Authors: Bello Abu, Ejovi Oghafor & Yewande R. Ahonaruogho

INTRODUCTION

The Companies and Allied Matters Act 1990 has been repealed and in its stead the Companies and Allied Matters Act 2020 (CAMA 2020) has been enacted with the objective of boosting investments in Nigeria.

The provisions of the new CAMA 2020 which are clearly innovative, will undoubtedly propel Micro, Small and Medium Enterprises (MSME’s) to thrive by helping to reduce the cost of establishing and running of a business while addressing a number of legal, administrative and regulatory burdens which had a dissuading effect on investment and the will to startup businesses in Nigeria.

Focusing strictly on the innovations that are advantageous to MSME’s, this article will highlight and contrast the provisions of the CAMA 2020 with that of the Repealed Act to identify its logical impact on the scope and manner of establishing and running MSME’s.

INNOVATIONS IN THE CAMA 2020 VIS-À-VIS THE REPEALED ACT

In the CAMA 2020, there has been an expansion in the recognized types of business organizations that can exist in Nigeria. While in the Repealed Act the recognized business organizations under Nigerian corporate law practice were Sole Proprietorship, Business Name (which included traditional partnership) and

Companies; the CAMA 2020 introduced the business form of Limited Liability Partnership and Limited Partnership .

Under the Repealed Act a partnership lacked legal personality and there was no limit to its liabilities hence the partners were personally liable for all debts and liabilities of the partnership without limitation, except if it was a limited partnership in Bendel state, Lagos state and the Western states3 or a limited liability partnership in Lagos by virtue of the amendments made to the Partnership Law of Lagos State in 2009 .

By virtue of the CAMA 2020, a legal framework now exist for the operation of limited liability partnership in other parts of the Federation asides from just in Lagos State and for limited partnership in other parts of the Federation asides from Bendel state, Lagos state and the Western states.

The introduction of limited liability partnership under part C of the CAMA 2020 is a welcomed innovation. It encourages the establishment of more partnerships given its recognition as a body corporate with a separate legal entity, thereby protecting the person and personal assets of all partners in a manner not previously done, for example, in the case of litigation the business organisation will act in a capacity as its own legal person. The foregoing point is evidenced in the decision by Uwaifo J.S.C. (as he then was) in the case of Iyke Med. Merch. v. Pfizer5, made under the repealed Act, where his Lordship held: “But it must be noted that a plaintiff who sues such partners in their firm’s name is taken to have sued them individually just as much as if he had set out their names: see Western National Bank v. Perez, Triana & Co. (1891) 1 Q.B.D. 304 at 314 per Lindley, L.J.”

In addition, in a limited liability partnership one partner will no longer be deemed to be an agent of the other , as is the case in traditional partnership as provided for

under Section 5 of the Partnership Act 1980. Therefore, one partner will not be liable for the negligence or misconduct of another. This has the power to influence investors and ultimately increase investment in Nigeria.

Part D of the CAMA 2020 makes accommodation for limited partnership across the Federation. It provides that a limited partnership shall not consist of more than 20 persons, in which one or more people shall be classified as either ‘general partners’ or ‘limited partners’ . Although limited partnership do not enjoy the status of being a legal person, this business form has its lure in being “a middle-point between a partnership and a limited company” , allowing limited partners to

benefit from limited liability up to their agreed contribution upon entry into the partnership9 while equally restricting limited partners from participating managerially in the business without jeopardizing their limited partner status10; the managerial function is strictly for the general partners.

For MSME’s forming a company is now easier and more cost effective than in previous years as a result of the points canvassed below:

• In the Repealed Act, regardless of the size of a company it was mandatory to have at least two directors11 but in the CAMA 2020 small companies are permitted to have only one director12 which has the advantageous effect of reducing operating expenses for a start-up MSME.
• In the Repealed Act, all companies at each general annual meeting, without exception, were required to appoint an Auditor/(s) to audit the financial records of a the company13 in respect of a financial year; however that is no longer the case for small companies and companies that have not carried out business since its incorporation, with the qualification of insurance companies, banks or any other company as may be prescribed by the CAC .

• The CAMA 2020 has also permitted the use of modern technology to allow for general meetings to be held virtually in the case of private companies 15 only .
• By virtue of Section 18 of the Repealed Act, any two or more people were permitted to form and incorporate a company by complying with the requirements of the Repealed Act. This is no longer the case for private companies whereby one person may apply for the formation and incorporation of a private company by complying with the requirements of CAMA 2020. This has the effect of allowing entrepreneurs with MSME’s to retain the full control of the managerial and operational aspects of their organizations.
• The compulsory requirement to appoint a company secretary17 in the Repealed Act is no longer applicable to small companies by virtue of Section 330 CAMA 2020. This is bound to reduce the operating cost of running the business.
• Following from above, by virtue of Section 336 CAMA 2020, only public companies are required to maintain a register of secretaries. For private companies, this reduces the stringent operational requirements mandatory for them to carry on business in Nigeria.

CONCLUSION

In conclusion, those previously deterred by the stringent and voluminous requirements mandated for the formation and running of a micro, small and medium scale businesses, can appreciate the provisions which in effect ease the process. The CAMA 2020 thereby encourages entrepreneurs varying capacities and class to set up business in Nigeria. With more businesses established, more investment is possible.