By ADEBAYO OBAJEMU
The signing into law of the amendment of the Companies and Allied Matters Acts by President Muhammadu Buhari is widely believed to be a major milestone in the annals of business in Nigeria. Analysts who spoke to BusinessHallmark praised the development as a major step forward for the economy in general and ease of doing business in particular.
When the idea of innovating the 1991 Acts was first mooted by the Corporate Affairs Commission it was well-received well-received by the business world, the consensus on this is hinged on the obsolesce of the newly amended law, which was believed to behind time.
Rationalising the need for amendment, CAC had disclosed why it proposed the amendment of the Companies and Allied Matters Acts. The commission said the Amendment Bill would help strengthen its supervisory and regulatory powers. Hajiya Saratu Shafii, Acting Registrar-General, CAC, said that before last week’s signing into law, the CAMA bill had been in operation for over 20 years without any form of an amendment.
Shafii said one major review that would be affected is the right of one person to form a Private Limited Liability Company. Before the amendment, a minimum of two directors was required to incorporate a private limited company.
Dr Olufemi Omoyele of the Department of Business Management, Redeemers University in a telephone chat with Business Hallmark said: “the signing into law of the amended the Companies and Allied Matters Act (CAMA) on August 7, 2020, is Nigeria’s most significant business legislation in three decades, and it introduces new provisions that promote ease of doing business and reduces regulatory hurdles.”
Speaking on the development, Dr Muhammed Adio of the Department of Economics, Kogi State University, said: “With the signing into law of the amended Act, we can say we have begun on a serious Journey into doing business according to best global practices.”
The amended Acts has altered some provisions. The Act as amended reflects the following:
1. 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.
2. The introduction of Statement of Compliance – S.40 (1) of the new Act 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.
This serves as an alternative to the requirement to submit a Declaration of Compliance, which must be signed by a lawyer or attested to before a notary public. A Statement of Compliance need not be signed by a lawyer.
3. Replacement of Authorized Share Capital with Minimum Share Capital – The concept of “authorised 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 need not pay for shares that are not needed at a specific time.
4. Procurement of a Common Seal is no longer a mandatory requirement – The procurement of a Common Seal is no longer a mandatory requirement according to S.98 of the new CAMA: Every company is required under the previous Act to have a common seal, 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.
5. Provision for electronic filing, electronic share transfer and e-meetings for private companies – The new CAMA makes provision for electronic filing, electronic share transfer and e-meetings for private companies. S.861 of the new CAMA provides that certified true copies 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.
6. Provision for virtual Annual General Meetings – The new CAMA also provides for remote or virtual general meetings, provided that such meetings are conducted following the Articles of Association of the company.
This will facilitate participation at such meetings from any location within and outside the shores of the country, at minimal costs. This is especially relevant today given the disruptions caused by the Covid-19 pandemic to company operations around the world.
7. 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 the financial records of the company. S. 402 of the new CAMA provides for the exemption to the audit of accounts in respect of a financial year.
8. Exemption from the appointment of the 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.
9. 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.
10. 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.
11. Merger of Incorporated Trustees – S. 849 of the new Act provides for the merger between two or more associations with similar aims and objects under such terms and conditions as may be prescribed by the CAC.
12. Disclosure of persons with significant control in companies – S.119 of the new Act 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.
13. Restriction on Multiple Directorship in Public Companies – S. 307(1) of the Act prohibits a person from being a director in more than five (5) public companies at a time.
14. 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 concerning Company Voluntary Arrangements (S.434 to S.442), Administration (S.443 to S.549) and Netting (S.718 to S.721).
15. Enhancement of Minority Shareholder Protection and Engagement – S. 265 (6) restricts firms from appointing a director to hold the office of the Chairman and Chief Executive Officer of a private company.
Ambrose Omordion, Chief Research Officer at Investa told this newspaper that “what the president has signed into law is a revolution; the only thing is that it should have been done about 15 years ago. But we thank the president for the signing for it will usher in a new era of doing business.”