Corporate and Commercial Business Meet: The New Companies and Allied Matters Act (CAMA) 2020
President Muhammadu Buhari on Friday, 7th of August 2020 in Abuja assented to the Companies and Allied Matters Bill, 2020 recently passed by the National Assembly. The new Companies and Allied Matters Act (CAMA) is Nigeria’s most central and significant business legislation in three decades that affects the corporate and commercial business industry environment in Nigeria.
The new Act is made of 870 Sections, (as opposed to the 613 sections in the 2004 Act) and is divided into 7 parts. Part A deals with the Composition of the Corporate Affairs Commission, Part B provides for Incorporation of Companies, Part C deals with Limited Liability Partnership, Part D provides for Limited Partnership, Part E covers the registration of Business Names, Part F guides on registration of Incorporated Trustees and Part G deals with general provisions and the establishment of Administrative Proceedings Committee.
A thorough evaluation of the Act reveals that it aligns with the Nigerian Government commitment to ease the process of doing business in Nigeria commencing from the mode of business registration. For micro, small and medium scale enterprises, some notable innovations/reforms under the new Companies and Allied Matters Act (CAMA) 2020 include:
- There has been a large percentage reduction on filing fee (registration fee for micro and small business owners). The total fees payable to the CAC for filing has been reduced to 0.35% of the value of the charge with a projected 65% reduction in the associated cost payable under Section 222 (12) CAMA 2020.
- Micro and small business owners can now register their business as a “one-man” business, there is no need for a second director or shareholders. Section 18(2) CAMA 2020 provides for single-member/shareholder for private companies.
- Authorized share capital is no longer a requirement. The concept of “authorised share capital” has now been replaced in section 27 of the Act with the concept of “minimum share capital”. With minimum share capital, promoter(s) of a business need not pay for shares that are not needed at a specific time. Put simply, business owners could pay per what they can afford when paying their filing fee.
- The section of the registration form which usually requires the services of a lawyer to sign the declaratory or notary form has been expunged from the Act. Section 40(1) CAMA 2020 introduces the Statement of Compliance which can be signed by an applicant or his agent, confirming therein that the requirements of the law as to registration have been complied with. Therefore, a business owner who cannot afford the services of a lawyer can simply sign the declaratory form by himself/herself.
Suffice it to say that these updated processes now make it easier for individuals to register their businesses on their own thereby encouraging more small scale and sole proprietor businesses to register with the Corporate Affairs Commission.
However, the newly updated CAMA 2020 Act made provisions for numerous innovations that affect large private companies or publicly listed companies. They are listed below:
- Procurement of a Common Seal is no longer a mandatory requirement. By virtue of section 98 CAMA 2020, every company is required to have a common seal and the use of which is to be regulated by the Articles of Association. This amendment is in line with international best practices as most jurisdictions around the world have expunged the requirement from their respective laws.
- Disclosure of persons with significant control in companies. Section 119 CAMA 2020 introduces new transparency provision with an obligation for entities to disclose capacity in which shares are held, either as a beneficial owner or as a nominee of an interested person.
- Provision for electronic filing, electronic share transfer and e-meetings for private companies. Section 176(1) provides that instruments of transfer of shares shall include electronic instruments of transfer. Section 861 CAMA 2020 also provides that certified true copies of electronically filed documents are admissible in evidence, with equal validity with the original documents.
- Provision of virtual meetings for private companies so long as it is conducted in accordance with the Articles of Association of the company by virtue of Section 240(2) CAMA 2020. Also, Section 240(1) provides that with the exception of small companies and companies having a single shareholder, all statutory and annual general meetings shall be held in Nigeria.
- Enhancement of Minority Shareholder Protection and Engagement. Section 265(6) restricts firms from appointing a director to hold the office of the Chairman and Chief Executive Officer of a private company.
- Restriction on Multiple Directorships in Public Companies. Section 307(1) of the Act prohibits a person from being a director in more than five (5) public companies at a time.
- Exemption from the appointment of a company secretary. The appointment of a Company Secretary is now optional for private companies. According to section 330(1) of the new CAMA, the appointment of a company secretary is only mandatory for public companies.
- Section 374(6) of the Act stipulates each public company shall keep its audited accounts displayed on its website.
- Section 394(3) CAMA 2020 also provides that a small company shall be described or fixed as a private company by the Commission from time to time whose turnover is not more than N120,000,000 (One Hundred and Twenty Million Naira) and whose net assets value is not more than N60,000,000 (Sixty Million Naira).
- Provision for exemption of small companies or any company having a single shareholder from the appointment of auditors at the Annual General Meeting to audit their financial records under Section 402(1)(b) CAMA 2020.
- Business Rescue Provisions for Insolvent Companies. The new act introduced provisions for rescuing a company in distress to prevent it from being insolvent to keep it alive such as Voluntary arrangements, Administration and Netting under Section 434-442 CAMA 2020.
Further innovations and reforms which transcend private and public listed companies provided for under the new CAMA legislation include:
- Creation of Limited Liability Partnerships (LLPs) and Limited Partnerships (LPs). 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.
- Section 839(1) of the new Act allows the Commission to by order suspend the trustees of an association and appoint an interim manager or managers to manage the affairs of an association.