President Muhammadu Buhari signed into law the Companies and Allied Matters Act (CAMA) on August 7, 2020. The new CAMA has repealed and replaced the extant CAMA of 1990 and will make Nigeria’s business environment as competitive as its counterparts around the world. This amendment is the first in 30 years and contains some vital amendments that startups and entrepreneurs must be aware and take advantage of.
Since what you don’t know can actually kill you (or your business), we have made a highlight of some of the key and vital provisions below to guide you:
1. Provision for single-member/shareholder companies. Section 18 (2) of the new CAMA now makes it possible to establish a private company with one member/shareholder as opposed to the former requirement of two (2). This is good news for startups, as a lot of businesses have been forced into unnecessary partnerships prior to the passing of this bill into law.
2. Appointment of company secretary is now optional for private companies. By virtue of section 330 (1), the appointment of company secretary is only mandatory for public companies. This would make business ownership and registration easy as it provides for small businesses to start and grow.
3. Provision for Limited Liability Partnership (LLP) and Limited Partnership (LP): This confers on partnership the organizational flexibility of limited liability of members of a company. This may increase foreign investments in the country.
4. Reduction of filing fees for Registration of Charges: Under the new Act, the total fees payable to the CAC for filing has been reduced to 0.35% of the value of the charge under Section 222 (12).
5. Small companies and/or any company having a single shareholder are not mandated to hold Annual General meeting.
6. Provision for electronic transfer of shares under Section 175 (1). This one provision I consider long overdue, the entire world now practically lives and conducts business virtually.
7. Disclosure of persons with significant controls in companies. This encourages transparency as it places an obligation on entities to disclose capacity in which shares are held, either as beneficial owners or as a nominee. Section 119
8. Exemption from appointing auditors: Small companies or any company having a single shareholder are no longer mandated to appoint auditors at the AGM to audit the financial records of the company. Section 402
9. Replacement of Authorized share capital with Minimum share capital for companies and startups. Section 27
10. Usage of Common Seal is no longer mandatory for companies- Section 98.
11. Section 184 (1) allows a Limited Liability Company to purchase its own shares, even redeemable shares.
12. Provision for virtual meeting for private companies, as long as it is conducted according to the Articles of the company. Also, with the exception of small companies and companies having a single shareholder, all statutory and annual general meetings shall be held in Nigeria – Section 240
13. A director is prohibited from simultaneously holding the office of chairman and Chief Executive Officer of a public company. This promote minority protection.
14. The CAC now has the power to at any time before a Certificate of Incorporation is issued, withdraw or cancel a reserved name if it discovers that such name is identical with that of an already registered existing company or so nearly resembles it as to be likely to deceive. Section 31 (3).
In our next post, we will address how the new CAMA affects incorporated trustees (NGOs, associations and religious bodies). Meanwhile, if there is any provision of the new CAMA highlighted above that you do not understand or need further clarifications on, feel free to talk to us.