23 Jul The Changes and Potential Impact of the Proposed CAMA Provisions
The proposed Companies and Allied Matters Bill passed its third reading at the Nigerian Senate on the 15th of May, 2018 and it contained a number of notable alterations. The amendments are centred on increasing the ease of doing business in Nigeria as well as attracting and retaining foreign investors in the Country.
Below are of some of the noteworthy changes that have been introduced in the Bill.
- Single Membership Companies
By virtue of Section 18(2) of the proposed CAMA, ONE person may have the capacity to form and incorporate a private company in Nigeria as opposed to the current requirement of at least two members before formation. This means that it will be possible for small companies to have only one director.
Partnerships under the current CAMA are registered as Business Names and not Companies. This has been amended in the proposed CAMA and thus Limited Liability partnerships and Limited Partnerships may be registered as corporate entities by the Corporate Affairs Commission (CAC). This will provide more options for people on the available types and structures of companies.
- Share Capital
The Bill has increased the requisite minimum issued share capital of both private and public companies. Private companies are to have a minimum of N100, 000, while public companies must have a minimum of N2, 000,000 as opposed to the current N10, 000 and N500, 000 respectively. This places more importance on the right amount of shares and the proportion to each shareholder.
- Company Acquisition of its own Shares
The 2004 CAMA allows a company to buy its own shares only under certain conditions such as the settlement or compromise of a debt, the elimination of fractional debts, inter alia. With the passing of the proposed CAMA, a company may if permitted by its Articles and approved by its shareholders, by a special resolution, purchase its own shares including redeemable shares. Thus, the purpose of the acquisition need not be any of those listed in Section 160 (1) of the present CAMA. It should be noted that a company will not be permitted to purchase its shares where there will no longer be any issued shares of the company other than redeemable shares or shares held as treasury shares.
- General Meetings
Small companies or companies having a single shareholder would no longer be mandatorily required to convene annual general meetings unlike the provisions of the current CAMA. This means that decisions of the shareholders of the company need not be dependent upon the holding of general meetings and directors and other notable positions can be filled and ratified without same.
- Electronic Signature
The proposed CAMA provides that a document or proceeding requiring authentication by a company may be signed by a director, secretary or other authorised officer of the company, and need not be signed as a deed unless otherwise required, provided that an electronic signature shall be deemed to satisfy the requirement for signing. Basically, contracts can be executed swiftly and transactions carried out more efficiently.
- Appointment of Company Secretary
Currently, all companies are required to have a company secretary at the time of incorporation but this position will be altered should the proposed bill be passed. The bill seeks to grant a period of 6 months to companies before they are required to have a company secretary. It also attempts to remove the burden on small companies from compulsorily having a company secretary. Thus, it may become an optional position for small companies and only public companies might be mandated to keep a register of secretaries.
- Audit Requirement
Companies that have not carried on any business since incorporation or whose turnover in a financial year is not more than N10,000,000 (ten million) and the balance sheet total is not more than N5,000,000 (five million) would be exempted from the requirement of having their accounts audited in respect of that financial year. However, such a company must not at anytime within the proposed financial year, have carried on business as an insurance company, a bank or such other company as may be prescribed by the Corporate Affairs Commission.
Other important changes in the proposed CAMA include the following;
- Express provisions on the Electronic Transfer of Shares
- Optional use of company seal and the regulation of the seal design by the company’s Articles.
- Removal of consent of the Attorney General for the incorporation of a company limited by Guarantee.
- Introduction of Business Rescue Proceedings
- The replacement of a statutory declaration of compliance in the prescribed form with a statement of compliance, which tactically removes the requirement of a legal practitioner during incorporation for small companies and individuals.
- Provision for private companies to hold general meetings electronically.
Although the Bill has not been assented to by the President, we will continue to update you on further development. For further clarification, please feel free to contact us. We are a corporate commercial law firm offering several commercial services including incorporation of companies, company secretaryship, legal opinions and due diligence.