In order to promote the ease of doing business in Nigeria, the Nigerian Senate passed the Companies and Allied Matters bill which was assented to by President Muhammed Buhari in August 2020. The new Companies and Allied Matter Act (CAMA) repeals the old Companies and Allied Matters Act of 2004. These are some of the changes occasioned by the new CAMA:
Changes Affecting Small/Private Companies
- By the new Section 18(2) of CAMA 2019, one person may form and incorporate a private company. This change does not apply to public companies.
- By section 394 of the new Act, a company qualifies as small if amongst other conditions, it is a private company and its turnover is not more than
N120,000,000 and its net assets value is not more than N60,000,000 or such amount as may be fixed by the Commission from time to time, in the case of a company having share capital, the directors between themselves hold at least 51% of its equity share capital and it meets these conditions in that year and the preceding financial year.
- By Section 27(2) of the new CAMA, the minimum issued share capital of a private company has been increased from
N10,000 to N100,000.
- Small companies according to section 330 of the new Act can dispense with the requirements for a company secretary.
- Section 240 exempts small companies and companies having one shareholder from compulsorily holding its general meetings in Nigeria subsection (2) further provides that private company may hold its general meetings electronically provided that such meetings are conducted in accordance with its articles.
- By Section 266, small companies are exempted from the requirement to enter minutes of general meetings, meeting of directors and managers in the book provided for such records. Subsection 4 further provides that where a company having a single member takes decision that may be taken by the company in general meetings, it will have the same effects as if agreed by a company at general meeting and he shall provide the board of directors with details of the decision.
- Section 271 of the CAMA removes exempts small companies from having a minimum of 2 directors.
- By the provisions of section 402, a company that has not commenced operations since incorporation or is a small company is exempted from audit of financial accounts with the exception of insurance company, a bank or any other company as may be prescribed by the Commission.
- The CAMA 2019 broadens the explanation on private companies restricting the transfer of its shares. By the new provision, as against the strict provision of the old CAMA that all private companies shall restrict the transfer of shares without more, the new provision of CAMA states that private companies may subject to the provision of their articles restrict the transfer of their shares.
Changes for Companies Limited by Guarantee
- In order to ensure the quick registration of Companies limited by guarantee, the new CAMA in Section 26(5) provides that the AG Fed shall give consent to registration of companies limited by guarantee within 30 days where there are no objections to the memorandum and no cogent reasons to decline consent. It also introduces an avenue to dispense with the consent of the AG Fed if the consent is not given within 30 days. The promoters according to Section 26(7) can advertise its application in 3 national dailies and leave it open for objections for a period of 28 days after which if no objection is submitted or where submitted, the Commission does not find a valid ground for the objection, the Commission will grant the application.
- Section 26(12) increased the liability of members of a company limited by guarantee to contribute to the assets of the company in the event it is being wound up from
N10,000 to N100,000.
- Section 118 restates the requirement for the number of members in a company limited by guarantee not to fall below 2. The legal minimum for a company limited by guarantee is 2. (If a company limited by guarantee carries on business or its objects, without having at least two members and does so for more than six months, every director or officer of the company, during the time that it so carries on business with only one or no member, is liable jointly and severally with the company for the debts of the company contracted during that period)
Changes Affecting Public Companies
- By Section 27(2) of the new CAMA, the minimum issued share capital for public companies has been increased from
N500,000 to N2,000,000. This means that a private company must issue shares valued at N100,000 and N2,000,000 for public companies. According to Section 124 of the new Act, the total share capital shall not be less than the minimum share capital.
- Section 118 restates the requirement for the legal minimum of 2 members in a public company. (If a public company carries on business or its objects, without having at least two members and does so for more than six months, every director or officer of the company, during the time that it so carries on business with only one or no member, is liable jointly and severally with the company for the debts of the company contracted during that period)
- Section 275 of the CAMA introduces the requirement for at least 3 independent directors for public companies. Independent directors are persons who amongst other requirements were not employees of the company or whose relatives were not employees or did not make or receive payments more than
- Section 336 introduces the requirement for public companies to maintain a register of secretaries containing particulars of the secretary.
- Section 374 (6) provides that each public company shall keep its audited accounts displayed on its website. Electronic copies of registers should also be kept by public companies according to section 375(3)
- The provision of Section 207 of the old CAMA requiring the register of charges kept by the company to be open to creditors and members for inspection has been removed.
- Section 403(4) of the new CAMA introduces disqualification for auditors. An auditor who among other provisions is a shareholder or spouse of a shareholder; is an employee of or consultant to the company who has been engaged for more than one year in the maintenance of any of the company’s financial records or preparation of any of its financial statements, is disqualified from appointment under the Act.
Changes Affecting Directors of Public Companies
- Section 278(2) now provides for disclosure of multiple directorship in any other public company at the meeting in which he is proposed for appointment as a director and provides a penalty for failure to so disclose. Section 307 provides in subsection (2) that a person shall not be a director in more than five public companies and if he is, he shall resign at the next AGM resign from companies in excess of 5 companies allowed by the Act. He shall be liable to penalty for failing to so comply.
Changes Affecting All Companies Having Share Capital
- The provision of Section 27(2)(b) of the old CAMA requiring the subscribers of the memorandum shall take among them a total number of shares of a value of not less than 25 per cent of the authorized share capital has been removed, as such, the requirement for taking up 25% of the share capital of the company is only applicable to increase in capital in Section 128 such that where new shares are allotted and there is an increase in share capital, if 25% of the total shares of the company is not taken up, the increase shall not take effect.
- The new CAMA has done away with the concept of authorized share capital, and states that minimum issued share capital shall be as provided in section 27.
- The provision of Section 100(1)(b) allowing a company to convert all or any of its paid‐up shares into stock, and re‐convert that stock into paid‐up shares of any denomination has been removed from the new Act.
- By the provisions of section 146 of the new Act, there are no longer conditions for issuing shares at a discount.
- The new Act in section 176 recognizes electronic register of transfers in respect of registering shares that are transferred.
- Section 147 removes the option of company limited by shares to issue irredeemable preference shares. According to this section, no company limited by shares should issue irredeemable preference shares.
Changes Affecting Shareholders
- Section 119 of the new CAMA introduces the concept of persons with significant control which are by the Act described as shareholders. Persons with significant control according to the new Act in every company and not public companies alone as provided for in the old Act, upon becoming such persons must notify the company within 7days with particulars of such control. A significant shareholder according to the new CAMA is one who holds by himself or by his nominee at least 5% of the unrestricted voting rights at any general meeting of the company which is below the 10% previously provided by the old Act.
- The new CAMA according to Section 119 provides for the Commission to be notified within one month from the date the company is notified by a person with significant control that he is such a person or any change therein, and also according to Section 120(5) to notify the Commission within 14 days of receipt of the notice or of becoming aware that a person is a substantial shareholder or has ceased to be such a person give notice in writing to the Commission of this fact.
Changes Affecting All Companies
- Section 40 of the new CAMA introduces statement of declaration required during incorporation stating that the provisions of the CAMA have been complied with to not be limited to declarations by legal practitioners but can also be statements by the applicant or his agent that the provisions of CAMA on registration have been complied with.
- Section 31 of the new Act introduces reservation of name through electronic means.
- By virtue of Section 99(2) of the new CAMA, the requirement for a company to have a common seal is no longer compulsory. Where a company has a common seal, the design and use of that seal shall be regulated by the company’s articles
- By virtue of Section 102, the requirement for company seal being affixed on deeds has been dispensed with. By the new provision, a deed is duly executed if a director and secretary sign on behalf of the company, if at least 2 directors sign or if a director signs in the presence of one witness. Where the deed is signed by in this manner, it will have the same effect as if the deed was executed under the company’s seal. Section 103 further states that where a document is executed in this manner, it satisfies any written law requiring a document executed by a company to be under seal.
- By section 257 of the new CAMA, the compensation of managers of a company shall be disclosed to members of the company at the annual general meeting.
- Section 283 of the new CAMA now includes persons suspended or removed according to the Act to persons disqualified from appointment as directors.
- By section 310(3) A person is a controlling member of a company if that person, either alone or in an understanding with other persons, has more than 50% of the voting power to elect or remove directors of the company.
- The new CAMA introduces data protection of its directors in Section 323 – 329 as to his usual residential address and the requirement for companies not to disclose protected information about any of its director except where the information is required for communicating with the director concerned, or in order to comply with any requirement of the Act as to particulars to be sent to the registrar. The commission shall also omit the protected information of directors on material available for inspection
- At trial in respect of minority rights, the plaintiffs according to section 346(4) now have the right to obtain any relevant documents from the defendant and the witnesses at trial, and may in pursuance of that right request categories of documents from such person without identifying specific documents
- Section 357 of the Act now protects whistle blower employees who in compliance with an inspector’s request, provides the inspector with any information concerning the company’s affairs during investigation of a company by its application or application by its members and where such employee is relieved for the reason of his disclosure, he shall be entitled to compensation as though he were retiring.
- Section 108 of the new CAMA provides that where a person falsely and deceitfully impersonates any member of a company and thereby obtains or endeavors to obtain any benefit due to any such member, he shall in addition to an imprisonment of 7 years or fine which the court may impose, be additionally liable for any fees prescribed by CAC and shall account to the aggrieved member for any benefit which he directly or indirectly derived as a result of his act of impersonation.
- The new CAMA provides for administration of companies by an administrator who is an insolvency practitioner appointed by order of Court where the company is or is likely to become unable to pay its debts, by the holder of a floating charge or by the company or its directors for the sole purpose of rescuing the company and where a company is in administration no resolution shall be passed for the winding-up of the company and no order shall be made for the winding up of the company according to section 479 and the receiver where present shall vacate his office if required to do so by the administrator.
- According to section 567(2) An action to recover a debt from a contributory who is liable to contribute to the assets of a company in the event of its being wound up shall not be brought after the expiration of six years from the date on which the cause of action accrued
- Section 718 introduces “netting” which is the termination, liquidation or acceleration of any payment or delivery obligation or entitlement under one or more qualified financial contracts entered into under a netting agreement which shall be enforceable in accordance with their terms, including against an insolvent party, and, where applicable, against a guarantor or other person providing security for a party.
- Section 851 now establishes an Administrative proceedings committee which is set up to: provide the opportunity of being heard for persons alleged to have contravened the provisions of this Act or its regulations, resolve disputes or grievances arising from the operations of this Act or its regulations and impose administrative penalties for contravention of the provisions of this Act or its regulations in the settlement of matters before it. Parties dissatisfied with decisions of the Administrative Committee may appeal to the Federal High Court.
- Section 80(7) of the new CAMA provides for exempted foreign companies to deliver to the CAC upon payment of fees a notice of its exemption within 30 days of the grant of the exemption by the prescribed authority and provides penalty for default to comply.
Changes Affecting Partnerships
- Section 753 of the new Act provides for registration of Limited Liability partnerships which shall have at least two partners whose partners may be an individual or body corporate one of whom shall be resident in Nigeria. Also by section 788, foreign limited liability partnership which before or after the commencement of this Act was incorporated outside Nigeria, and having the intention of carrying on business in Nigeria, shall take all steps necessary to be incorporated as a separate entity in Nigeria
- Section 797 also provides for the registration of limited partnership whose members shall not be more than 20 and further states that the provisions of the Partnership Act 1890, except so far as they are inconsistent with the express provisions of this Act, shall apply to limited partnerships
Changes Affecting Incorporated Trustees
- By section 839 of the new Act, the commission can now suspend the trustees of a registered incorporated trustees and appoint interim managers where there is or has been any misconduct or mismanagement in the administration of the association; it is necessary or desirable for the purpose of protecting the property of the association, securing a proper application for the property of the association towards achieving the objects of the association, or it is necessary for public interest or where the affairs of the association are being run fraudulently.
- The new Act now provides in section 824 for banks to disclose to the Commission dormant accounts of incorporated trustees with the bank and the Commission may require the IT to disclose its activities to it within 15 days failing which the Commission may dissolve the IT and direct the bank to transfer the amount standing in the credit of the IT to two or more other associations.
- By the provisions of section 845, Incorporated Trustees are now to submit to the Commission a bi-annual statement of affairs of the association, as the Commission shall specify in its regulations
- Two or more Associations with similar aims and objects can now merge under terms and conditions as the Commission may prescribe by regulation as provided for by section 849 of the new Act.