The Companies and Allied Matters Act was amended in the year 2020. The new CAMA 2020 provided series of innovative provisions that sought to cause a strong shift from the old to the present reality of doing business in Nigeria. This article lists the major changes by the CAMA 2020.
Changes in the Company and Allied Matters Act
1. Small Companies/Single ownership business
Compared to the past mandatory minimum requirements of two shareholders, an individual can start up a business and be the sole proprietor of the business under section 18(2) of CAMA 2020.
This indicates that individuals who are interested in owning the businesses completely can presently run legal entities with perpetual existence that are separate from the owner.
2. Electronic Changes
By provision of Section 31(1), startup companies or businesses are asked to apply to reserve names of their proposed business electronically on the CAC platform, This practice has been established since the Recommendations of the Presidential Enabling Business Environment Council (PEBEC) in 2015 despite the provision just being added to the CAMA 2020, helping in furthering the objective of starting up a business in Nigeria with ease.
The prerequisite has simplified the process of incorporation, there is no longer a need for physical signature by officers of a company following section 101 of the CAMA 2020, documents requiring authentication can be electronically signed from any part of the world and such would be accepted having attained the requirements for signing.
Also, by the provisions of section 240 of CAMA 2020, private companies need not hold a physical meeting but can meet virtually from any part of the world, such meetings would be assumed to have met the requirements of the law. In addition, by the provisions of section 237 of CAMA, Single owned incorporated businesses are now exempted from the annual statutory general meeting.
3. New corporation structure
Part D and E of the CAMA 2020, the limitations of liability of the members of a partnership can be brought upon by the partners willing to start up a business. Although the reason for this provision is to create more partnerships by incorporating the limited liability concept into its agreement.
Nonetheless, limited liability partnerships for the first time since Nigeria’s creation have been added to our laws.
4. Merging framework
The joining of two associations with the same aim and objective had been allowed by the provisions of section 849 under F of the CAMA 2020, this would help bring about tremendous growth and maximize output compared to having the smaller and weaker companies lose market share to the giant corporations.
5. Changes in Shares and value
Formerly, companies were made to have an authorized share capital of 10,000 Naira for private companies and 500,000 Naira for public companies on which 25% should be given to your shareholders, rather company should have an initial issued share capital for registration which is presently a minimum of 100,000 Naira and 2 million Naira for private and public company respectively.
6. Changes for small companies
Following the provision of Section 330 of CAMA, small companies have been exempted from mandatory having a Company Secretary at the time of registration.
The provision of 266(1) CAMA 2020, has exempted single companies from filling and keeping minutes book of meetings and in Section 421(1) of the CAMA 2020, small companies have also been exempted from the 42-day statutory minute-filling process.
7. Disclosure of multiple directorships in public limited companies
By the provision of Section 278(2) of the CAMA 2020, directors proposed for appointment in a public limited company are expected to disclose any position head as director in other public companies to their appointing company.
By Section 278(3) of CAMA 2020, failure of the proposed directors to disclose directorship in other public limited companies will attract a penalty to be determined by the latter company.
8. Introduction of the requirement of three independent directors in public companies
By the provisions of Section 275(1) of the CAMA 2020, public companies are required to have a minimum of three independent directors.
This is because of the corporate and significant role they play in improving the corporate credibility and governance standard of the company, through the balance of knowledge, expertise and exposure they provide to the board.
9. Clear Explanation of roles
For public companies, there must be a breakdown of roles and specialisation of duties.
By the provision of Sector 65(6) of CAMA, an individual is prohibited from performing both the role of Chairman and also the Chief Executive Officer(CEO) in a public limited company.
This is to prevent potential conflicts of interest when an individual seeks to dominate the affairs of the public company, Separating these functions is a strategy that allows one to work independently of the other.
10. Changes for Mandatory use of common seals
By the provision of section 852(2) of the CAMA 2020, The mandatory use of common seals is changed. Previously under the old CAMA, the company seal must be placed on all documents relating to it for such a document to be duly executed.
Under sections 102 (2) and (3) of CAMA 2020, a company can execute a document it describes as a deed without necessarily attaching a common seal to it.
The signature of either the director or Secretary in the presence of a witness has breached the gap of affixing company seals.
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11. Reduced cost in registering security
The provision of CAMA 2020 has made the CAC filing fee to be 0.35% of what it was I.e 1% of a secured fee(private) and 2% of a secured fee(Public)
Hence, the price of the security has greatly reduced and the impact of this innovation of this cannot be overemphasised. It will help to allow company’s gain further profits while undertaking businesses in Nigeria.
Companies registration and regulation in Nigeria is the sole responsibility of the CAC. The provisions of CAMA 2020 guides the CAC and companies registered and operating in Nigeria to better function effectively allowing for growth in the corporate practice industry of Nigeria.
Frequently asked questions
Can I incorporate companies foreign companies at the CAC?
Yes, the CAC is the sole body for the incorporation of foreign and local companies in Nigeria.
How long does it take to register a business at the CAC?
Usually, it takes about three weeks to register a business with the CAC.