Nigeria, in the quest for global competitiveness has made modest progress in the world economic ranking in ease of doing business and as the largest Economy in Africa, the country must lead in reforms. It is also a good opportunity for leading law firm in Nigeria knowledgeable in commercial law to assist investors on any technical legal challenges of business law in Nigeria.
The Nigerian Legislature in May 2018 passed some innovative and far reaching amendment and reforms on 15 Sections of Companies and Allied Matter Act of 1968 and 1990 now Cap C20 LFN 2004 to align with 21st century business law and ease of doing business just like the top 4 countries like New Zealand, Singapore, Denmark and Hong Kong just to mention few.
The new amended Sections of Companies and Allied Matters Act signed into law on 7th of August, 2020 by the President is primarily a regulatory framework and is notably instrumental in promoting the ease of doing business in Nigeria and also reduce regulatory obstacles to business formation and operation encountered by the general public, foreign investors, individuals, companies, Nigerian law firm and lawyers and other professionals involved on matter relating to business and Company Law.
The following are brief details of the new regulations and fundamental changes to 15 different Sections of Companies Allied Matter Act (1990) by the Nigerian Legislature which will change business environment forever when it becomes effective after the President’s Assent this year…
The reforms can be categorized in this order:
Single Member Companies – The newly passed law allows an individual to form a company without appointing a second person as Director or Shareholder. The current law stipulates minimum of 2 directors and shareholders and maximum of 50 persons for private companies and also 50 persons and above for shareholders and directors for public companies. This new innovation is going to be a game changer for Creative Minds, Entrepreneurs and Start-Up companies.
The CAM Bill will create a new Legal entity called Limited Liability Partnership and Limited Partnership with a very liberal rules compared to Limited Liability Company.
Minimum Share Capital – The new minimum of share capital is now 100,000 share capital and above. The authorized share capital under section 27 of the CAM Bill has now been replaced by a specified minimum share capital.
Paid Up Share Capital – The current Companies and Allied Matters Act does not make compulsory a time limit within which the shareholders must pay up the shares allotted to them, however, the new bill provides that 25% of the shares issued of the share capital of the company must be paid up at all times.
Common Seal – It is now optional under the new amendment for small companies to make use of common seal of the company as one of the prerequisites for registration and operation of the business.
Annual General Meeting – It is no longer compulsory that the annual general meeting must be held in Nigeria with all the directors and shareholders present, it can now be done with video conferencing in irrespective of the location of the participant in World also E-meeting and Electronic transfer of shares are now allowed and the compulsory 15 month Annual General Meeting is no longer mandatory for the small companies.
Minority Shareholders Right – The newly pass Bill gives the shareholder right to initiate a derivative action against the company and affiliates, this promotes minority shareholders right and also promote openness in respect of transparency in corporate governance of the company.
Company Secretary – A Company Secretary is now optional for small companies with less than 2 million share capital and a non-Nigerian can now be a Company Secretary under the new Bill.
Auditing by small companies – The new bill clearly exempt small companies for appointment of auditors if the company has not carry out business since incorporation or in a particular financial year. Or if the company turnover is not more than N10, 000,000 and its total balance sheet is not more than N5, 000,000.
Merger of Incorporated Trustees – Under section 850 of the new Bill, 2 or more association of incorporated Trustee with similar aims and objectives can merge on such terms.
Restriction on Multiple Directorship – Under section 308 of the Bill, an individual cannot be a director in more than 5 public companies.
Company Limited by Guarantee – Incorporated Private Company limited by Guarantee no longer needs the consent of the Attorney General of the Federation to register as it is under the current Companies and Allied Matters Act 1990.
Financial Assistance – The new bill provides that if the company complied with conditions of non-reduction of net asset, the company can pass the resolution permitting the company to provide financial assistance for acquisition of its own shares which is not allowed under the current law.
Public display of Audited Accounts – It is now mandatory for Public Companies to display on their website the Audited accounts of the preceding Financial Year to promote transparency.
Other Amendments: There are other good amendments in the newly passed Bill not mentioned here which will greatly improve the business environment and make the current Companies and Allied Matter Act fulfill its purpose of enactment in 1990 and work in the interest of all the Stakeholders.
The above amendments was finally signed into law by the president on the 7th August, 2020.
We believe the new innovative regulation reforms passed by the Legislature in this new amended Bill will greatly have a multiplier effect on Nigeria Global Ranking on ease of doing business in respect of regulations, because it is a known economic fact that excessive regulations with no clear conducive legal frame work will greatly hinder economic growth of a Country and more so foreign investors’ confidence in an economy.
Good corporate and business Law legal regimes will surely translate to influx of foreign investment and increased local investments in Nigeria on the long run. Nigerian Corporate Regulatory Body is alive to this important role and other regulatory Bodies must support with innovative ideas to guarantee hitch free and seamless business environment to compete globally with other Countries of the World.
BAM & GAD SOLICITORS