THE AMENDMENT OF THE COMPANIES AND ALLIED MATTERS ACT: A MARCH TOWARDS BUSINESS DEVELOPMENT
On the 15th day of May 2018, the Senate at its plenary session finally passed the Bill for an Act to Repeal the Companies and Allied Matters Act 1990 (CAMA) and enact the Companies and Allied Matters Act 2018. Should the bill receive the Presidential Assent, it would improve Nigeria‚Äôs ranking in the World Bank Ease of Doing Business index and also enhance Nigeria‚Äôs system of company law and corporate governance.
PROPOSED CHANGES UNDER THE BILL
1. ONE-MEMBER COMPANY
Under the CAMA, a minimum of two persons must constitute the membership of a company; whether public or private. By the provisions of the Bill, a single individual is enabled to establish a private company. Also, the Bill removes the requirement for a company to have at least 2 directors and allows for single directorship, provided it is a small company.
2. MINIMUM ISSUED SHARE CAPITAL
The Bill has done away with the need for companies to have an authorized share capital with the requirement to have a minimum issued share capital. The rationale behind this is to enable the payment of stamp duties only on the issued share capital, as opposed to the current practice of paying of stamp duties on the entire authorized share capital, at incorporation. Where a company proposes to issue more shares, it may pass a resolution approving issuance of same, and pay the additional stamp duties in respect of the additional shares issued.
3. REDUCTION IN SHARE CAPITAL
The Bill provides for the process by which a company can reduce its share capital; a special resolution is passed, but the extant need to apply to the Court for confirmation is dispensed with under the Bill.
4. USE OF COMMON SEAL
The Bill has abolished the mandatory requirement for each company to have a common seal. A company may opt to obtain a common seal and regulate its use and form through its articles of association.
5. ANNUAL GENERAL MEETING
CAMA requires every company to hold AGMs on a yearly basis, but not more than 15 months must lapse between the date of one AGM and the next.
Under the provisions of the Bill, small companies will no longer be compulsorily required to hold AGMs, provided such companies come within the definition of a small company under the Bill.
6. FINANCIAL ASSISTANCE
The Bill allows companies to provide financial assistance to their shareholders. Under CAMA, Companies and their subsidiaries are prohibited from rendering such assistance when it would result in a reduction in the net assets of the company or no assets at all.
7. COMPANY SECRETARY
The Bill limits the requirement to appoint a company secretary to public companies. This means small companies or companies with one shareholder may decide not to appoint a company secretary.
8. EXEMPTION FROM AUDIT
The Bill provides that a company is exempted from appointing auditors if:
a. It has not carried on business since its incorporation or in a particular financial year.
b. The company‚Äôs turnover is not more than N10m and its balance sheet is not more than N5m.
Exceptions: An insurance company, a bank or any other company prescribed by the Commission.
9. PAID UP CAPITAL
Unlike CAMA, where there is no provision for a time which shareholders to a company should pay for shares allotted to them, the Bill stipulates that 25% of the issued share capital of a company should be paid up at all times.
10. LIMITED LIABILITY PARTNERSHIP
By the provisions of the Bill, a new form of legal being known as the Limited Liability Partnership is formed.
11. RESOLVING INSOLVENCY
The Bill introduces an insolvency plan which is not focused on a company‚Äôs demise, but on rescuing companies from the insolvency framework. If effective, it will achieve the following aims:
a. Save viable businesses
b. Ensure that non-viable businesses are closed down.
OTHER PROPOSED AMENDMENTS (SELECTED FEW)
A. Pre-Action Notice and Restriction on Levy of Execution
B. Company Limited by Guarantee
i. Total liability of a member of a company to contribute to the assets of the company in the event of its being wound up shall not be less than N100,000
C. Authorized Share capital of a Company shall not be less than N100, 000 for a private company and N2, 000,000, in the case of a public company.
D. Reservation of Name can now be done either in hardcopy or through electronic communications.
E. Re-registration of Public Company as Private (Requirement)
i. It now includes a statutory declaration that the provisions of Section 22 of CAMA have been complied with.
F. Business transacted at the Annual General Meeting now includes the choice of venue of the next Annual General Meeting.
G. Place of Meeting: A Private Company may hold its general meetings electronically provided that such meetings are conducted in accordance with regulations made by the Commission.
H. Duty of Directors to disclose age and multiple directorship to a Company: A person proposed to be appointed a director shall disclose any position he holds in any other public company at the meeting in which he is proposed for appointment for a director.
I. Annual Returns by a Company may be delivered either in hardcopy or through electronic communications.
J. Unclaimed Dividends: A Company shall publish a list of unclaimed dividends and the names of persons entitled to them in two national newspapers and attach the published list to the notice to the members for the next AGM.
EFFECTS OF THE PROPOSED AMENDMENTS
1. Improve the ease of doing business in Nigeria.
2. Encourage the growth of SMEs.
3. Less stringent requirements for Small Companies.
4. Reduction in time and cost of setting up a company.
5. Opening the doors to investments in the Nigerian Economy.
The passage of the Bill is a welcome development, as it would have the effect of making the climate of the Nigerian Company Law conducive, and improve the business environment and performance of the Nigerian economy.