Companies And Allied Matters Act (Repeal & Re-Enactment Bill) 2018: Herald Of A New Dawn In Modern Business World
It is no longer news that in May, 2018, the 8th Senate of the Federal Republic of Nigeria at its plenary session passed the bill for the repeal of the Companies and Allied Matters Act 1990 and re-enactment of the Companies and Allied Matters Act (CAMA) 2018. This step, which heralded a new dawn in business reform in Nigeria, had been anticipated over the long run of the 28 years that the CAMA 1990 was passed into law.
The CAMA 1990 was drafted to suit the business engagements at the time. However, the business world is changing and there is the need for a new CAMA to accommodate the modern business world. It cannot be overemphasized that there are new developments in every sector; hence, as a progressive country, it is imperative that we review our laws from time to time to fit into our dynamic environment.
Recommendations were received from various institutions and professional bodies such as the Nigerian Bar Association, FMDQ OTC Securities Exchange, inter alia and were duly considered by the Senate which birthed the passage of the Bill. The Bill has 860 sections and 16 schedules as opposed to 613 sections and 15 schedules of the 1990 CAMA. The changes the Bill seeks to bring if it receives presidential assent are discussed below. These are however not exhaustive as this article does not aim to discuss all the changes the Bill seeks to bring.
- SINGLE MEMBERSHIP
The Bill seeks to provide for single membership of a company as opposed to the provision of section 18 of CAMA 1990 which makes provision for at least two members in the formation of a company. This is a welcomed development by medium business owners who would like to form a one- man company. In addition, this Bill eliminates the two- director and two-shareholder requirements. The Bill provides for one director and one shareholder for small companies.
- ANNUAL GENERAL MEETING
Every small/single shareholder company has been exempted from compulsorily convening and holding Annual General Meeting.
- LIMITED LIABILITY PARTNERSHIP
The introduction of the Limited Liability Partnership as a legal entity would potentially enable such entities combine the organisational flexibility and the tax status of a partnership with limited liability Company for its members. This new legal entity will reflect partnership with the perpetuity of a limited liability company. This will ease the establishment of companies in various ways.
- COMPANY LIMITED BY GUARANTEE
The compulsory requirement of the assent of the Attorney – General of the Federation before registration as provided for by section 26 (5) of CAMA 1990 has been cancelled by the Bill.
- COMMON SEAL OF A COMPANY
Small companies are under no compulsion to own a company seal.
- MINIMUM ISSUED SHARE CAPITAL
The Bill proposes a shift from the recognized authorized share capital to a minimum share capital. This is to eradicate the payment of taxes on the authorized share capital of a company which changes from time to time, thus, enabling such payments be made on minimum share capital.
- EASY REDUCTION OF SHARE CAPITAL
CAMA provides that a special resolution is passed at the meeting of a company if it intends to reduce its share capital and subsequently make an application to the Federal High Court for confirmation. This Bill dispenses of this strenuous process. A copy of the minute of the meeting showing the amount of the share capital, the number of share divided to, the amount per share and the amount deemed to be paid per share upon registration of the minute which shall form part of the memorandum of the company.
- SHARE BUY-BACK
The Bill provides that a company can buy back its own shares.
The Bill exempts small companies that have not carried on business since its incorporation or its turnover for the year is not more than 10million from appointing Auditors.
- COMPANY SECRETARY
Contrary to the provisions of CAMA, the Bill exempts small/single shareholder companies from compulsorily appointing office secretary.
- ACCOUNTING RECORDS
The Bill requires public company to upload their accounting records on their website and make it available to the public.
- ELECTRONIC USAGE
- E- REGISTRATION
The Bill provides for electronic means of reserving company/business name, registration and incorporation. This will ease the registration process as all the hassles that come with manual registration will be dispensed with.
- E- SIGNATURE
Under the Bill, electronic signature will suffice.
- E- INSTRUMENT
The Bill seeks to allow electronic instrument in transactions made by companies. Share can now be transferred by automated means. Certificates can be issued in e-format.
- E- MEETING
Companies need not convene meeting in a physically existing place as meetings can be held by electronic means provided they are conducted in accordance with the articles of the company.
- E- NOTICE
In addition, notices need not be sent by letters anymore. The Bill provides for electronic means of sending notices.
This Bill, if it receives Presidential assent, has come to expiate and redress the shortcomings of CAMA 1990. The Bill seeks to revise the Nigerian company law to reflect modern commercial realities as well as reduce compliance costs for businesses in Nigeria. The passage of the Bill is commendable as it seeks to improve the ease of starting and running a business in Nigeria by removing certain obstacles.
By incorporating electronic means of doing almost everything in the running of a company, this Bill has finally come to terms with technological advancement in the corporate world. So many things have been faced out by daily advancement in technology; our business sector in Nigeria should not be met with this misfortune. This Bill is deemed “small-company friendly” as it has numerous provisions in favour of small companies. This Bill has been appraised by small and medium companies because it rids them of the stringent procedures in the incorporation and daily management of companies.
It is pertinent to note that it is not the case that this Bill is without fault. I do not think exempting small companies from mandatorily appointing company secretary is a laudable change. The role of company secretaries can never be belittled: Company secretaries see to the effective flow of information and efficient management of companies.
In addition, it is unclear how some provisions of the Bill will apply in the light of other existing laws such as tax laws. For instance, the exemption of certain companies from audit appears contrary to the requirement.
Ultimately, most of the changes the Bill seeks to introduce are applaudable as this new development will launch a new era in our commercial environment; mirroring an advancing technology- friendly business sector and entice foreign investors.