,000 (ten thousand naira) only, to ₦100,000 (one hundred thousand naira) only.
- Power to Exempt a Foreign Company from Incorporation:
As opposed to the repealed CAMAwhich provides that the power to exempt a foreign company was vested in the President,Section 80 of the newly enacted CAMA, however,vests this power in the Minister of Trade.In addition to that, all exempted foreign companies are to deliver a notice of exemption within 30 days of the grant of such exemption to the Corporate Affairs Commission upon the payment of prescribed fees.
- Limit of Multiple Directorship in Public Companies:
Section307(2)now provides that it is not permissible for one personto be a director in more 5 public companies at the same time.
- Merger of IncorporatedTrustees:
Section 849 of CAMA now provides that two or more incorporated trustees which have similar aims can come together and merge.This, however, is subject to the conditions set by the CorporateAffairs Commission.
- Exemption of Small Companies from Appointing an Auditor:
As opposed to the repealed CAMA,under the newly enactedAct, small companies are no longer mandated to appoint an Auditor or Auditors at each Annual General Meeting to audit the financial statements of the company. Section 402 of the Act exempts small companies from the requirement of appointing Auditor(s) relating to the audit of accounts in respect of a financial year.
- Appointment of a Secretary in a Small Company now Optional:
Section 330 (1) now makes the appointment of a Secretary in a small company optional as opposed to the repealed CAMA which provided for compulsory appointment of a Secretary. According to Section 330 (1) of CAMA 2020, the appointment of a Company Secretary is only mandatory for public companies.
- Power of CAC to suspend trustees of an Association:
Section 839 provides that the Corporate Affairs Commission has the power and may, by order, suspend the Trustees of a registered association and appoint an Interim Manager or Managers to coordinate its affairs where it reasonably believes that there has been any misconduct or mismanagement, orwhere the affairs of the association are being run fraudulently, orwhere it is necessary ordesirable to protect the property of the association, or in the public interest.
- A Company’s Inability to Pay its Debts:
Section 572(a),however, increased the threshold of a company to be deemed unable to pay its debts.It provides that a company would be deemed as being unable to pay its debts if that company is indebted to a creditor to a sum exceeding ₦200,000.00 (two hundred thousand naira) only, after a demand has been made by the creditor and the company has for three weeks thereafter neglected to discharge the debt.
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- Definition or a Small Company:
Section 395(4) of CAMA 2020 increased the standard and provides a definition of small companies. Among other things, a small company must be a private company.Its turnover must not be more than ₦120,000,000.00 (one hundred and twenty million naira) only; its net assets value must not be more than ₦60,000,000.00 (sixty million naira) only; none of its members must be an alien, a government corporation, or agency, or nominee. In the case of a company having share capital, the Directors between themselves must hold at least 51% of its equity share capital.
- Optional Procurement of a Common Seal of a Company:
Section 98 makes it optional for companies to have a common seal as opposed to the repealedCAMA which made this mandatory.
- Execution of Documents with the Common Seal:
Section. 102(2) provides that a company may execute a deed without affixing a common seal. Affixing a common seal is now optional.Sections 102 (2) of the Act provides that a company may execute a document described or expressed as a deed without affixing a common seal on the document by signature on behalf of the company by(a) a Director of the company and the Secretary of the company, (b) at least two Directors of the company, or (c) a Director of the company in the presence of at least one witness who shall attest the signature.
- Consent of the AGF for Company Limited by Guarantee:
Section 26(7)of the newly enacted CAMA provides that the AGF has a time frame of 30 (thirty) days to grant consent for the approval of a company limited by guarantee. It also enumerates steps to be carried out by promoters when the approval is rejected.provided it was not granted within 30 days and no cogent reasons are given for refusal of consent.
- Chairman and Chief Executive Officer
Section 265(6) prescribes that the Chairman of a public company cannot act as a Chief Executive Officer of the same company. This is in line with the Code of Corporate Governance 2018.
- Annual Returns of A company:
Section 425(3) provides that Failure to file Annual Returns for aperiod of 10 years is a ground for striking the name of a company off the Companies’ Register.
- Electronic Filings:
Section 860 of the newly enacted CAMA provides for electronic filing.It states that any document which is to be filed with the Corporate Affairs Commission for registration may be filed electronically.
Eloghene Adaka Esq is a weekly columnist on Legal Corner with NIGER DELTA TODAY (NDT). She can be reached at firstname.lastname@example.org for further clarification or questions on legal issues.