In a bid to address the ease of doing business initiative of the present administration, President Muhammadu Buhari, on Friday, August 7, 2020, signed into law an amended Companies and Allied Matters Act (CAMA).
The new Companies Allied Matters Act CAMA 2020 is expected to enhance the ease of doing business in Nigeria. The new document has repealed and replaced the extant CAMA 1990 with critical amendments that would remove some bottlenecks from the old Act.
In this writeup, we look into the salient provisions that enhance the ease of doing business, especially for small businesses.
1. Provision of single-member/shareholder companies: S.18 (2) of the new CAMA now makes it possible to establish a private company with only one (1) member or shareholder.
2. Introduction of Statement of Compliance: S.40 (1) of the new Act introduces the Statement of Compliance. Previously, companies are required to submit a Declaration of Compliance, which must be signed by a lawyer or attested to before a notary public. A lawyer need not sign a Statement of Compliance.
3. Replacement of Authorized Share Capital with Minimum Share Capital: S.27 of the new Act replaced the concept of authorized share capital with the concept of “minimum share capital.” This means promoter(s) of a business need not pay for shares that are not needed at a specific time.
4. Procurement of a Common Seal is no longer a mandatory requirement: According to
S.98 of the new CAMA, the procurement of a Common Seal, is no longer a mandatory requirement for companies. This amendment is in line with international best practices as most jurisdictions around the world have deleted this requirement from their respective laws.
5. Provision for electronic filing, electronic share transfer and e-meetings for private companies: S.861 of the new CAMA provides that correctly certified copies of electronically filed documents are now admissible in evidence, with equal validity with the original documents. S.176 (1) also provides that instruments of transfer of shares shall include electronic instruments of transfer.
6. Provision for virtual Annual General Meetings: The new CAMA also provides for remote or virtual general meetings, provided that such meetings are conducted following the Articles of Association of the company. This provision is especially relevant today, given the disruptions caused by the Covid-19 pandemic to company operations around the world.
7. Exemption from appointing Auditors: S. 402 of the new CAMA provides that small companies or any company having a single shareholder are no longer mandated to appoint auditors at the annual general meeting to audit the financial records of the company.
8. Exemption from the appointment of company secretary: According to S. 330 (1) of the new CAMA, the appointment of a company secretary is only mandatory for public companies making it optional for private companies.
9. Creation of Limited Liability Partnerships (LLPs) and Limited Partnerships (LPs): The new CAMA introduces the concept of Limited Liability Partnerships (LLPs) and Limited Partnerships (LPs). This implies that Startups are not stuck with the option of setting up a Company, but also enjoy the benefits of partnership which a partnership agreement instead of the regular Articles and Memorandum of Association, while still protecting their personal assets from being sold in claims for debts, liability, or creditors.
10. Reduction of Filing Fees for Registration of Charges: S. 223 (12) of the new Act reduces the total fees payable to the CAC for filing to 0.35% of the value of the charge. This is expected to lead up to a 65% reduction in the associated cost payable under the regime.
11. Creation of safety net for Insolvent Companies: According to S. 434 – 549, 718 – 721 Insolvent Companies can now be rescued from distress and liquidation instead of winding up through the following options: Voluntary Arrangements, Administration, and Netting. (S.434 to S.442), Administration (S.443 to S.549) and Netting (S.718 to S.721).
Insolvent Companies can now be rescued from distress and liquidation, instead of winding up through the following options: Voluntary Arrangements, Administration, and Netting.
Nigeria is mostly dominated by Medium and Small-Scale Enterprises (MSMEs). While making registration more comfortable for small businesses will improve the economy, it will also bring in more businesses into the formal space, therefore enhancing the tax revenue for the government.