The Nigerian Senate on the 15th of May, 2018 passed a bill to repeal and amend the old Companies and Allied Matters Act, 1990. The proposed law has been described as revolutionary and is aimed at improving the ease of doing business in Nigeria. The law has not yet been assented by the President but it is hoped that assent will be given soon and the law can come into effect.
There are various changes the proposed law intends to bring into effect such as the submission of documents through the option of electronic means, increase in fees and penalties etc. Let us take a look at some of the more prominent changes expected:
- One of the most notable changes proposed in the new CAMA is Section 18(2) which provides that a single person may incorporate a private company. This is a major change from the former provisions of CAMA that mandate that a minimum of two (2) people must subscribe to the formation of a private company. This change has been generally agreed to be in line with business practices in most developed countries like the UK.
- Another noticeable addition to the provisions of the proposed new CAMA is the requirement that a three-month pre-action notice must be served on the Corporate Affairs Commission before a law suit can be commenced against it. Section 17 of the new CAMA shall provide that no action or law suit shall be commenced against the Commission before the expiration of three months after a written notice of intention to commence the suit shall have been served upon the Commission by the intending plaintiff or his agent. In essence, you cannot sue the CAC without first informing them that you intend to sue and have to wait three months AFTER giving said notice before you can commence your suit.
- Also under the proposed new CAMA, the requirement of the pre-approval or consent of the Attorney-General of the Federation of Nigeria to register a company limited by guarantee has been dispensed with. S. 26(4) and (5) provide that publication of the application to register the company limited by guarantee would be made in three national daily newspapers inviting objections, if any, from the public to the incorporation of the company. If at the expiration of 28 days after the advertisements the Commission has received no objection, then it may assent to the application and register the company. This process is similar to that for registering Incorporated Trustees like NGO’s and charitable organizations.
- Another noticeable change is the increase of the minimum required share capital for private limited liability companies from N10,000 (Ten Thousand Naira) to N100,000 (One Hundred Thousand Naira), as well as that of public companies from N500,000 (Five Hundred Thousand Naira) to N2,000,000 (Two Million Naira) under S. 27(2)(a) of the proposed new CAMA.
- Section 30 of the proposed new CAMA provides that where a registered company with a name similar to that of a previously existing company defaults in changing its name within 6 weeks after notice has been given to it to do so or have its name struck off by the Corporate Affairs Commission, the offending company’s name will be struck off from the register of incorporated companies. However, such striking off will not invalidate any contract entered into by the company before being struck off neither will it make any legal proceeding by or against the company defective or invalid (S.30(4)).Where a company changes its name because such name is similar to the name of a previously existing company, CAC shall issue a newspaper publication about such change (S.30(10)).Where the company just changes its name for any reason other than having a similar name with another company, it shall publish a notice of such change in a daily newspaper and submit a copy of the newspaper to CAC within 30 days of the change of name (S.30 (11)).
- S.31 provides that the CAC can at any point during the incorporation process before the certificate of registration is issued, withdraw, cancel or revoke an approved name if the name is identical to a previously existing one (S.31(3)) or if the name approval was gotten fraudulently or unlawfully (S.31(5)).Other provisions regarding name changes under the new CAMA are:
- A person can transfer a name reservation to another person on the condition that CAC is satisfied that such person is not trading in reserved names (S.31(6)).
- If a name becomes available because the company using the name changed its name, CAC is obliged to make such name available for reservation within 60 days (S.31 (4)).
Some other prominent changes and inclusions in the new law are as follows:
- Where a company increases its share capital, it has three (3) months within which to issue not less than 25% of the new total share capital after the increase (S.101 (1)(a)). This is a change from the previous six (6) months period provided for in the old CAMA.
- A private company is allowed to hold its Annual General Meetings (AGM) electronically, e.g. Skype, teleconference, etc S.213(2)). This is a noteworthy change from the previous mandate that all AGM’s must be held with the relevant members present together in Nigeria.
- A person convicted of an offence involving fraud is prohibited from being made a director or taking part in the management of a public company and anyone in contravention shall beguilty of an offence and liable on conviction to a fine of N200,000 (Two Hundred Thousand Naira) or imprisonment for a term of two years or both (S.252).
- S. 279 (2) provides that a person cannot be a director in more than 5 public companies.
- S.291(1) provides that every company shall have a secretary who shall be appointed within six (6) months of the date of incorporation of the company.
- S. 356 provides that companies (excluding insurance companies, banks or any other company prescribed by the Commission) are exempt from the requirements of the Act relating to the audit of accounts in respect of a financial year if:(a) it has not carried on any business since its incorporation; or (b) its turnover in that year is not more than N10 million and the balance sheet total is not more than N5 million. This basically means that small companies do not need to audit their accounts.
- S.527 empowers the Commission to strike off the names of defunct companies from its list of registered companies after the satisfaction of certain conditions.
- Every registered business name is expected to submit annual returns now accompanied by financial statements of the preceding year from January 1st to December 31st not later than the 30th of June every year. (S.578). The old CAMA did not require business names to submit financial statements with their annual returns.
- The Commission may direct an association be treated as forming part of an already registered association; and any two or more association having the same trustees be treated as a single association (S.587). Two or more associations with similar aims and objects may also merge (S.605).
- S.595 provides that the Commission has the power to suspend trustees of an association and appoint an interim manager to manage the affairs of the association if it reasonably believes that: (a) There is or has been any misconduct or mismanagement in the administration of the association; (b) It is necessary to protect the property of the association and public interest; or (c) The affairs of the association are being run fraudulently.
- By virtue of S. 611, it shall now be unlawful for any person or association of persons to carry on business in Nigeria as a company or under a business name without being registered with CAC.