COMPANIES AND ALLIED MATTERS ACT, 2020 REVIEW
Hairat has broken down the new CAMA and it is important for every business owner to read this article
The Nigerian business climate has operated under the authority of the Companies and Allied Matters Act1990.The Companies and Allied Matters Act effectively administered the Nigerian business regime, providing guidelines and structures that have kept the business frame work running for decades. However, with time passing and in view of the current realities of doing business, Companies and Allied Matters Act1990 became outdated, therefore, considering the importance of this legislation, it became imperative to ensure that its provisions truly reflect the modern and global best practices; Hence the new Companies and Allied Matters Act. Considering the substantial changes which the Act has made to Nigeria’s corporate law regime, particularly the fact that it indicate the alteration of the usual manner many companies/ business operate on a daily basis, it is crucial to examine the key changes and innovations brought by the new Act. 1. PART A: CORPORTE AFFAIRS COMMISSION. Section 17 of CAMA 2020 provides for pre-action notice and restriction on levy of execution. It provides that a suit shall not be commenced against the Commission before the expiration of 30 days after a written notice of intention to commence the suit is served upon the Commission by the intending plaintiff or his agent. There no existence of such provision in the previous Act. 2. PART B: INCORPORATION OF COMPANIES AND INCIDENTAL MATTERS Section 18(2) of CAMA 2020 provides for the Right to form a company by an individual person whereas the previous Act provides that 2 or more persons can form a company. Section 22 (2) of CAMA 2020 provides for the extent of the restrictions on the transfer of shares of a private company while the previous Act provided restriction on the transfer of shares of a private company without defining the extent of its restriction. The New Act provides thus : 2) Subject to the provisions of the articles, a private company may restrict the transfer of its shares and also provide that- (a) the company shall not, without the consent of all its members, sell assets having a value of more than 50% of the total value of the company’s assets; (b) a member shall not sell that member’s shares in the company to a non-member, without first offering those shares to existing members; and (c) a member, or a group of members acting together, shall not sell or agree to sell more than 50% of the shares in the company to a person who is not then a member, unless that non-member has offered to buy all the existing members’ interests on the same terms. Section 26 of CAMA 2020. COMPANY LIMITED BY GUARANTEE. Whilst the previous act provided for the consent of Attorney General for the registration of Company Limited by Guarantee, the new Act maintained the same position and added time frame of 30 days within which the consent may be authorize and further directives at the expiration of the 30 days where the consent is not obtained. It provides thus: in section 26(5) –(10) (5)The Attorney-General of the Federation shall within thirty days grant authority to the promoters of a company limited by guarantee where there are no objections to the memorandum or other cogent reasons to decline to grant approval to register the company as one limited by guarantee. (6) Where further information is required by the Attorney-General of the Federation from the promoters of a company limited by guarantee, the thirty-day period shall begin on receipt of all relevant information. (7)Where all valid documents are furnished and no decision has been made by the Attorney-General of the Federation within the thirty-day period - (a) the promoters shall place advertisements in three national dailies and shall invite objections, if any, to the incorporation of the company; (b) an objection shall state the grounds on which it is made and shall be forwarded to the Commission within 28 days from the date of the last publications in the newspapers, where there is objection to the incorporation of the company; (c) the Commission – (i) shall consider the objection and may require the objector and applicant to furnish further information or documentation; and (ii) may uphold or reject the objection as it deems fit and inform the applicant accordingly. (8) If the Commission is satisfied that the memorandum and articles of association have complied with the provisions of this Section, it shall cause the application to Company limited by guarantee. be advertised in the prescribed form in three national daily newspapers. (9) The advertisement referred to in subsection (8) shall invite objections, if any, to the incorporation of the company and the objection shall state the grounds on which it is made and shall be forwarded to reach the Commission within 28 days of the date of the last of the publications in the newspapers, and if any objection is made the Commission shall consider it and may require the objector and applicant to furnish further information or documentation, and may uphold or reject the objection as it deems fit and inform the applicant accordingly. (10) If – (a) after the advertisement, no objection is received within the period specified in subsection (9) or, where any objection is received, the same is rejected, the Commission, having regard to all the circumstances, may assent to the application or withhold its assent; and (b) the Commission assents to the application, it shall register the company and issue a certificate of incorporation. Section 27: Memorandum of a company The new Act takes in view the currency inflation of the country and pegged the minimum share capital of the private Company which was in the previous Act prescribed at N10,000 to N100,000 and Public Company which was in the previous Act prescribed at N500,000 to N2,000,000. Section 40: Statement of Compliance. The previous Act mandated that a statement of Compliance must be signed by a Lawyer or attested to by a Notary Public, the new Act dispensed with the mandatory provision and provided that : (1) The statement of compliance required to be delivered to the Commission is a statement by the applicant or his agent that the requirements of this Act as to registration have been complied with. (2) The Commission may accept the statement of compliance as sufficient evidence of compliance. (3) Nothing in this section prevents the Commission from accepting declaration of compliance which is signed by a legal practitioner and attested before the commissioner for oaths or notary public. This means that an applicant or his agent may sign the statement of compliance and would be sufficient for the purpose of registration. SECTION 98: Common Seal. The Previous Act provided a mandatory requirement for the Common Seal of a Company which the new Act dispensed with and provided thus: A company may have a common seal but need not have one, and where a company has a common seal, the design and use of that seal shall be regulated by the company’s articles and it shall have its name engraved in legible characters on the seal. This means that a Common Seal is now optional for a company that desires to have one. SECTION 223: Registration of Charges The new Act under subsection (12) stipulates the amount to be paid to CAC for the filing of charges at 0.35% of the value of the charge. This will result in reduction in cost of filing charges stipulated in the previous Act. SECTION 240 : General Meetings The new Act under subsection (2) provides for Electronic meetings of a private company provided that same is held in line with the Articles of the Company. This is expected to facilitate participation from any location at minimal cost. SECTION 265: POWERS AND DUTIES OF A CHAIRMANOF THE GENERAL MEETING The new Act under subsection(6) provides that a chairman of a Public company shall not act as the Chief Executive Officer of the same company. This encourages good corporate governance practice and encourages minority protection. SECTION 307: MULTIPLE DIRECTORSHIP The new Act stipulates that a person shall not be a director in more that 5 companies. It also provides penalty for any person who breaches this provision. This provision will reduce the incidences of conflict of interest. SECTION 330: APPOINTMENT OF COMPANY SECRETARY The new act promotes the ease of running a Private company by dispensing with the provisions of the previous Act that mandated the appointment of a Company secretary. SECTION 394: QUALIFICATION OF A SMALL COMPANY The new Act under subsection (3) increases the amount of turnover for a small Company from N2,000,000 to N120,000,000 and an asset value from not exceeding N1,000, 000 to a value not exceeding N60,000,000. SECTION 402: EXEMPTION FROM AUDIT REQUIREMENT. The provision of this section was introduced in the new Act exempting small business under section 394 and any other company that has not carry on business since its incorporation from carrying out an audit in its financial year. 3. PART C: LIMITED LIABILITY PARTNERSHIPS. SECTIONS 746 - 787 This is a new provision of the Act which provided for Limited Liability partnership to run as a company. The company must be registered with 2 partners and have a separate distinct personality from its partners. It has a similar operations to that of a private company. 4. PART D: LIMITED PARTNERSHIPS. SECTIONS 795 -810 This is also a new provision under the Act. This is the distinction between general partners and limited partners. A general partner bears the obligations and liabilities that arises from the partnership whereas the limited partner contributes that capital for the partnership. CONCLUSION. Tis new CAMA is expected to enhance the ease of doing business in Nigeria. The revised Act will make Nigeria’s business environment as competitive as its counterparts around the world. Some innovative processes and procedures which were included are to ease the operations of companies and in line with the current situation of the country.
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