CAMA 2020: 30 Innovative Provisions Every Individual And Corporate Entity Must Know

BY OLUWATOYIN BAMIDELE, ONI

INTRODUCTION/ BACKGROUND

The new CAMA 2020 was signed into law on August 7, 2020 and apparently has been unequivocally described as Nigeria’s most significant commercial and corporate legislation since 1990 when the initial Companies and Allied Matters Act was enacted. CAMA 2020 brings to limelight plausible and commendable provisions which further amplifies the advocacy and campaign of the Government of the Federal Republic of Nigeria on the ease of doing business (EODB) and reduces to a large extent the seemingly cumbersome, burdensome and vexatious regulatory requirements for registration and operations of business in the country.

The newly enacted CAMA 2020 has generated raucous reactions and controversies owing to plethora of higgledy-piggledy commentaries and interpretations. The most active participants of this topsy-turvy protestation are Incorporated Trustees with Churches, mosques, and Non-Governmental Organizations at the forefront.

This piece seeks to reveal for knowledge sake some of the innovative provisions in the new Act for effective administration and maximum procedural compliance by individuals and corporate entities.

KEYPOINTS

• Directors must now disclose their ages/no more directorship in above 5(five) companies SECTION 278, 307(1).
• The managing director can no longer be the Chairman of the board
• All public companies must display audited account on the website SECTION 374(6)
• Shareholders with significant control must now disclose it within 7 days S.119, 120
• How to become a shareholder with significant control- SECTION 120(2)
• All public companies must keep register of secretaries S 336, 337, 338
• Shares can now be transferred electronically S.176 (1)
• Companies can now hold electronic AGM, and EOGM Section 240(1)(2)
• Electronic filing of documents is now legally certified
• Company officers can now use electronic signatures SECTION 101
• Company Common seal is no longer compulsory SECTION 98
• Share certificates can now be signed as a deed without the common seal
• Ordinary businesses at the AGM has been increased SECTION 238, 242, 257.
• Filing fees of all companies has now been reduced SECTION 222(12)
• New plans to rescue insolvent companies- SECTION 434-442, 443-549, 718-721.
• Public companies can now be re-registered as an unlimited SECTION 75, 76

 

 

• An individual can now form a company (S.18(2))
• Statutory declaration of compliance by a lawyer is no longer necessary- S.40 (1)
• No more authorized share capital SECTION 27
• We can now have limited partnerships and limited liability partnership. SECTIONS 746-810
• AG’s consent no longer compulsory for company limited by Guarantee-SECTION 26 (4-7)
• Pre-action notice to CAC now mandatory SECTION 17 (1) (2)
• Model article of association can now be adopted SECTION 32, 33,34
• Exemption of foreign companies is now by the Minister SECTION 80
• Private companies need not appoint company secretaries SECTION 330
• private companies need not appoint auditors at AGM SECTION 402, 394
• private companies need not audit account at AGM
• All companies can now validate an improperly issued share without going to court SECTION 148 (1) (2) (3)
• New qualifications of a private company– SECTION 394(3)
• Merger of NGO’s, etc and power of Court/CAC to suspend its trustees-SECTION 839, 869.

 

SECTION A:

INCORPORATION, REGISTRATION AND THE CORPORATE AFFAIRS COMMISION (CAC)

• SINGLE MEMBER COMPANIES CAN NOW BE FORMED (S.18(2) CAMA 2020)

Prior to the introduction of CAMA 2020, the Repealed 1990 enactment made Provision for the express prohibition of single shareholder companies. Section 18 of CAMA 1990 states that a company can only be formed and incorporated by two or more persons. However, Section 18(2) of the new CAMA 2020 makes it possible to establish a private company with only one (1) member/shareholder. This will allow individuals who are business persons and would love to incorporate their business into a legal entity to do same without necessarily partnering with another shareholder. This would further allow for autonomous control of such businesses.

• STATEMENT OF COMPLIANCE NOW INTRODUCED IN LIEU OF STATUTORY DECLARATION OF COMPLIANCE- S.40 (1) CAMA 2020

Section 35(3) of the Repealed 1990 enactment made provision for compulsory statutory declaration of compliance which must be signed by a legal practitioner in the prescribed form attesting to the fact that the registration requirements have been complied with and shall be produced to the commission, and the commission may accept such declaration as sufficient evidence of compliance. This requirement is sine qua non for incorporation of companies before the new CAMA 2020. However, since the enactment of the new law, the statement of compliance can be signed by the applicant or his agent confirming therein that the essential requirements of the law with regards to registration has been duly complied with.

It is important to note that this purported alternative provision in the new law does not absolutely overrule the acceptability of a declaration of compliance which is signed by a legal practitioner under the legal practitioners Act and attested to by a notary public or a commissioner for oaths. Section 40 (3) of the Act provides thus…

“Nothing in this section prevents the commission from accepting declaration of compliance which is signed by a legal practitioner and attested to before a commissioner for oaths or notary public”.

 

• MINIMUM SHARE CAPITAL IS MADE TO REPLACE AUTHORISED SHARE CAPITAL. SECTION 27 CAMA 2020.

Section 27 of the new law made provision for the replacement of the concept of “authorized share capital” with “minimum share capital” stated in its memorandum of association.

Note that by the provision of section 27 (2)(a) of CAMA 1990 Act, the Authorised share capital (ASC) requirement was not expected to be less than N10,000.00 (ten thousand naira only) for private companies and N500,000.00 (five hundred thousand naira only) for public companies. However, with the introduction of CAMA 2020 the Minimum Issued Share Capital (MISC) for a private company has been increased to a minimum of N100,000.00 (one hundred thousand naira only) and N2,000,000.00 (two million naira only) in the case of a public company. Furthermore, the minimum contribution of members of a company limited by guarantee is now N100,000.00 as opposed to N10,000.00 provided for in section 27(4) (b) of the Repealed 1990 enactment.

 

• CREATION OF LIMITED LIABILITY PARTNERSHIPS (LLPs) AND LIMITED PARTNERSHIPS (LPS) AS LEGAL ENTITIES- SECTIONS 746-810 CAMA 2020- SECTION 746-810 CAMA 2020

LLPs and LPs are widely practiced in other Jurisdiction like the United States of America and the United Kingdom as a separate legal entity distinct from its partners and having perpetual succession. Ab initio Partnerships in Nigeria were regulated by the Partnership Act of 1890 and the Partnership Law 1958 (Western Region) as a legally recognized organizational structure or an association of a business owned by two or more people who share the profits and are personally liable for all business debts. Partnerships were not considered a body corporate with separate legal entity, and thus the liability of such partnerships were not legally recognized under Nigerian laws.  With the enactments of the new CAMA  and specifically in Sections 746 – 810 the concept of Limited Liability Partnerships (LLPs) and Limited Partnerships (LPs) are introduced and makes way for manageable organizational structure and tax status of a partnership with the limited liability of members of a company, this provision is not existent in the repealed Act.  CAMA 2020 makes it possible for potentials business partners who require the benefit of a limited liability structure with the tax status and flexibility of a partnership to operate either as LLPs or LPs.

• REDUCTION OF FILING FEES FOR REGISTRATION OF CHARGES FOR PUBLIC AND PRIVATE COMPANIES- SECTION 222(12) CAMA 2020

LLPs and LPs are widely practiced in other Jurisdiction like the United States of America and the United Kingdom as a separate legal entity distinct from its partners and having perpetual succession. Ab initio Partnerships in Nigeria were regulated by the Partnership Act of 1890 and the Partnership Law 1958 (Western Region) as a legally recognized organizational structure or an association of a business owned by two or more people who share the profits and are personally liable for all business debts. Partnerships were not considered a body corporate with separate legal entity, and thus the liability of such partnerships were not legally recognized under Nigerian laws.  With the enactments of the new CAMA  and specifically in Sections 746 – 810 the concept of Limited Liability Partnerships (LLPs) and Limited Partnerships (LPs) are introduced and makes way for manageable organizational structure and tax status of a partnership with the limited liability of members of a company, this provision is not existent in the repealed Act.  CAMA 2020 makes it possible for potentials business partners who require the benefit of a limited liability structure with the tax status and flexibility of a partnership to operate either as LLPs or LPs.

• COMPANY LIMITED BY GUARANTEE CAN NOW BE REGISTERED WITHOUT THE AG’S CONSENT-SECTION 26 (4-7)

Section 26 of CAMA 2020 retains the provision for obtaining the AG’s consent as part of the registration process for a Company Limited by Guarantee. However, there is now a 30days time limit for the AG to make a decision, failing which the application can progress to the advertisement stage. Section 26 CAMA 2020 provides that;

“Where the AG refuses to grant his consent within 30days of application for consent the promoters of the Company Limited by Guarantee shall proceed to the advertisement stage”.

Prior to the new law, under the 1990 CAMA and precisely in section 26 (5) which was in force before now, the consent of the AG cannot be dispensed with even if he withholds his consent for personal reasons.

• NO MORE AUTOMATIC INSTITUTION OF COURT ACTIONS AGAINST CAC- SECTION 17 (1) (2)

From the commencement of the newly enacted CAMA 2020, it has become illegal to institute a law suit against the Corporate Affairs Commission (CAC) without first serving on the CAC a pre-Action notice. This is described by the Act as a written Notice of intention to commence suit after which such intending Plaintiff, his agent, or legal practitioner(s) shall wait till the expiration of 30 days after the written notice of intention has been served on the commission before commencing the suit. The Act further provides that the said notice shall expressly and explicitly state the cause of action, particulars of the claim, name and place of abode of the intending plaintiff, and relief sought. This provision is expected to reduce litigation for the CAC as faster resolution of issues is facilitated at a reduced cost. The commission may also explore any of the Alternative Dispute Resolution (ADR) Mechanisms available.

• PRESCRIPTION OF MODEL ARTICLE OF ASSOCIATION FOR ADOPTION AT INCORPORATION- SECTION 32, 33,34 CAMA 2020

As prescribed by CAMA 1990, every company is required to register an Article of Association prescribing regulations for the company. However, in accordance with the provisions of Sections 32, 33 and 34 of the CAMA 2020, a company may elect not to register an Article of Association, in which case such company will be deemed to have adopted the Model Articles prescribed in the new CAMA 2020 for a company of its description. The act empowers the minister (for industry, trade and investment) to prescribe model articles of association for companies and different model articles may be prescribed for different description of companies. Note that any amendment made by the model article which is to be prescribed by the minister does not affect a company registered before the amendment takes effect.

• FOREIGN PARTICIPATION: APPLICATION FOR EXEMPTION NOW TO BE HANDLED BY THE MINISTER- SECTION 80 CAMA 2020

By the provisions of section 54, 55, and 56 of Repealed Act, a foreign company intending to carry on business in Nigeria without fulfilling the requirement of the law regarding incorporation of the company with the CAC had to apply to the President for exemption and this is to be done through a letter addressed to the secretary of the Government of the Federation and such letter shall set out all the required information contained in section 56(2) of the repealed Act

However, the above provision seems to have been amended by section 80 of CAMA 2020 which now allows a foreign company to apply directly to the Minister of Trade for exemption.

The foreign company upon approval for exemption is further mandated to notify the Corporate Affairs Commission within thirty (30) days failing which the foreign company will be liable to a fine.

The Minister may at any time revoke any exemption granted to any company if he is of the opinion that the company has contravened any provision of this Act or has failed to meet any condition contained in the exemption order or for any other good or sufficient reason.

 

SECTION B:

PROVISION FOR ELECTRONIC SHARE TRANSFER, ELECTRONIC SIGNATURES, ELECTRONIC FILING AND E-MEETINGS.

• ELECTRONIC SHARE TRANSFER: S.176 (1)

Section 176 (1) provides that instruments of transfer of shares shall include electronic instruments of transfer. Before the enactment of CAMA 2020 the instrument of transfer of share was only limited to hardcopy or paper documents which must be executed by or on behalf of the transferor and transferee and the transferor shall be deemed to remain a holder of the share until the name of the transferee is entered in the register of members in respect of the share (Section 151(3) CAMA 1990). It is imperative to now advise public and private companies of the importance of the new provision for electronic transfer of shares and the electronic register of transfer in order to avoid legal liabilities.

(11)ELECTRONIC MEETINGS: Section 240(1)(2) CAMA 2020

CAMA 2020 retains the provision of the previous enactment for Public companies with regards to Statutory meetings and Annual general meetings which must all be held in Nigeria, With the unavoidable interruption of corporate calendars by the novel coronavirus which has been discovered to be a member of the β group of coronaviruses and scientifically described as an infectious disease caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), it became imperative to make legal Provisions for electronic or virtual Annual General Meetings (AGM) provided that such meetings are conducted in accordance with the Articles of Association of the company. This gives room for participation at such meetings from any location within and outside Nigeria and at low budget costs.

11.1 PRIVATE COMPANIES: In the case of a private company, it is expressly provided in Section 240(2) of CAMA 2020 that Annual General meetings (AGM) and Extra-Ordinary General Meetings (EGM) can now be held electronically or virtually provided it is conducted in accordance with the article of association of such company.

11.2 PUBLIC COMPANIES: With regards to public companies, Section 240(1) provides that all Statutory and AGMS of Public companies must be held in Nigeria and to this end it is sacrosanct to state that ‘once all the requirements of CAMA’ on notices, quorum, and voting are complied with, a virtual statutory meeting or Annual General meeting held in Nigeria is valid and legal. Section 240(1) made no provision for the mode in which such meeting is to be conducted whether physical or virtual and it is an already established law that whatsoever is not expressly prohibited by a written law is permitted within the ambit of the law therefore a public company can also hold virtual meetings. This principle of law is advocated and given judicial affirmation by the Supreme Court of Nigeria in the words of the well-revered Justice John Inyang Okoro JSC in the case of Dankwambo v Abubakar & Ors (2015) LPELR- 25716 (SC) Page 77 Paragraphs B-E– where his Lordship stated thus:

 

“it is a cardinal principle of law that what is not expressly forbidden, is permitted. See Jarvis Motors (Harrow) Ltd & Anor (1964) 3 ALL ER 899 at 91 paras B-C. I need to say that…”

Internet connected technological devices have distinct Internet Protocol address which is known as IP address. This is used to uniquely identify a device from another and also locate network interference. Thus where the IP address hosting the meeting is in Nigeria, the meeting can be properly said to be held in Nigeria in accordance with section 240 of CAMA 2020.

Therefore, CAMA 2020 contains provisions which allows all companies to hold and conduct its meetings virtually.

(12)ELECTRONIC FILING

Section 860 (1) of the new CAMA provides that Certified True Copies of electronically filed documents are admissible in evidence, with equal validity with the original documents. This further buttresses the already established position of law with regards to admissibility of electronically generated evidence as widely provided for in Section 84 and 85 of the Evidence Act 2011 and in KUBOR v DICKSON (2013) 4 NWLR (pt. 1345) 534 Where the supreme Court decided that electronically generated documents are admissible in evidence.

Section 860 (2) succinctly provides thus;

“A copy or extract from any document electronically      filed with the Commission or issued by the Commission and certified to be a true copy or extract shall in any proceedings be admissible in evidence as of equal validity with the original documents”

(13) INTRODUCTION OF ELECTRONIC SIGNATURES- SECTION 101 CAMA 2020

In line with global trend and technological development any document, agreement or proceeding requiring signature or authentication may be signed by a Director, Secretary, or other authorized officer of the company and need not be signed as a deed unless otherwise so required in this part and that an electronic signature is deemed legal, satisfactory and acceptable requirement for the signing of documents. Therefore Directors and officers of a company can make use of digital signatory platforms, computer software, and mobile applications like docusign, Adobe fill & sign, SignEasy etc. in appending their signatures digitally to documents from anywhere in the world. This would save time for matters that require urgency, save resources, and dispense with the need to always travel just to append signatures on documents.

SECTION C:

PROVISIONS AFFECTING DIRECTOR(S) OFFICE

(14) USE OF COMMON SEAL IS NO LONGER A MANDATORY REQUIREMENT. SECTION 98 CAMA 2020

This is in line with international best patterns as practiced in most jurisdictions around the world where the compulsory common seal requirement has been expunged from their respective laws. Section 98 of the new Act provides:

“A company may have a common seal but need not have one, and where a company has a common seal, the design and use of that seal shall be regulated by the company’s articles and it shall have its name engraved in legible characters on the seal.”

 

In light of Section 98 of CAMA 2020, the use of common seal is now optional as opposed to the provision of Section 74 of the repealed Act which made the use of common seal compulsory and regulated by the articles of the association. Therefore, companies and corporate entities can now go into contract and executed commercial agreement without affixing the common seal as the use of common seal is now left to the sole discretion of the company. A company may now decide either to have a common seal or not.

(15) SHARE CERTIFICATES CAN NOW BE SIGNED AS DEED AND NEED NOT BE UNDER SEAL

With regards to Section 98 of CAMA 2020 which removes the compulsory requirement of a common seal on a transactional document of the company, the use of common seal on share certificate is now optional as it may either be;

(a) issued under the company’s seal (where the company has a common seal or

(b) signed as a deed by the Directors/secretary..

(16) EXPANSION OF THE SCOPE OF ORDINARY BUSINESSES TO BE TRANSACTED AT ANNUAL GENERAL MEETINGS (AGM). SECTION 238, 242, 257.

Compulsory Disclosure of the remuneration of Managers must be done at the AGM.

Section 238 of CAMA 2020 has added the disclosure of remuneration of managers of a company to the list of ordinary businesses which can be transacted at the AGM. Originally AGM’S are legally designed for special business as all businesses transacted at the AGM are deemed to be special businesses except for 5 (five) ordinary business permitted under  Section 214 of the previous enactment which are declaration of dividend, presentation of the financial statements and reports of the directors and auditors, election of directors in the place of those retiring, the appointment, fixing of the remuneration of the auditors, appointment of members of the audit committee.

Section 238 of CAMA 2020 has successfully added the disclosure of remuneration of managers of a company as a sixth ordinary business which can be transacted at the AGM.

On the flip side, Section 257 of CAMA 2020 makes the disclosure of the compensation of managers of a company compulsory at the AGM. It provides thus:

“The compensation of managers of a company shall be disclosed to members of the company at the annual general meeting.”

Even though Section 242 of CAMA 2020 listed the businesses to be transacted as ordinary businesses at the AGM to the exclusion of disclosure of remuneration of managers of a company, it is widely believed that where this goes before the Court in issue, the Court will not hesitate to decide in the affirmative.

(17) DISCLOSURE OF AGE OF DIRECTORS AND RESTRICTION ON MULTIPLE DIRECTORSHIP IN PUBLIC COMPANIES- SECTION 278, 307(1) CAMA 2020.

The maximum number of director positions that can be held by a person in public companies is now 5 (Section 307). Any person who is a director in more than five public companies shall, at the next Annual General Meeting of the companies after the expiration of two years from the commencement of CAMA 2020, resign from being a director from all but five of the companies.

Furthermore, Section 278 of CAMA 2020 provides that any person who is appointed or to his knowledge proposed to be appointed director of a public company and who is 70 or more years old shall disclose this fact to the members at the general meeting and where any person fails to disclose his age or multiple directorship as now newly required under the law shall be liable to a penalty in such amount as the Corporate Affairs Commission shall specify in its regulations.

This is in conformity with the provision of the various code of good corporate governance (CGCG) and focuses on the ability of a director to discharge the functions of his office despite his multiple responsibility to different entities and also to inform the company of any potential or existing conflicts of interest in respect of the multiple directorships.

(18) MINORITY PROTECTION: PROHIBITION OF MANAGING DIRECTORS FROM OCCUPYING DUAL POSITIONS ON THE BOARD

Section 265 (6) of CAMA 2020 restricts companies from appointing directors to hold the office of the chairman and chief executive officer of a private company. This is acquiescent with the Code of Corporate Governance for Public Companies in Nigeria 2011 issued by the Securities and Exchange Commission (SEC) which replaced the 2003 SEC Code.

The 2011 SEC Code recommended that the Chairman of the Company should provide leadership and not be involved in the day to day running of the Company. Therefore, in line with best corporate practice, the position of the Chairman should be separated from the Executive Directors of the Company through the instrumentality of a Board Charter which defines clearly the roles and responsibilities of the directors of the Company. The 2020 CAMA has however gone further to make a mandatory provision that no public company should have a director who doubles as the Managing Director and the Chairman.

Other provisions for minority protection includes

1. Preservation of the preemptive rights of existing shareholders where new shares are issued.
2. Whenever there is a proposed sale of more than 51% (fifty one percent) of the company’s asset it will now become mandatory to seek and receive the consent/approval of minority shareholders.
3. Full disclosure of all material facts relating to buyer-seller transactions and the existence of a conflict of interest.
4. The courts will now be able to rescind third party transactions which are proved to be unfair or oppressive or cause economic harm to the company, in general.
5. Conflict of interest is now one of the grounds upon which shareholders can hold the Board liable for damages caused by related third-party transactions,
6. Erring directors are now to be disqualified from continuing to serve for a one-year period for causing loss to the company.

The requirement of a minimum of three (3) independent directors on the Board of private companies.

 

SECTION D:

COMPANY SECRETARIES

(19) REGISTER OF SECRETARIES MANDATORY FOR PUBLIC COMPANIES- S 336, 337, 338

All companies were required to keep a register of secretaries under the repealed 1990 Act. However, section 336 of CAMA 2020 now requires public companies to maintain a register of secretaries and the required particulars are provided for in Sections 337 & 338.

(20) EXEMPTION FROM THE APPOINTMENT OF COMPANY SECRETARY: SECTION 330 CAMA 2020

Section 293 of the Repealed 1990 Act made the appointment of a company secretary legally obligatory for every company and where the office of the company secretary is vacant or he/she is unable to act for any reason, the assistant secretary, deputy secretary or any person appointed in that behalf by the directors may act. However, by virtue of Section 330 of CAMA 2020, the appointment of a company secretary is optional and no longer mandatory for small companies and only compulsory for public companies.

Section 330(2) and (4) further provides that where a public company has not appointed a secretary before the commencement of CAMA 2020, The company shall make such appointment within 6 (six) months of its commencement. Where a public company contravenes the provisions of this section, the company and the directors of the company are liable to a fine in such amount as the Corporate Affairs Commission shall specify and, in the case of continued contravention, to a daily penalty in such amount as the Commission shall specify. Note that even though the new Act has no commencement date and has not been gazetted, it is believed to have been effective from the date it was assented to by the president.

SECTION E:

AUDIT RECORD AND AUDITOR(S)

(21) PUBLIC COMPANIES SHALL KEEP ITS AUDITED ACCOUNTS DISPLAYED ON ITS WEBSITE- SECTION 374(6)

CAMA 2020 mandates every public company to have a website and also display their Audited Accounts on Websites in furtherance of the objective of promoting corporate transparency and accountability. Accountability and transparency is embedded in the constitutional principles and values of an open and democratic commercial organization and is also the apex of the corporate governance approach which in turn will allow the company to perform efficiently.

(22) APPOINTMENT OF AUDITORS AND AUDIT OF ACCOUNTS BY SMALL COMPANY

By the provision of Section 402 of the newly enacted CAMA, a company having a single shareholder or a small company by virtue of 394 are no longer mandated to appoint auditors at the Annual general meeting to audit their financial records and audit of accounts in respect of a financial year.

(23) EXEMPTION FROM APPOINTING AUDITORS AND FROM AUDIT REQUIREMENTS: SECTION 401, 402, 394 CAMA 2020

Under the repealed Act all companies are expected at each annual general meeting (AGM) to appoint auditor(s) to audit the financial statements of the company and to hold office from the conclusion of that meeting until the conclusion of the next AGM. However, by the provision of Section 402 of the New CAMA all Small companies within the meaning of section 394 or any company having a single shareholder are no longer mandated to appoint auditors at the Annual General Meeting to audit the financial records of the company. Furthermore, Public or private companies that have not carried out business since incorporation (other than an insurance company or a bank or any other company as may be prescribed by the CAC) are also exempted from the requirements of the law relating to the audit of accounts in respect of a financial year.

SECTION F:

SHAREHOLDERS

(24) DISCLOSURE OF PERSONS WITH SIGNIFICANT CONTROL IN   PUBLIC AND PRIVATE COMPANIES- 119, 120 CAMA 2020

Section 119 of the new Act introduces new transparency provision with an obligation for entities to disclose the capacity of shareholding of its members. Shareholders and every person with significant control over a company shall, within 7 (seven) days of becoming such a person, indicate to the company in writing the particulars of such control, capacity in which shares are held, either as beneficial owner or as a nominee of an interested person and the company after receiving or coming into possession of the information shall not later than one month from the receipt of the information or any change therein, notify the Commission of that information provided that a company shall in every annual return, disclose the information required in respect of the year for which the return is made.

(25) CONDITION FOR BECOMING A SHAREHOLDER WITH SIGNIFICANT CONTROL- SECTION 120(2)

Section 120 (2) of CAMA 2020 now provides that a person is deemed a substantial shareholder in a public company if he holds under his name or by his nominee, shares in the company which entitle him to exercise at least 5% of the unrestricted voting rights at any general meeting of the company.

It is therefore a statutory requirement that such notice is given to the Commission, where;

1. any person becomes a substantial shareholder, within 14 days of receipt of the notice from the substantial shareholder or upon becoming aware that a person is a substantial holder; and
2. any person ceases to be a substantial shareholder, within 14 days of becoming aware of such cessation.

(26) COMPANIES CAN NOW VALIDATE AN IMPROPERLY ISSUED SHARE WITHOUT GOING TO COURT- SECTION 148 (1) (2) (3)

CAMA 1990 provided that improperly issued or allotted shares can only be validated by the court (FHC) upon the court being satisfied that in all the circumstances specified in the Repealed Act that it is just and equitable to validate the allotment or issuance of the shares.

However, by virtue of Section 148 of CAMA 2020 the company itself is now empowered to validate the issuance or allotment of such shares within 30 (thirty) days of an application made by a holder, mortgagee of those shares or by a creditor of the company by way of a special resolution.

The affected party need not apply to court and may also apply to the court where the company neglects or refuses take the appropriate steps as provided above.

 

 

SECTION G:

OPERATIONS

(27) CONDITIONS FOR QUALIFYING AS A PRIVATE COMPANY UNDER THE ACT – SECTION 394(3)

A company qualifies as small in relation to its first financial year if the requirements are met in that year, and in relation to a subsequent financial year if the requirements are met and/or qualifies as small in that year and in the preceding financial year.

A small company is innovatively defined as a private company which in any year satisfies the following qualifying requirements:

1. maximum turnover of N120,000,000, or such other amount as may be fixed by the CAC;
2. a net assets value of not more than N60,000,000, or such other amount as CAC may determine;

• has no alien as member;

1. none of its members is a government, government corporation or agency or its nominee; and

Where it has a share capital, the directors hold at least 51% of its equity share capital.

(28) SUSPENSION OF TRUSTEES AND MERGER OF INCORPORATED TRUSTEES – SECTION 839, 869

Section 869 of the new Act provides for merger between two or more associations with similar aims and objects under such terms and conditions as may be prescribed by the Commission, therefore incorporated trustees with similar aims are now permitted to merge. Proper attention must still be paid to the requirements for merger in Federal Competition and Consumer Protection Act 2018 (FCCPA) since the Federal Competition and Consumer Protection Commission (FCCPC) is the highest statutory institution with reference to merger.

Furthermore, Section 839 of CAMA 2020, which makes provision pertaining to the power to suspend the trustees of an association and appoint an interim manager by the Corporate Affairs Commission has generated unprecedented raucous controversies in the realm of Nigerian Corporate Law as some persons has averred that the new provision is an attempt to witch-hunt religious and charitable organizations in the country.  This protest is actually misconstrued and premised on wrong interpretations of Section 839 of the new enactment, it must now be correctly noted and unequivocally pointed out that the commission does not have the unilateral power to suspend the trustees of an organisation  out rightly as only the court of Law being the Federal High Court (FHC) can give such order after thoroughly assessing credible and reasonable evidence presented to it alongside a petition for such removal of trustee by the Commission (CAC) or members consisting one-fifth of the association.

(29) PROVISION OF BUSINESS RESCUE PLAN FOR INSOLVENT COMPANIES- SECTION 434-442, 443-549, 718-721.

The new enactment makes provision for the rescue of businesses of Insolvent Companies, a new framework for rescuing a company in distress and to keep it alive as against allowing such corporate entity become insolvent. These provisions include:

1. Company Voluntary Arrangements (S.434 to S.442),
2. Administration (S.443 to S.549) and

• Netting (S.718 to S.721).

With these statutory options made available it is expected that companies in financial crises will make use of any of the available options instead of undergoing a compulsory winding up.

Going forward, financially distressed companies can partake in business rescue re-organization such as a Company Voluntary Arrangement and Administration instead of Winding Up. The Act further provides for suspension of the enforcement of securities, court actions, sequestration of assets, etc. while a company is undergoing Administration. Where certain undervalued transactions have led to a company’s financial distress a court order can be obtained restoring it to its previous position and a company will also be able to disclaim onerous contracts with the leave of court.

Furthermore Contracts for the supply of essential services may be entered into or continued on the basis that the supplier obtains a personal guarantee by the officeholder in charge of rescuing the company during winding up or a re-organization.

The Act has also modified the conditions for Winding up and clearly set out the rights of secured creditors in Winding up. Therefore the minimum enabling debt for bringing a Winding up petition against a company will be N200, 000 (Two Hundred Thousand Naira) as against the previous criteria of a debt sum of N2,000 (Two Thousand Naira) and claims of holders of fixed charges will rank in priority to other claims and expenses upon the commencement of winding up proceedings.

(30) A PUBLIC COMPANY CAN NOW BE RE-REGISTERED AS AN UNLIMITED COMPANY- SECTION 75, 76

An essential addition to the provisions on the re-registration of companies is the option of re-registration of a public company as an unlimited company provided that the conditions stipulated in section 75 of CAMA 2020 are fulfilled being that all the members of the company have assented to its being so re-registered, the company has not been previously re-registered as a limited or unlimited company, and the application for re-registration is brought in the prescribed manner as provided in section 76.

WRITTEN BY OLUWATOYIN BAMIDELE, ONI  LL.B(HONS), BL,ACARB, ISCL (SIITGO), DGL RI. ,+2349031576668, [email protected]