On 15 May 2018, the Senate passed the bill for the repeal of the Companies and Allied Matters Act (CAMA) 1990 and the re-enactment of the CAMA 2018.
The provisions of this bill will have a profound impact on the business sector of Nigeria’s economy and will play a significant role in improving its rankings on the World Bank Doing Business (WBDB) Ranking Index.
The new bill, when signed into law, will contain provisions that enable the following:
Single Owned Company
The provisions of CAMA 2018, will allow for one or single person to own a private company, having one directorship and will no longer need a lawyer to register a company. This will enable for more start-ups and young entrepreneur businesses.
Financial Assistance
It also permits companies to provide financial assistance to shareholders, which was not allowed in CAMA 1990, whereby any form of gifts, indemnity given that will reduce the company shares are prohibited.
Insolvency Framework
It will create an insolvency framework, which is a legal regime that will help companies in debt, recover from it. This insolvency framework will keep feasible businesses still running and get rid of non-feasible businesses.
Reduction In Minimum Share Capital
The provisions to CAMA 2018 will allow for a reduction in minimum share capital for companies and start-ups in Nigeria, without the burden or disadvantage of applying to court. This will encourage more investments and create new jobs in the economy.
Limited Liability Partnerships
The provisions of the bill will incorporate limited liability partnership, which is a legal entity that allows for several individuals to come together to share in the risks, cost, responsibilities, and profits of a business. This limited liability partnership will operate as a normal partnership business, taxes would be paid to the States of residence as usual, but will provide limited liability for its members. Up till now, this partnership structure has only been practised in Lagos State, but will be introduced to partnerships all over the federation once the CAMA 2018 is signed into law.
Electronic Registration
The bill makes provision for business owners to now register their businesses from anywhere in the world in a faster and more efficient way, using technology, called e-registration. This will allow for start-ups and entrepreneurs to start business and a lawyer would not be needed for registrations. The use of technology shows our advancement in the business sector.
Annual General Meetings And Company Secretary
The provisions of the bill will see to the removal of unnecessary regulatory provisions such as the requirements for annual general meetings and having a company secretary, for small companies as seen in the CAMA 1990.
Exemption from External Audit
This bill will remove the obligation of external audits from companies that are incorporated but yet to commence operations, small businesses, start ups and companies that do not have a turnover of up to N5 million and above.
Beneficial Ownership
Shareholders will be mandated to disclose beneficial interests in a company’s shares and will be punished for not doing so. Where a person holds interests on behalf of another in a nominal capacity in a company, both parties (the owner and the nominal holder) will be required to disclose the beneficial interests to the company.
Minority Shareholder Rights
The new law will better protect minority shareholder rights as it gives them access to judicial redress, particularly with respect to related party transactions carried out by their companies. Minority or other Shareholders can take legal actions both in respect of a company and any of its subsidiaries, parent company and other affiliated companies.
The Perceived Benefits of the Bill Includes:
- Making the Nigeria business environment as competitive as its counter parts around the word.
- Allowing one person to open and run a company, which is good for start-up entrepreneurs.
- Promoting the use of technology in the registration of business.
- Removing all the unnecessary regulatory provisions for small companies.
- Protecting minority shareholder rights, particularly with regard to related party transactions carried out by their companies.
As the Senate President Bukola Saraki stated, CAMA is a pro-business law, which will show the world that Nigerians are ready for business.
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