After three decades, the Companies and Allied Matters Act of 1990 has finally been repealed and replaced by the new Companies and Allied Matters Act 2020 [“CAMA 2020”]. This latest statute is divided into 7 Parts [A – G] containing 870 Sections in all. The new law contains certain stand-out provisions which seek to make less-challenging, the set up and operation of businesses in Nigeria. The recent changes in this legislation are laced with positives and good tidings for anyone willing to invest in Nigeria’s commercial industry. Some of them include:
- Single Shareholder/Director
It is now possible for companies to have just a single shareholder or director. Unlike the old law that required a minimum of two directors, under the current dispensation, just one director or shareholder is needed. [Section 18(2)].However, this is available to small companies only [Section 271(1)]. The advantage of this is that business owners who currently operate sole proprietorships [whose legal status are at best Business Names] can now upgrade their businesses to limited liability companies without the need for additional directors or shareholders. The beauty of this is that they can still continue to run their businesses as before and now enjoy the additional benefits that come with their new limited liability status; including access to credit from financial institutions of repute. A double plus.
2. Redefinition of Small Companies
Under the old law, a small company was defined as one which had a turnover of not more than N2 Million and a net asset value of not more than N1Million. Under Section 394(3)(b) & (c) of CAMA 2020, there has been a change; a small company is now a company with a turnover of not more than N120 million and a net asset value of not more than N60 Million. The benefit inherent here is that these small companies do not have to hold annual general meetings [Section 237(1)], appoint auditors [Section 402(1)(b)] or a company secretary [Section 330(1)] among other benefits. In the past under the old dispensation, these matters were highly important and business owners had to expend resources in appointing officers and holding these meetings. Now, it is not a requirement to have, which translates to conservation of resources to be deployed.
3. Reduced Costs for Registration of Securities
Under the old CAMA, before you can register security interests with the Corporate Affairs Commission [hereinafter referred to as the “Commission”], the filing fee costs 1% of the secured amount [for private companies] and 2% of the secured amount [for public companies]. Under the CAMA 2020, the maximum amount the Commission can charge is 0.35% of the secured amount [Section 222(12)]. This means that the cost of registering security interests at the Commission has been reduced by 65% for private companies and 82.5% for public companies. Therefore, business owners get to spend less on registration and thus, there is a reduction in their expenditure.
4. New Corporate Entities
There are new corporate entities and structures established by the new CAMA 2020. These are the Limited Partnerships [Section 795] and Limited Liability Partnerships [Section 746]. This is one of the best innovations of the new law; because investors now have alternative ways to carry on businesses in Nigeria without going through the stress of registering a company. Partnerships are registerable, thereby establishing their legal status and entity even better.
5. Proper Framework and Implementation for Corporate Restructuring
Under the CAMA 2020, Section 711 provides for a proper and better structure whereby mergers and other forms of arrangement, compromise or restructuring can be implemented. Under this framework, if the transaction is approved by at least ¾ [75%] in value of the shares held by shareholders present and voting at the meeting, the Court will sanction it [Section 711(2)]. The court sanction will then be filed at the Commission within 7 days [Section 711(6)]. Schemes of arrangement or compromise can also be done by virtue of Section 715. However, such schemes can be referred by the Court to the Securities and Exchange Commission to determine the fairness of the scheme. This requirement of referral is however not required under Section 711. Schemes under Section 715 do not become effective until a court order sanctioning such scheme has been filed at the Commission.
6. Companies Limited by Guarantee
In the old law, before one can register a Company Limited by Guarantee, one must seek and obtain the consent of the Attorney General of the Federation [hereinafter called “AGF”]. This meant that business owners were at the mercy of the AGF. However, by virtue of Section 26(5), if after all necessary documents have been submitted but the AGF does not grant his consent or communicate his refusal within 30 days, the promoters may place an advertisement in 3 national daily newspapers inviting the general public to make any objections to the incorporation of the company which will be considered by the Commission. If the Commission is satisfied that the Memorandum and Articles of Association of the company are in compliance with the CAMA 2020, the Commission will advertise the application in 3 national newspapers, inviting objections from the public to the proposed registration. If there are no objections from the public within 28 days, the Commission can go ahead and approve the application and register the company without the AGF’s consent. The upside of this new provision is that it reduces red-tapeism and bureaucracy. In the past, without consent, intended business owners were stranded; but now the new law has provided a way to scale that hurdle.
7. Increased Transparency
Transparency and disclosure in business naturally creates trust and boosts confidence amongst investors. The new law via Section 119 insists that disclosures are now required of persons with significant control [i.e. persons who hold 5% or more of the voting rights] in private and public companies while Section 791 provides same for limited liability partnerships. The Commission will also maintain a register of such persons in which it will enter the information received from the companies or any change thereto.1
In conclusion, the new CAMA 2020 has no doubt evolved and the developments in it reflect the realities of the modern commercial day. Some of the bottlenecks and hiccups affecting business owners in the past have been resolved and thus, this recent legislation is a welcome development for entrepreneurs. Undisputedly, the CAMA 2020 is a sigh of relief for businesses in Nigeria.
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1 There are still provisions of the new CAMA that concern the subject matter at hand. As time goes on, there would be an update of those in our subsequent articles
By :
TEAM VERNIA
52B, Adeyemo Akapo Street,Omole Phase I Estate,
Off Agidingbi Road, Ikeja, Lagos.
+234 813 830 6975
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