Every day Companies, SMEs, Partnerships and the likes are constantly established and registered in Nigeria. For the past 30 years, this area has been regulated by the just repealed provisions of the Company and Allied Matters Act (C20) LFN 2004.
However, on the 7th day of August, 2020, President Muhammadu Buhari, assented and signed into law the Company and Allied Matters Act, 2020. This new Act contains laudable provisions which reflects the increasing efforts by the Nigerian government to remain abreast with the changing economic and business culture.
The new Act contains a total of 870 sections and is divided into 7 parts (A-G); Composition of the Corporate Affairs Commission, Incorporation of Companies, Limited Liability Partnership, Limited Partnership, Registration of Business Names, Registration of Incorporated Trustees, General provisions and the establishment of Administrative Proceedings Committee.
The reforms introduced by this new Act includes:
1. SINGLE MEMBER/SHAREHOLDER FOR PRIVATE COMPANIES: Section 18(2) of the new Act provides that a minimum of one person is required to set up a company as opposed to the requirement of at least two persons in the 2004 Act.
2. MINIMUM ISSUED SHARE CAPITAL: Section 27(2)(a) of the new Act replaces the phrase "Authorized share capital" in the 2004 Act with "Minimum share capital" as it relates to a company's share capital and the amount to be stated in the company's memorandum of association.
3. WITHDRAWAL/CANCELLATION OF A RESERVED NAME: According to Section 31(3) of the new Act, the Corporate Affairs Commission shall have the power to, at any time before a certificate of incorporation is issued, withdraw or cancel a reserved name if it discovers that such name is identical with that by which a company in existence is already registered, or so nearly resembles it as to be likely to deceive.
4. PRESCRIPTION OF MODEL ARTICLE OF ASSOCIATION: Section 33 of the new Act provides that the Minister shall have the power to prescribe model Articles of Association and allow for different model articles prescribed for different descriptions of companies.
5. SIGNING OF STATEMENT OF COMPLIANCE: Section 40 provides that a Statement of Compliance can be signed by the applicant or his agent confirming that the requirements of the law with respect to registration has been complied with thereby expunging the need for an attestation by a legal practitioner or Notary Public.
6. COMMON SEAL: Section 98 of the new Act provides that the use of a common seal is no longer a mandatory requirement for companies.
7. AUTHENTICATION AND SERVICE OF DOCUMENTS: Section 101 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. Such document or proceeding need not be signed as a deed unless otherwise so required and an electronic signature is deemed to satisfy the requirement for signing.
8. INDICATION OF SIGNIFICANT CONTROL OVER A COMPANY: Section 119 of the Act mandates any person with significant control over a company to, within seven days of becoming such a person, indicate to the company in writing the particulars of such control.
9. ELECTRONIC TRANSFER OF SHARES: Section 175(1) of the Act provides for electronic transfer of shares. This addition is in line with the current trends of the digital economy.
10. CAPACITY OF PRIVATE COMPANIES TO GIVE FINANCIAL ASSISTANCE: The new Act in section 183(4) allows for the non-prohibition of a private company from giving financial assistance in a case where the acquisition of shares in question is or was an acquisition of shares in the company or, if it is a subsidiary of another private company.
11. PURCHASE OF OWN SHARES: Section 184(1) of the new Act allows a limited liability company to purchase its own shares including redeemable shares.
12. REDUCTION OF FILING FEES FOR THE REGISTRATION OF CHARGES: Section 222(12) of the new Act reduces the total fees payable to the Corporate Affairs Commission for filing to 0.35% of the value of the charge with a projected 65% reduction in the associated cost payable under the Act.
13. NON-MANDATORINESS OF ANNUAL GENERAL MEETINGS FOR SMALL COMPANIES: Section 237(1) provides that Small companies and/or any company having a single shareholder are not mandated to hold an Annual General Meeting.
14. VIRTUAL MEETINGS: Section 240(2) of the new Act provides that private companies can hold virtual meetings provided that it is done in line with the articles of association of the company.
15. RESTRICTIONS ON DIRECTORS OF PUBLIC COMPANIES: Section 256(2) of the Act restricts a director in a public company from holding the office of Chairman and Chief Executive Officer simultaneously. Section 307(1) also prohibits a person from being a director in more than five public companies at the same time.
16. COMPANY SECRETARIES AND AUDITORS FOR PRIVATE/SMALL COMPANIES: Section 330(1) exempts small private companies from appointing company secretaries. Section 402(1)(b) also provides for the exemption of small companies or any company having a single shareholder from appointment of auditors at the Annual General Meeting to audit their financial records under.
17. VOLUNTARY ARRANGEMENTS, ADMINISTRATION AND NETTING: Section 434-442 of the new Act makes provisions for saving a company in distress and preventing it from going insolvent.
18. SUSPENSION OF TRUSTEES AND APPOINTMENT OF INTERIM MANAGER(S): The new Act in section 839(1) empowers the Commission to by order suspend the trustees of an association and appoint an interim manager or managers to manage the affairs of an association.
19. VIEW OF SPECIFIED GOVERNMENT DEPARTMENT FOR REGISTRATION: Section 853 of the Act provides that the Commission may, by regulations, require that in connection with an application for the approval of the Commission for the registration of company, limited liability partnership, limited partnership, business name or incorporated trustee, that the applicant must seek the view of a specified Government Department or other body.
20. ADMISSIBILITY OF ELECTRONICALLY FILED DOCUMENTS: The Act in section 860 provides for the admissibility of certified true copies of electronically filed documents in evidence as same will have equal validity as the original documents.
The foregoing provisions of the Act are aimed at enhancing the ease of doing business in Nigeria. It is the writer's belief that the provisions relating to small private companies will also encourage more involvement in entrepreneurial ventures in the country.
Blogpost written by our guest editor: Aneke Chinedu Patrick