On Friday, August 7th 2020, President Muhammadu Buhari signed into law the Companies and Allied Matters Bill following its recent passage by the National Assembly.
The President disclosed this known in a statement via his official twitter handle on Saturday, reiterating his administration’s resolve to reform and improve the business environment in Nigeria.
The President’s Special Adviser on Media and Publicity, Femi Adesina, said the new law would result in the reduction of filing fee. Along with other reforms, the newly signed law will make registration for small and medium businesses cheaper and more accessible in Nigeria.
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How it all Began
On Thursday, January 17th, 2019, the House of Assembly passed a bill of an Act to repeal the 2004 Companies and Allied Matters Act Cap C20, LFN (“CAMA”) and replace it with the Companies and Allied Matters Act 2018.
This was after an extensive review by the Senate Committee on Trade and Investment. The Senate then passed it in May 2018 and forwarded it to the House of Representatives.
In their review, the Senate highlighted six benefits of the Bill to include
- It will make Nigeria’s business environment competitive just like its counterparts around the globe
- The law will empower one person to open and administer a business as against the old law that requires two or more people.
- It will promote the usage of technology in business registration
- The new legislation will eliminate all unnecessary laws working against small businesses
- It will create a new legal identity for companies in Nigeria
- The online registration provision will make it possible for Nigerians to register their businesses from anywhere in the country.
The Implication of the Newly Signed Law on Small Businesses in Nigeria
The 6 points listed above, as highlighted by the Nigerian Senate in 2018, summarize the benefits of the Companies and Allied Matters Act.
But if you need a further break down of the Act provisions and its effect on businesses, we have highlighted some of them here for you.
E-Registration
The Bill has now made it officially possible for businesses to register with the Corporate Affairs Commission (CAC) electronically. In other words, you don’t have to start looking for CAC office around you before you can register your business.
By the way, CAC had already commenced electronic registration of businesses via the CAC official website even before this law. This has only been an administrative practice, but now officially backed by the law.
Single Member Companies
Before now, the law only allowed tow people as the minimum to set up a company. The newly signed law has now changed that, reducing the number to one. This is consistent with the law of other countries including India, Singapore and England.
Before now, entrepreneurs who needed to register their businesses have to “partner” with friends or family members to enable them to register their business. That’s no longer the case now as you alone can simply register your business…online.
Limited Liability Partnerships
The law is coming with a new legal business entity known as Limited Liability Partnership (LLP). This provision allows for two or more people to come together to form a lawful business to profit can incorporate a limited liability partnership under the new Act. The jointly established business can exist as a legal entity separate from the body of its partners.
Attorney General of the Federation’s Consent for Companies Ltd by Guarantee
The former law required that companies limited by Guarantee to get the consent of the Attorney General (AG) of the federation before it can be registered. And the AG may choose to withhold such consent. Promoters of non-profit organizations have had to live with this over the years, but that stops now.
With the signing of the new Companies and Allied Matters Act, companies will no longer need the consent of the AG. Instead, CAC now has a duty to ensure the advertisement of the application in three national newspapers. This should cheer NGO advocates and stakeholders.
There is an upward review of the minimum issued shared capital, as seen in section 27(2) of the Act. This includes both private and public companies.
For private companies, the new minimum issued share capital now ranges from N10,000 to N100,000. And for public companies, the new issued share capital is from N500,000 to N2,000,000.
Please note that this does not change the statutory cost of registering a business. A minimum threshold amount is still required to register a private company with a share of capital ranging from one million or less.
Name Registration
CAC is now empowered to cancel or withdraw any given approval if they discover any wrongdoing in such approval.
This is an upgrade from the former law where an offendant or an aggrieved person will have to write to the court for an order directing the CAC to cancel the improperly registered name.
This new legislation puts more power and responsibilities on the shoulders of CAC.
You should be worried about this if you register your business via fraudulent or improper means.
However, we hope that CAC would give all parties involved a fair hearing when they start implementing.
Articles of Association
The Act will abolish the compulsory prescription of the model article by CAC and instead empower the commission to prescribe articles which only applies when a company cannot provide its own Articles of Association.
This will allow companies to create their Articles, unlike the current provision, which forces the model Articles on companies.
Certificate of Incorporation
The Act allows a company, with CAC’s approval, to direct another company to change its name after the registration of such name under a name similar to the one by which the first company in existence is registered previously. However, it also empowers CAC to withdraw, revoke or cancel such issued certificate of registration where discovered to be unlawfully or fraudulently procured.
Statement of Compliance
Another registration requirement for companies has always been the submission of a Statutory Declaration of Compliance. This can only be filled by a lawyer or legal practitioner as spelt out in previous law (CAMA), section 35(3).
However, the newly signed legislation will be changing things here as well. The requirement of a “Statutory declaration in the prescribed form by a legal practitioner…” has been removed and has been simply replaced with “A statement of compliance”.
Electronic Signature
Whenever there is a need for a company to authenticate a document or proceeding, the Act approves the use of the electronic signature. As stated in the Act: “A document or proceeding requiring authentication by a company may be signed by a director, secretary, or other authorized officer of the company, and need not be signed as a deed unless otherwise so required in this Part of this Act, provided that an electronic signature shall be deemed to satisfy the requirement for signing under this section.”
Other Provisions of the Act
- The law has made it optional for companies to have a common seal is now optional.
- It allows for the reduction of share capital to enable private companies to avoid the extra burden of applying to the court for confirmation.
- The law allows companies to render financial assistance to its members to acquire their shares after its shareholders have approved such.
- It permits a Limited Liability Company to purchase its shares provided its Articles allow it and its shareholders approve it.
- General and board meetings can be held electronically.
- The law exempts all small companies that have not more than one shareholder from the compulsory Annual General Meetings
- It is now optional for small companies with one shareholder to appoint a company secretary.
- Public companies are expected to display their audited accounts on their websites for public consumption.
- Companies with any form of distress are permitted to explore such options as merger, wind-up, compromise and acquisition. However, the law comes with the introduction of Rescue and Insolvency legal regal regime, which would focus on rescuing companies from insolvency.
- Notice communication is now more comfortable as the legislation has allowed the communication of notice via electronic mail.
Wrapping Up
This new law will indeed make it easier to run business in Nigeria. Quite laudable.
The highlights of the new legislation for most small businesses would be the ease that now comes with registering companies. Hence, if your business is yet to be registered, the time to do so is now.
By the way, there is still the concern on implementation. From experience, the application is usually the problem with most government legislation and policies. While this looks good on paper, we can only hope its execution would be as good (or better).
