Author: Ayompe Ungitoh
Since the 2nd of January, 1990, the Nigerian Business Sector has been governed by the 1990 Companies and Allied Matters Act (CAMA). Over the years, there has been a need to amend CAMA as it is not in line with current global trends and has failed to reflect the realities of doing business in Nigeria. This has prevented the business sector in Nigeria from meeting up with global standards. In a bid to address these issues, on the 7th of August, 2020, the President Muhammadu Buhari signed the Companies and Allied Matters Bill which was passed into law by the National Assembly and referred to as “Companies and Allied Matters Act (CAMA), 2020” to repeal the defunct Act. This article focuses on recent amendments, loopholes found in the amendments and my recommendation.
By virtue of Section 17 of CAMA, 2020 the Corporate Affairs Commission (CAC) can be held accountable for any short coming as a suit can be commenced against the Commission before the expiration of 30 days after a written notice of intention to commence the suit is served on the Commission by the intending Plaintiff or his agent.
Section 18(2) of CAMA, 2020 allows one person to form and incorporate a company. This new provision would lead to the creation of many more companies and an increase in job opportunities. Both Acts allow for Private Companies to restrict the transfer of its shares through its articles. However, Section 22(2) of CAMA,2020 goes further to state that: if ever a company wishes to sell its assets, it must be with the consent of all member and it cannot sell assets having a value of more than 50% of the total value of the company’s assets; a member shall not sell his or her shares to a non-member unless all members are not willing to buy; and a member or group of members acting together cannot sell more than 50% of the shares in a company to a non-member
unless such a non-member agrees to buy all members’ interest on the same terms.
Also, under Section 26 of the new Act, it stipulates a time frame of 30 days within which the Attorney-General may authorise the registration of the company limited by Gaurantee after consent has been sought. It goes ahead to state what the promoters of such a company can do if the Attorney General fails to arrive a decision after the time stipulated by the Act. Furthermore, the authorised Share Capital has been replaced with Minimum Share Capital.
Section 27(2)(a) of the new Act requires that the memorandum of Association of a company with a share capital to state the amount of Minimum Share Capital which is: 100,000 Naira for a private company and 2,000,000 Naira for public company as opposed to 10.000 and 500,000 Naira respectively under the previous Act.
Section 40 of the new Act, introduces a Statement of Compliance. The defunct Act required a legal practitioner to depose to a statutory declaration stating that the requirements for the registration of a company have been complied with. This provision has been replaced with the statement of compliance which can be signed by an applicant or his/her agent rather than a legal practitioner.
In addition, Section 98 of the 2020 Act is to the effect that having a common seal is no longer a mandatory requirement.
Under Section 119 of the new Act, persons with significant control in companies are required to disclose capacity in which shares are held, by stating whether they hold such shares as beneficial owners or as a nominee of an interested person.
Section 222(12) of the new Act stipulates that: the amount to be paid for filing of charges to CAC would be 0.35% of the value of the charge. Which is a major reduction when compared with the old Act.
The new Act by virtue of Section 240(2) allows for Virtual meetings
Based on Section 265(6) a director cannot be the Chairman and Chief Executive Officer of a private company. This clause is intended to protects minority rights in private companies.
In line with provisions of Section 307 of the 2020 Act, it restricts Multiple directorship as it prohibits a person from being a director in more than five (5) public companies at a time.
Section 330 makes the appointment of a company secretary optional for private companies.
Under Section 394 of the new Act, the amount of turnover for a company to qualify as a small company has been increased to not more than 120,000,000 Naira and it should have a net assets value of not more than 60,000,000 Naira.
Companies that qualify as small companies in line with Section 394 and companies that have not carried out business since their incorporation are exempted from being audited as stipulated by the new Act in Section 402
Section 427 of CAMA, 2020 states that, the profit of a company shall be used to pay dividends and this profit shall be the realised accumulated profit. Thus, shareholders are entitled to their dividend on the accumulated profit.
There are several new provisions aimed at saving companies in financial distress: looking at Section 434 to 442 of the new Act, there is the introduction of the concept of voluntary arrangement through which an insolvent company can propose to its creditors to settle its debts by paying only a proportion of the amount which it owes to its creditors; Section 443 to 549 introduces administrators who have a mandate to act at all times in the best interest of a company to pay the company’s creditors and keep it from winding up; then Section 718 to 721 introduces Netting to help assess and reduce financial obligations of companies.
Section 746 to 787 and 795 to 810 allows for and regulates Limited Liability Partnerships and Limited Partnerships respectively. This combines the organisational flexibility and tax status of a partnership with the limited liability of members of a company.
Section 839 of the new Act equally introduces a new provision which is to the effect that a Commission can suspend or appoint a manager of an association if it reasonably believes that the association is not being run properly. Likewise, a manager can be suspended or replaced if the Commission or members consisting one-fifth of the members of the association petition the Court.
Section 840 of the new Act requires a bank to notify the Commission if any Incorporated Trustee has two or more dormant accounts with them, upon receiving such a notice, the Commission would request that the association should provide evidence of its activities and if such an association fails to give a satisfactory response within 15 days, the Commission can dissolve the Association.
Section 860 of the new Act provides that any document required to be filed by the commission can be filed electronically and certified true copies of electronically filed documents are admissible in evidence, with equal validity with the original documents.
While this new Act has been hailed by most business men for its business friendly provisions which they believe would lead to a boom in the business sector of Nigeria, create more job opportunities and a better standard of living, some institutions in Nigeria have frowned at the new Act as they are of the opinion that some provisions are overreaching and give too much power to the Commission. Section 839 (1 & 2) and 840 of the new Act are strongly condemned . The question here is, what would
the Commission consider as an unsatisfactory response? This looks very vague and some are of the opinion that: it is not right for certain institutions that are not meant to be involved in politics to be put at the mercy of the government as they implied that, the government may take advantage of such institutions2 who can only seek redress
before the expiration of 30 days after a written notice of intention to
commence the suit is served upon the Commission as stipulated by section 17 of the new Act.
Also, section 19(2) that expressly stated how much defaulters would pay under the old Act now states that such defaulters shall be liable to a fine as prescribed by the Commission. This again gives the Commission the power to charge arbitrarily. Which might constitute a problem in the long run.
RECOMMENDATION AND CONCLUSION
I recommend that a Court of competent Jurisdiction should be seized to interpret some of these provisions that seem to be vague and clearly define the limit of the powers conferred on the government or the commission to ensure that the law is very clear.
In a nutshell, I would say that the provisions introduced by the new Act would be major game changer in the corporate regulatory landscape leading to an economic boom and move the business sector of Nigeria forward once all vague sections are properly interpreted.
LINKS
BUSINESS FRIENDLY PROVISIONS IN NIGERIAS NEW COMPANIES ANND ALLIED MATTERS ACT