The Companies and Allied Matters Act (Cama) remains at
the core of the regulation of business formations through which
local and foreign direct investments (FDI) flow into the
Nigerian economy. Despite its importance, Cama has proven
inadequate, as it is only a re-enactment of the1968 Companies
Act with further insignificant amendments in 1990 and 2004.
These amendments did not reflect the ever dynamic and
innovative global business environment Cama sought to regulate,
justifying the need for a complete overhaul of the Act in the
face of Nigeria's current commercial realities.
The near abysmal rating of Nigeria in the World Bank's ease
of doing business index (145th out of 190 countries) called for
the Companies and Allied Matters Act (Repeal and Re-enactment)
Bill, 2018 to be approved on May 15 2018 by the Nigerian
Senate. The eventual implementation of the Bill is expected to
make Nigeria's entire corporate legal framework more efficient,
and re-position the country as a destination for FDI.
Structurally, 247 extra sections have been included in the
Bill among other alterations to existing provisions of Cama.
Some major highlights follow.
A key innovation in the Bill is the provision ensuring that
the Corporate Affairs Commission (CAC) sets up platforms under
which registration and other transactions for business
formations can be conducted electronically as opposed to the
traditional manual system previously prescribed by Cama.
E-registration enhances the efficiency and speed of business
The Bill also provides for the possibility of having
single-shareholder and single-director companies (for small
enterprises) as opposed to the minimum requirement of two
shareholders under Cama. This is intended to encourage the
creation of small and medium enterprises, and support the
growth of fledging businesses as observed in other
Ease of formation of companies limited by guarantee
The Bill totally obviates the need for the approval of the
attorney general of the Federation (AGF) for the registration
of the memorandum and the formation of a company limited by
guarantee. This need for the AGF's approval is currently a
requirement under Cama and is a critical hurdle each investor
is required to overcome, given that the bureaucratic clog and
inordinate delays in obtaining ministerial approval have been a
deterrent to potential investors.
Share buybacks by companies
Unlike Cama, the Bill now enables companies to buy back and
acquire their own shares subject to certain conditions. This is
to allow a company to reduce its capital costs, float its
capital for other uses and benefit from the temporary
devaluation of its stock for access to funding.
Formation and recognition of limited partnerships
One of the most radical innovations in the Bill is the
provision for registration of limited partnerships which was
impossible under Cama.
Ease of reduction in authorised share capital
In a marked difference from Cama which makes a reduction in
a company's authorised share capital conditional on a court
order, the Bill no longer makes this a requirement. This is a
welcome development particularly because obtaining court orders
for any purpose in Nigeria is typically hampered by incessant
delays. This provision allows for a speedy resolution to
Corporate governance innovations
The Bill exempts small companies and businesses that are yet
to commence commercial operations from appointing auditors.
This in essence nullifies the need for small companies to hold
annual general meetings. A company is exempt from appointing an
auditor and holding an annual general meeting in any given year
a. it has not been active since its
incorporation/in a particular financial year; or
b. the company's turnover is no more than NGN10 million
($27,000 approximately) and its balance sheet total is no more
than NGN5 million.
Once the Bill is passed into law, the appointment of a
company secretary would also no longer be a statutory
requirement for small companies as opposed to earlier
provisions under Cama.
We have been informed that the Bill currently awaits
presidential assent before it becomes operational. It is
however hoped that the bureaucratic formalities for the
implementation of this Bill will be fast-tracked to address
Nigeria's poor ranking in the ease of doing business index, and
provide a more efficient and cost-effective administration of