On August 7, 2020, President Muhammadu Buhari signed the Companies and Allied Matters Bill into law. And that’s a big deal. The Act was passed by the National Assembly in 2018 but was refused assent. Well, ta-dah! The Companies and Allied Matters Act (CAMA) promises to ease business in Nigeria by reducing regulatory hurdles and compliance costs. The bigger picture is more jobs and investments. Today, in simple English, we take a quick look at the most significant changes this Act brings. Let’s take 5 eh?
1. Yaay! We’re going online!
The new CAMA has moved things online for private companies. It provides for electronic filing and electronic transfer of shares. Electronic meetings too. Section 861 provides that certified true copies (CTCs) of electronically filed documents are admissible as evidence in a court, the same way original documents are admissible. Also, section 176(1) of the Act provides that instruments of transfer of shares shall include electronic instruments of transfer.
Oh, virtual Annual General Meetings too. The Act provides that a company can hold its AGMs virtually, as long as they comply with its Articles of Association. So, stakeholders can be anywhere in the world during such meetings. This is especially relevant in these Corona times, don’t you think?
2. New kinds of businesses!
Section 18(2) makes it possible to form a company with only one member. Yup, just you. Importantly, this new CAMA introduces the creation of Limited Liability Partnerships and Limited Partnerships. These are a hybrid of companies and partnerships and were already operative in Lagos (under its Partnership Law). LPs and LLPs enjoy the flexibility of partnerships as well as the limited liability of companies.
Oh, mergers are now plausible for Incorporated Trustees (not just companies). Incorporated Trustees are usually NGOs, schools, churches, etc. According to Section 849 of the new Act, two or more associations that share the same objectives can merge, subject to the directions of the Corporate Affairs Commission (CAC).
3. Exemption from appointments.
The former CAMA had extensive provisions on persons you must appoint for several compulsory roles. For instance, a company had to appoint auditors at its annual general meeting to audit its financial records. Section 401 of the new CAMA expunges this requirement. Also, all companies were mandated to appoint a company secretary. Section 330(1) of the new CAMA removes this requirement for private companies.
In addition, small companies are now allowed to have a minimum of one director, as opposed to the requirement of two directors under the former CAMA.
4. Transparency and Protection.
Many provisions of the new CAMA are all about that transparency life. First, Section 307(1) of the Act prohibits a person from being director in more than five public companies at the same time. Second, a company is now required to disclose persons who have significant control in a register. Significant control involves holding shares amounting to 10% of voting rights. Section 119 of the new CAMA imposes an obligation on these companies to disclose the capacity in which shares are held (whether in person or by nominees).
Finally, in order to protect the minority shareholders, section 265(6) prohibits firms from appointing the same person as Chairman and CEO of a private company.
5. Fees and ease.
There is more! The filing fees for charges have been reduced from 1% and 2% for private and public companies to only 0.35% of the value of the charge. Also, the old CAMA required companies to own a common seal, used to authenticate their documents. Section 98 of the new CAMA says nah, no need.
Under the old CAMA, when you filed your incorporation documents, you also had to file a Declaration of Compliance. This Declaration had to be signed by a lawyer or attested to by a notary public. Under the new CAMA however, this document has been replaced with a Statement of Compliance. Section 40(1) provides that this Statement can simply be signed by you or your agent.
Speaking about replacements, one final one! The concept of authorized share capital has been replaced with minimum issued share capital. What matters is no longer the share capital of the company but the number of shares alloted. This way, promoters of a company only need to pay for shares when they actually need them.
The new CAMA rides on the back of the Finance Act, a comprehensive law that improved several tax legislations in the country. A tax drive is visible in the new CAMA, the government is easing and mandating registrations so it can expand the tax bracket. But CAMA is also good news for MSMEs (micro, small and medium enterprises) especially. The Nigerian market is dominated by MSMEs so easing formation and independence for them is important.
Oh well, we have come to the end again. More information next week.
Until then, peace!