19 Aug THE COMPANIES AND ALLIED MATTERS ACT 2020 – KEY HIGHLIGHTS
The Companies and Allied Matters Act Chapter C20 Laws of the Federation of Nigeria 2004 (CAMA) was enacted in 1990. Although it was an improvement of the repealed Companies Act 1968, it was considered as being obsolete almost thirty years after it came into force.
Consequently, in 2020, President Muhammadu Buhari signed the Companies and Allied Matters Act 2020 (CAMA 2020) into law which effectively repealed CAMA 1990 in line with improving the ease of doing business in Nigeria.
Some of the objectives of CAMA 2020 are to ensure efficiency in the registration and regulation of corporate vehicles, reduce the compliance burden of small and medium enterprises (SMEs), enhance transparency and stakeholders’ engagement in corporate vehicles, and also to promote a more friendly business climate.
Some of the major amendments are highlighted below, in comparison with the provisions of CAMA 1990.
|1.||SINGLE-MEMBER COMPANY||CAMA 2020 provides that one shareholder/member can form a company as opposed to the requirement of CAMA 1990 for a minimum of 2 shareholders/members.|
|2.||SUBSTITUTION OF AUTHORIZED SHARE CAPITAL WITH ISSUED SHARE CAPITAL||CAMA 2020 substitutes minimum authorized share capital with minimum issued share capital, stating the minimum issued share capital for a private company to be One Hundred Thousand Naira (N100,000) while that of a public company to be Two Million Naira (N2,000,000), as opposed to Ten Thousand Naira (N10,000) for a private company and Five Hundred Thousand Naira (N500,000) for a public company as provided in CAMA 1990.|
|3.||PAID-UP CAPITAL||CAMA 1990 is silent on the percentage of the share capital to be paid up while CAMA 2020 provides that twenty-five percent of a company’s issued share capital is to be paid up at all times.|
|4.||REDUCTION IN SHARE CAPITAL||Previously, a private or public company that wished to reduce its share capital must pass a special resolution for the reduction and thereafter apply to the Federal High Court for an order confirming the reduction. The new provisions of CAMA 2020 allow a private company to reduce its share capital by passing a special resolution to that effect without the added burden of applying to the court for confirmation. However, a public company still requires a court order to reduce its share capital.|
|5.||MANDATORY PRE-EMPTIVE RIGHTS FOR ALL COMPANIES||CAMA 1990 empowered a company subject to its articles to issue shares up to the total number authorized by the memorandum at any time. However, CAMA 2020 places some restrictions by requiring both private and public companies to first offer newly issued shares to all existing shareholders of the class being issued in proportion as nearly as may be to their existing holdings.|
|6.||COMPANIES LIMITED BY GUARANTEE||While the consent of the Attorney General of the Federation (“AGF”) is needed to register a Company Limited by Guarantee, under CAMA 1990, CAMA 2020 in dispensing this stringent requirement provides that where the AGF’s consent is not given within 30 days of furnishing the AGF’s office with the requested documents, it is deemed that the AGF does not object to the application.
There is also the requirement of publishing the application for registration in three (3) national newspapers.
|7.||SUBMISSION OF INCORPORATION DOCUMENTS||As opposed to the physical submission of incorporation documents for registration to the Corporate Affairs Commission (CAC), CAMA 2020 provides for electronic submission/filing of incorporation and other documents as well as the use of electronic signature. This gives full effect to the current online registration regime by the CAC.|
|8.||ELECTRONIC MEETINGS, VOTING, AND NOTICES||In line with current realities, the new provisions of CAMA 2020 now recognize the use of electronic means in holding meetings although this concession is restricted to just private companies subject to the provisions of its articles.
It further provides for electronic service of notice of meetings and electronic voting at meetings for both private and public companies.
|9.||NOTICE OF MEETINGS||CAC is entitled to also receive notice of meetings for public companies under the provisions of CAMA 2020.|
|10.||ORDINARY BUSINESS OF AGM||The provisions of CAMA 2020 for ordinary business for Annual General Meeting (AGM) of a company have been amended to include amongst others the remuneration of managers.|
|11.||COMPANY SECRETARY||CAMA 2020 has been amended to exclude small companies from the statutory obligation to appoint a company secretary as opposed to the mandatory requirement on all companies under CAMA but this obligation is still mandatory for public companies.|
|12.||LIMITED LIABILITY PARTNERSHIPS AND LIMITED PARTNERSHIPS||The new provisions of CAMA 2020, introduced new forms of legal entities known as Limited Liability Partnerships (LLP) and Limited Partnership (LP). The LP and LLP must have a minimum number of two partners and a maximum number of twenty persons for Limited Partnership and unlimited number of partners for Limited Liability Partnership.|
|13.||STATUTORY DECLARATION||CAMA 2020 now introduces statement of compliance to be signed by an applicant or his agent (not necessarily a lawyer), confirming that the requirements of the law as to registration have been complied with as opposed to the statutory declaration by a legal practitioner provided in CAMA 1990.|
|14.||NUMBER OF DIRECTORS||CAMA 2020 allows small companies to have a minimum of one (1) director, as opposed to two (2) required under CAMA 1990. Further to this, public companies are to have at least three (3) independent directors at all times.|
|15.||DISCLOSURE & RESTRICTION ON MULTIPLE DIRECTORSHIP IN PUBLIC COMPANIES||CAMA 1990 is silent on the provision for disclosing or restricting multiple directorships in public companies. CAMA 2020 provides that further to the disclosure of age by any person proposed to be appointed as a director of a public company, such person shall disclose any position he holds as a director in any other public company. CAMA 2020 further introduces a restriction on any person from being a director in more than 5 public companies at a time.|
|16.||RESTRICTION ON THE ROLE OF CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF A PRIVATE COMPANY||CAMA 2020 precludes the chairman of a public company from acting as the Chief Executive Officer of the same company.|
|17.||DISCLOSURE OF SIGNIFICANT CONTROL||CAMA 1990 provides for disclosure by persons who have acquired ten percent of the share capital of a public company. However, CAMA 2020 provides that every person with significant control over a company shall indicate to the company in writing the particulars of such control.|
|18.||IRREDEEMABLE PREFERENCE SHARES||CAMA 2020 prohibits the issuance of irredeemable preference shares by a company limited by shares.|
|19.||ISSUE OF SHARES AT A DISCOUNT||CAMA 1990 allows a company to issue shares at a discount as long as certain conditions have been met. However, CAMA 2020 makes it unlawful for a company to issue shares at a discount.|
|20.||CREDITORS VOLUNTARY WINDING UP IN A SCHEME OF ARRANGEMENT||CAMA 2020 estops any petition or enforcement for the voluntary winding up of a company or its asset by its creditors upon commencement of the process of arrangement and compromise within six months.
Regardless of this provision, a secured creditor may apply to the Court, in writing, within 30 days of receiving notice of the arrangement and compromise, to have the six-month moratorium period raised on certain grounds.
|21.||COMPANY RESCUE REGIME||CAMA 1990 does not make provision for company voluntary arrangements.
CAMA 2020 introduces the company’s voluntary arrangement and administration which allows a company to settle its debts by paying only a proportion of the amount which it owes to its creditors.
|22.||COMMON SEAL||Previously every company was mandated to have a common seal. Under CAMA 2020, the use of a common seal has now been made optional. Thus, an authorized signature of a company is now sufficient execution of any contract undertaken by a company.|
|23.||EXEMPTION FROM APPOINTING AUDITORS FOR CERTAIN COMPANIES||Previously, all companies were required to appoint an auditor. However, CAMA 2020 provides that small companies or any company having a single shareholder are not required to appoint auditors at the Annual General Meeting to audit the financial records of the company.
Additionally, every public company is required to display its audited accounts on its website.
The above are salient provisions of CAMA which every business owner should be aware of, as these amendments are considered positive steps toward easing the operation of a business in Nigeria.
We provide business, legal, advisory, and compliance support services to private and public companies. If you require further clarification and information as to any of the new provisions of the Act, kindly get in touch with us at firstname.lastname@example.org.