On August 7, President Muhammadu Buhari signed the Companies and Allied Matters (CAMA) Bill, recently passed by the National Assembly, into law. The new Act introduces new provisions to reflect modern commercial realities as well as reduce compliance costs and regulatory hurdles for businesses in Nigeria.
A lawyer, Gbenga Biobaku, in this interview, x-rayed the Act and concluded that it is an improvement and would significantly enhance the Ease of Doing Business in Nigeria which is likely to reflect in an improved rating in the World Bank Doing Business (WBDB) Ranking Index.
According to him, the Bill, as passed, has 871 sections and 16 schedules as opposed to the 613 sections in the 2004 Act – a total sum of 247 additional sections. He explains the key new developments.
Electronic registration of companies will now be possible by virtue of the provisions of the Bill. By virtue of Section 34(2) of the Bill, the Corporate Affairs Commission (CAC) would be able to establish companies using any means of electronic communication to facilitate an automated reservation of names and registration. This will definitely speed things up and result in a hassle-free process of registration of companies. It should be noted that independent of the Bill, the CAC has already commenced electronic registration of Business names and companies. Therefore, when passed into law, the effect of the provision of the Bill in this regard will be to codify an existing administrative practice.
The minimum number of people that can set-up a private company has been reduced to one by the provisions of the Bill. This is consistent with several other jurisdictions such as England, India and Singapore, which provide that a company can be formed by one or more persons. This may be contrasted with the provisions of the CAMA which requires a minimum of two persons to form and incorporate a company. The reduction of the statutory minimum requirement by the Bill will be a welcome development for multinational companies and other holding companies who can now be the only shareholder in their Nigerian subsidiaries.
Limited Liability Partnerships
The Bill proposes a new form of legal entity known as a Limited Liability Partnership (LLP). By this provision, two or more persons desirous of carrying on a lawful business with a view to profit may form or incorporate a limited liability partnership under the Act as a legal entity separate from that of its partners having perpetual succession. For such limited liability partnerships, at least one of the partners must be resident in Nigeria. Upon registration, a limited liability partnership becomes a body corporate that by its name is capable of suing and being sued, holding property and having a common seal (if it decides to have one) among others. It is worthy of note that Lagos State Partnership Law 2009 provides for Limited liability partnership (LLP) which allows investors that register their businesses under this law to enjoy reduced responsibility in the event the partnership breaks up or the venture fails.
AGF’s consent on Memorandum of Companies Ltd by Guarantee
Section 26(5) of CAMA 2004, which provides that the Memorandum of a company limited by Guarantee shall not be registered without the authority of the Attorney General of the Federation, has been deleted. The Bill replaces this with a duty on the Commission to cause the application to be advertised in Three (3) national newspapers. In removing the requirement for the authorization of the Attorney –General, the new law has dealt with a matter of considerable difficulty often encountered by promoters of non-profit organizations to wit – the bottlenecks associated with obtaining the AG’s consent, who may in his absolute discretion withhold such consent.
Minimum Issued Share Capital
Section 27(2) of the Bill upwardly reviews the minimum issued share capital for both private and public companies. For private companies, it proposes an increase from N 10,000 to N100,000. 00 and for public companies, from N500, 000 to N2 million. However, this amendment does not significantly change the statutory cost of registering a company due to the fact that a minimum threshold amount is still required for the registration of private companies with a share capital of one million or less.
Registration of name
The Commission is empowered by Section 35(7) of the Bill to withdraw or cancel any approval given where it is discovered that the approval was fraudulently or improperly procured. This is an improvement over the current practice where an aggrieved Party will need to apply to the court for an order directing the CAC to withdraw or cancel the name which was improperly registered. We hope that in the exercise of these powers that the CAC will give parties concerned a fair hearing.
Articles of Association
The Bill seeks to abolish the mandatory prescription of Model Articles by the Commission and instead gives the Commission powers to prescribe model articles which will only apply where a company is unable to provide its Articles of Association to the Commission. This is a welcome development as it will give companies the flexibility to create their own Articles as against the current practice of the Commission insisting on the adoption of the model Articles in CAMA.
Certificate of Incorporation
Although the Act empowers a company, with the approval of the Commission to direct another company to change its name where such name is registered under a name identical to that by which the first company in existence is previously registered, or so resembling it as to be likely to deceive, the Commission will be empowered by virtue of the Bill to withdraw, cancel or revoke such certificate of registration issued where it is discovered that the certificate was fraudulently, unlawfully or otherwise improperly procured
Protection of director’s Information
Section 292(6) of the CAMA mandates that the Register of directors containing the necessary details should be made available for inspection by any member of the company. The Bill, in Section 322 introduces certain measures to protect the directors’ information particularly as contained in the Register of directors. The Bill classifies some of the information contained in the Register as “protected information”.
It goes further to provide that the information does not cease to be ‘protected information’ because the individual has ceased to be a director of the company. The Bill forbids a company from disclosing protected information except for the purpose of communicating with the director concerned, in order to comply with any requirement of the Bill.