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Friday, February 26, 2021

[CAMA 2020]: 30 Innovative Provisions Every Individual and Corporate Entity Must Know By Oluwatoyin Bamidele, Oni

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As President Muhammadu Buhari signed the amendment of the new Companies and Allied Matters Act (CAMA) 2020 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.

However, In this Article, Mr.  Oluwatoyin Bamidele, Oni spoke about the new CAMA 2020 as was signed into law by the president.
Read the full article below…

                                          INTRODUCTION/ BACKGROUND

The new CAMA 2020 was signed into law on August 7, 2020 and apparently has been unequivocally described as Nigeria’s most significant commercial and corporate legislation since 1990 when the initial Companies and Allied Matters Act was enacted. CAMA 2020 brings to limelight plausible and commendable provisions which further amplifies the advocacy and campaign of the Government of the Federal Republic of Nigeria on the ease of doing business (EODB) and reduces to a large extent the seemingly cumbersome, burdensome and vexatious regulatory requirements for registration and operations of business in the country.

The newly enacted CAMA 2020 has generated raucous reactions and controversies owing to plethora of higgledy-piggledy commentaries and interpretations. The most active participants of this topsy-turvy protestation are Incorporated Trustees with Churches, mosques, and Non-Governmental Organizations at the forefront.

This piece seeks to reveal for knowledge sake some of the innovative provisions in the new Act for effective administration and maximum procedural compliance by individuals and corporate entities.

KEYPOINTS

  • Directors must now disclose their ages/no more directorship in above 5(five) companies SECTION 278, 307(1).
  • The managing director can no longer be the Chairman of the board
  • All public companies must display audited account on the website SECTION 374(6)
  • Shareholders with significant control must now disclose it within 7 days S.119, 120
  • How to become a shareholder with significant control- SECTION 120(2)
  • All public companies must keep register of secretaries S 336, 337, 338
  • Shares can now be transferred electronically S.176 (1)
  • Companies can now hold electronic AGM, and EOGM Section 240(1)(2)
  • Electronic filing of documents is now legally certified
  • Company officers can now use electronic signatures SECTION 101
  • Company Common seal is no longer compulsory SECTION 98
  • Share certificates can now be signed as a deed without the common seal
  • Ordinary businesses at the AGM has been increased SECTION 238, 242, 257.
  • Filing fees of all companies has now been reduced SECTION 222(12)
  • New plans to rescue insolvent companies- SECTION 434-442, 443-549, 718-721.
  • Public companies can now be re-registered as an unlimited SECTION 75, 76
  • An individual can now form a company (S.18(2))
  • Statutory declaration of compliance by a lawyer is no longer necessary- S.40 (1)
  • No more authorized share capital SECTION 27
  • We can now have limited partnerships and limited liability partnership. SECTIONS 746-810
  • AG’s consent no longer compulsory for company limited by Guarantee-SECTION 26 (4-7)
  • Pre-action notice to CAC now mandatory SECTION 17 (1) (2)
  • Model article of association can now be adopted SECTION 32, 33,34
  • Exemption of foreign companies is now by the Minister SECTION 80
  • Private companies need not appoint company secretaries SECTION 330
  • private companies need not appoint auditors at AGM SECTION 402, 394
  • private companies need not audit account at AGM
  • All companies can now validate an improperly issued share without going to court SECTION 148 (1) (2) (3)
  • New qualifications of a private company– SECTION 394(3)
  • Merger of NGO’s, etc and power of Court/CAC to suspend its trustees-SECTION 839, 869.

SECTION A:

INCORPORATION, REGISTRATION AND THE CORPORATE AFFAIRS COMMISION (CAC)

(1)  SINGLE MEMBER COMPANIES CAN NOW BE FORMED  (S.18(2) CAMA 2020)

Prior to the introduction of CAMA 2020, the Repealed 1990 enactment made Provision for the express prohibition of single shareholder companies. Section 18 of CAMA 1990 states that a company can only be formed and incorporated by two or more persons. However, Section 18(2) of the new CAMA 2020 makes it possible to establish a private company with only one (1) member/shareholder. This will allow individuals who are business persons and would love to incorporate their business into a legal entity to do same without necessarily partnering with another shareholder. This would further allow for autonomous control of such businesses.

(2)  STATEMENT OF COMPLIANCE NOW INTRODUCED IN LIEU OF STATUTORY DECLARATION OF COMPLIANCE- S.40 (1) CAMA 2020

Section 35(3) of the Repealed 1990 enactment made provision for compulsory statutory declaration of compliance which must be signed by a legal practitioner in the prescribed form attesting to the fact that the registration requirements have been complied with and shall be produced to the commission, and the commission may accept such declaration as sufficient evidence of compliance. This requirement is sine qua non for incorporation of companies before the new CAMA 2020. However, since the enactment of the new law, the statement of compliance can be signed by the applicant or his agent confirming therein that the essential requirements of the law with regards to registration has been duly complied with.

It is important to note that this purported alternative provision in the new law does not absolutely overrule the acceptability of a declaration of compliance which is signed by a legal practitioner under the legal practitioners Act and attested to by a notary public or a commissioner for oaths. Section 40 (3) of the Act provides thus…

“Nothing in this section prevents the commission from accepting declaration of compliance which is signed by a legal practitioner and attested to before a commissioner for oaths or notary public”.

(3)  MINIMUM SHARE CAPITAL IS MADE TO REPLACE AUTHORISED SHARE CAPITAL. SECTION 27 CAMA 2020.

Section 27 of the new law made provision for the replacement of the concept of “authorized share capital” with “minimum share capital” stated in its memorandum of association.

Note that by the provision of section 27 (2)(a) of CAMA 1990 Act, the Authorised share capital (ASC) requirement was not expected to be less than N10,000.00 (ten thousand naira only) for private companies and N500,000.00 (five hundred thousand naira only) for public companies. However, with the introduction of CAMA 2020 the Minimum Issued Share Capital (MISC) for a private company has been increased to a minimum of N100,000.00 (one hundred thousand naira only) and N2,000,000.00 (two million naira only) in the case of a public company. Furthermore, the minimum contribution of members of a company limited by guarantee is now N100,000.00 as opposed to N10,000.00 provided for in section 27(4) (b) of the Repealed 1990 enactment.

 

(4)  CREATION OF LIMITED LIABILITY PARTNERSHIPS (LLPs) AND LIMITED PARTNERSHIPS (LPS) AS LEGAL ENTITIES- SECTIONS 746-810 CAMA 2020- SECTION 746-810 CAMA 2020

LLPs and LPs are widely practiced in other Jurisdiction like the United States of America and the United Kingdom as a separate legal entity distinct from its partners and having perpetual succession. Ab initio Partnerships in Nigeria were regulated by the Partnership Act of 1890 and the Partnership Law 1958 (Western Region) as a legally recognized organizational structure or an association of a business owned by two or more people who share the profits and are personally liable for all business debts. Partnerships were not considered a body corporate with separate legal entity, and thus the liability of such partnerships were not legally recognized under Nigerian laws.  With the enactments of the new CAMA  and specifically in Sections 746 – 810 the concept of Limited Liability Partnerships (LLPs) and Limited Partnerships (LPs) are introduced and makes way for manageable organizational structure and tax status of a partnership with the limited liability of members of a company, this provision is not existent in the repealed Act.  CAMA 2020 makes it possible for potentials business partners who require the benefit of a limited liability structure with the tax status and flexibility of a partnership to operate either as LLPs or LPs.

(5)  REDUCTION OF FILING FEES FOR REGISTRATION  OF CHARGES FOR PUBLIC AND PRIVATE COMPANIES- SECTION 222(12) CAMA 2020

LLPs and LPs are widely practiced in other Jurisdiction like the United States of America and the United Kingdom as a separate legal entity distinct from its partners and having perpetual succession. Ab initio Partnerships in Nigeria were regulated by the Partnership Act of 1890 and the Partnership Law 1958 (Western Region) as a legally recognized organizational structure or an association of a business owned by two or more people who share the profits and are personally liable for all business debts. Partnerships were not considered a body corporate with separate legal entity, and thus the liability of such partnerships were not legally recognized under Nigerian laws.  With the enactments of the new CAMA  and specifically in Sections 746 – 810 the concept of Limited Liability Partnerships (LLPs) and Limited Partnerships (LPs) are introduced and makes way for manageable organizational structure and tax status of a partnership with the limited liability of members of a company, this provision is not existent in the repealed Act.  CAMA 2020 makes it possible for potentials business partners who require the benefit of a limited liability structure with the tax status and flexibility of a partnership to operate either as LLPs or LPs.

(6)  COMPANY LIMITED BY GUARANTEE CAN NOW BE REGISTERED WITHOUT THE AG’S CONSENT-SECTION 26 (4-7)

Section 26 of CAMA 2020 retains the provision for obtaining the AG’s consent as part of the registration process for a Company Limited by Guarantee. However, there is now a 30days time limit for the AG to make a decision, failing which the application can progress to the advertisement stage. Section 26 CAMA 2020 provides that;

“Where the AG refuses to grant his consent within 30days of application for consent the promoters of the Company Limited by Guarantee shall proceed to the advertisement stage”.

Prior to the new law, under the 1990 CAMA and precisely in section 26 (5) which was in force before now, the consent of the AG cannot be dispensed with even if he withholds his consent for personal reasons.

(7)  NO MORE AUTOMATIC INSTITUTION OF COURT ACTIONS AGAINST CAC- SECTION 17 (1) (2)

From the commencement of the newly enacted CAMA 2020, it has become illegal to institute a law suit against the Corporate Affairs Commission (CAC) without first serving on the CAC a pre-Action notice. This is described by the Act as a written Notice of intention to commence suit after which such intending Plaintiff, his agent, or legal practitioner(s) shall wait till the expiration of 30 days after the written notice of intention has been served on the commission before commencing the suit. The Act further provides that the said notice shall expressly and explicitly state the cause of action, particulars of the claim, name and place of abode of the intending plaintiff, and relief sought. This provision is expected to reduce litigation for the CAC as faster resolution of issues is facilitated at a reduced cost. The commission may also explore any of the Alternative Dispute Resolution (ADR) Mechanisms available.

(8)  PRESCRIPTION OF MODEL ARTICLE OF ASSOCIATION FOR ADOPTION AT INCORPORATION- SECTION 32, 33,34  CAMA 2020

As prescribed by CAMA 1990, every company is required to register an Article of Association prescribing regulations for the company. However, in accordance with the provisions of Sections 32, 33 and 34 of the CAMA 2020, a company may elect not to register an Article of Association, in which case such company will be deemed to have adopted the Model Articles prescribed in the new CAMA 2020 for a company of its description. The act empowers the minister (for industry, trade and investment) to prescribe model articles of association for companies and different model articles may be prescribed for different description of companies. Note that any amendment made by the model article which is to be prescribed by the minister does not affect a company registered before the amendment takes effect.

(9)  FOREIGN PARTICIPATION: APPLICATION FOR EXEMPTION NOW TO BE HANDLED BY THE MINISTER- SECTION 80 CAMA 2020

By the provisions of section 54, 55, and 56 of Repealed Act, a foreign company intending to carry on business in Nigeria without fulfilling the requirement of the law regarding incorporation of the company with the CAC had to apply to the President for exemption and this is to be done through a letter addressed to the secretary of the Government of the Federation and such letter shall set out all the required information contained in section 56(2) of the repealed Act

However, the above provision seems to have been amended by section 80 of CAMA 2020 which now allows a foreign company to apply directly to the Minister of Trade for exemption.

The foreign company upon approval for exemption is further mandated to notify the Corporate Affairs Commission within thirty (30) days failing which the foreign company will be liable to a fine.

The Minister may at any time revoke any exemption granted to any company if he is of the opinion that the company has contravened any provision of this Act or has failed to meet any condition contained in the exemption order or for any other good or sufficient reason.

 

To Be Continued…

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