As President Muhammadu Buhari signed the amendment of the new Companies and Allied Matters Act 2020 (CAMA) into law, policy makers and business analysts have described some new provisions in the act as a welcome development.
Many believe the reform will tone down regulatory hurdles and ease the business environment to stimulate growth, claiming business in the country has been simplified and investors will have more confidence doing business in Nigeria.”
The new CAMA 2020 has other reforms to make it easier and cheaper for small and medium-size enterprises. The resultant effect will be that a pattern of hitherto unparalleled growth and development has emerged on the corporate horizon with Nigerians bracing up to the task.
Some of the new provision as amended in the acts include:
1. The new CAMA provides for remote or virtual general meetings: provided that such meetings are conducted in accordance with the Articles of Association of the Company, (which contains the rules and regulations guiding the internal management of a company). This will facilitate participation from any location at minimal costs. This is especially relevant today given the disruption caused by the COVID-19 pandemic to operations around the world.
2. Provision for electronic filing: electronic share transfer and e-meetings for private companies. According to S.861, the new CAMA provides that certified true copies (CTC) of electronically filed documents are admissible in evidence with equal validity with the original documents. S.176 (1) also provides that instruments of transfer of shares shall include electronic instruments of transfer.
3. Enhancement of minority shareholder protection and engagement: S.265 (6) restricts firms from appointing directors to hold the office of the chairman and chief executive officer of a private company.
4. Introduction of statement of compliance: S.40 (1) of the new Act introduces that Statement of Companies be signed by an applicant or his agent confirming therein the requirements of law as to registration has been complied with. This serves as an alternative to the requirement to submit a Declaration of Compliance signed by a lawyer or attested to before a notary public.
5. Merger of Incorporated Trustees: S.849 of the new Act provides for merger between two or more associations with similar aims and objects under such terms and conditions as may be prescribed by the CAC. The previous Act did not contain this provision.
6. Limited Liability Partnership and Limited Partnership: The new CAMA introduces the concept of Limited Liability Partnerships (LLPs) and Limited Partnerships (LPs). This combines the organisational flexibility and tax status of a partnership with the limited liability of members of a company. There was no such provision in the previous Act.
7. Reduction of filing fees for registration of charges: Under S.223 (12) of the new Act, the total fees payable to the CAC for filing has been reduced to 0.35% of the value of the charge. This is expected to lead to up to 65% reduction in the associated cost payable under the regime.
8. Business rescue provisions for insolvent companies: The new Act introduces a framework for rescuing a company in distress and to keep it alive as against allowing such entity to become insolvent. Provisions were made with respect to Company Voluntary Arrangement (S.443 to S.549) and Netting (S.718 to S.721).
9. Procurement of a common seal (which was mandatory in the previous Act) is no longer a mandatory requirement: According to S.98 of the new Act, this amendment is in line with international best practices as most jurisdictions around the world have expunged the requirement from their respective laws.
10. Replacement of authorized share capital with minimum share capital: The concept of ‘Authorized share capital’ has now been replaced in S.27 of the Act with the concept of ‘Minimum share capital’ with minimum share capital promoter(s) of a business not required to pay for shares not needed at a specific time.
11. Exemption from appointing auditors: Small companies or any company having a single shareholder are no longer mandated to appoint auditors at the annual general meeting to audit their financial records. S.402 of the new CAMA provides for the exemption in relation to the audit of accounts in respect of a financial year.
12. Provision of single Member/ Shareholder Companies: S.18 (2) of the new CAMA now makes it possible to establish a private company with only one (1) member or shareholder.
13. Exemption from the appointment of company secretary: The appointment of a Company Secretary is now optional for private companies. According to S.330 (1) of the new CAMA, the appointment of a company secretary is only mandatory for public companies.
14. Restriction on multiple directorships in public companies: S.307 (1) of the Act prohibits a person being a director in more than five (5) public companies at a time.
15. The new CAMA also requires the disclosure of persons with significant control of companies in a register of beneficial owners to enhance corporate accountability and transparency. Therefore, if a company is seen as a puppet of a person, the veil of incorporation which keeps the members and the company as separate entities could be lifted on grounds of equity.