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OVERVIEW OF THE COMPANIES AND
D ALLIED MATTERS ACT 2020
DCSL Corporate Services Limited
OVERVIEW OF THE
COMPANIES AND ALLIED
MATTERS ACT 2020
Introduction: The Act has introduced sweeping allows for electronic filing of forms
President Muhammadu Buhari, on reforms to the administration of and resolutions, electronic share
Friday 7 August 2020, assented to compaies Notably, the Act provides transfers, electronic signatures, as
the Companies and Allied Matters for the registration of private well as virtual general meetings by
Bill (“CAMA 2020”, “the Act”), recently companies with a single member or private companies.
passed by the National Assembly. shareholder, single directorship for In this edition of our newsletter,
The President’s assent to CAMA private companies, Limited Liability we have addressed the major
2020 repealed and replaced the pPrtnerships, Limited Partnerships, alterations and innovations
Companies and Allied Matters Act, and reduced registration fees for introduced by the Act under the
1990 “the Repealed Act”). The Act is small companies. The Act further following key headings:
viewed as a welcome development makes elaborate provisions for
and an attempt to add vigour to the administration, compromise, • The Corporate Affairs
government’s economic reforms voluntary arrangements, netting Commission
and ongoing initiatives on the ease and schemes of contract to ensure • Incorporation of Companies
of doing business in Nigeria. The the sustainability of businesses and Incidental Matters
Repealed Act which was designed and a formal cessation process.
Furthermore, the Act abrogates the • Limited Liability Partnership
after the English Companies Act need for statements of compliance, • Limited Partnership
1985, was generally regarded as replaces the concept of “authorized • Incorporated Trustees
obsolete and unable to address key share capital” with “minimum
emerging business and investment share capital” to reduce the cost of
issues. incorporation. The CAMA 2020 also
A. THE CORPORATE sought. This is a novel provision • provide the opportunity
AFFAIRS COMMISSION which would assist to stem spurious of being heard to persons
litigation brought against the CAC. alleged to have contravened
Pre-action Notice To be Served on the provisions of this Act or its
the Corporate Affairs Commission Administrative Proceedings
Committee: Section 851 of the regulations;
Section 17 of CAMA 2020 provides Act empowers the Commission • resolve disputes or grievances
that a pre-action notice, (a written to establish an Administrative arising from the operations of
notice of intention to commence Proceedings Committee made this Act or its regulations; and
a suit against the CAC) must be up of the Registrar General, five • impose administrative
served on the Commission by an members of the Commission and penalties for contravention of
intending plaintiff or his agent. a representative of the Federal the provisions of this Act or its
Such notice is required to state the Ministry of Trade and Investment. regulations in the settlement of
cause of action; particulars of the The Administrative Committee matters before it.
claim; name and place of abode of shall:
the intending plaintiff; and reliefs
OVERVIEW OF THE COMPANIES AND
ALLIED MATTERS ACT 2020
The sanctions that may be imposed b. Any partnership for the purpose for exemption to be submitted
by the Administrative Committee, of carrying on practice as Legal to the Minister of Trade and
include: Practitioners or Accountants. Investment. It is expected that this
• imposition of administrative Power to Withdraw Approval new requirement would simplify
penalties; of Name Reserved for the procedure for application,
processing and grant of the
• suspension or revocation of Registration exemtion from Incorporation.
registration; or Section 30 (4) of the Act empowers Minimum Share Capital for
• recommendation for criminal the Corporate Affairs Commission Private & Public Companies
prosecution if matters brought to withdraw or cancel any approval
before it reveal any criminal act given for the registration of a Section 27(2) of the Act increases
or conduct. Name, where it is discovered that the minimum Authorised Share
It should be noted that the decisions the approval was fraudulently Capital from ₦10,000 to ₦100,000
of the Administrative Committee or improperly procured. This is for private companies and from
are subject to confirmation by the an improvement on the current ₦500,000 to ₦2,000,000 for public
Board. Parties dissatisfied with practice where an aggrieved party companies.
decisions of the Administrative will need to apply to the court for Power of the Minister of Trade
Committee may appeal to the an order directing the Commission to Prescribe Model Articles for
Federal High Court. to withdraw or cancel the name Companies
which was improperly registered.
B. INCORPORATION OF Introduction of Statement of Section 33 of the Act authorizes the
COMPANIES AND INCIDENTAL Compliance for Agents and Minister of Trade and Investment
MATTERS Promoters of Companies to prescribe, by regulation, model
Pre-Registration and Articles of Association for the
Registration Matters: Section 40 (1) introduces the different types of companies. A
requirement for a Statement of company may adopt all or any of
Minimum Number of Persons Compliance to be signed by an the provisions of model Articles.
Required to Form Companies applicant or his agent, confirming Unless expressly excluded or
that the requirements of the law as modified, the relevant model
Under the CAMA 2020, two or more to registration have been complied Articles would be deemed to form
persons may form and incorporate with. Under the repealed Act, the part of the company’s Articles in
a company by complying with the applicant was required to submit a the same manner and to the same
requirements for registration. Declaration of Compliance signed extent as if the Articles expressly
Furthermore, Section 18 (2) of the signed by a Lawyer or attested to included the relevant model
Act provides that a single person before a Notary Public. Articles in the form in which the
may form and incorporate a private Application for Exemption Articles were initially registered.
company by complying with the
requirements for registration. of Foreign Companies from Consent of the Attorney
The Act further provides that Registration to be Submitted General of the Federation
any association and partnership to the Minister of Trade and (AGF) for the Registration
of more than 20 members for Investment of Company Limited by
the purpose of carrying on a Like the repealed Act, Section 80 Guarantee
business must be registered as a of the new CAMA requires foreign
company under CAMA unless such companies to apply for exemption The repealed Act required that
association or partnership is – from registration in Nigeria on the Memorandum and Articles of
certain grounds. However, unlike Association of a company limited by
a. A co-operative society guarantee shall not be registered
registered under the provisions the repealed Act which stipulated without the consent of the Attorney
of any enactment in force in that such application should be General of the Federation (“AGF”).
Nigeria; and submitted to the Secretary to the
Government of the Federation,
CAMA 2020 requires the application
OVERVIEW OF THE COMPANIES AND
ALLIED MATTERS ACT 2020
Although the new Act retains this to any condition or direction that corporation or agency or its
requirement, the consent is now may be imposed in the Articles or nominee; and
required to be provided within by the company in general meeting. • In the case of a compabny
thirty (30) days. Where all valid The Act further provides that the having share capital, the
documents are furnished and no power to allot shares cannot be directors among themselves
decision has been made by the exercised by the directors of a hold at least 51% of its equity
AGF within 30 days, the promoters company unless express authority capital
of the company shall advertise the to do so has been vested in the
registration of the new Company board of directors by: A company with foreign
in three (3) national newspapers • the company in a general shareholding is required to appoint
inviting objections, if any, to the meeting; or a Company Secretary whether it is
incorporation of the company. small or large..
The Act has thus removed a major • the company’s articles. Similarly, every public company
bottleneck hitherto encountered The power to allot shares of a is required to appoint a Company
by the promoters of not-for-profit public company is subject to the Secretary. Companies with
organizations. provisions of the Investment and government stake or nominee on
ii. Post Registration Matters Securities Act. the board must appoint Company
Appointment of Company Secretaries whether large or small.
Disclosure of Persons It should be noted that the criteria
with Significant Control in Secretary for determing a small company as
Companies Section 330 of CAMA 2020 provides stated in the Act is different from
Section 119 of the Act requires the that every company is required to the classification under the Finance
disclosure of the capacity in which have a secretary except a small Act 2019 which sets a threshold of
shares are held, either as beneficial company. It should be noted a turnover of N25, 000, 000 (twenty
owners or as nominees of interested that the CAMA does not make five million) for a small company
persons. This disclosure must be in the appointment of a Company for tax purposes. The Finance Act
writing and made within seven (7) Secretary optional for private also requires a company with less
days of acquiring significant control companies, all private companies than N100, 000, 000 (one hundred
over the company. The company is that are not small companies million naira) turnover to pay tax at
in turn required to notify the CAC as defined in Section 394 must a reduced rate (20%).
within one month of receiving such appoint a company secretary. A iii. Returns and other
information. company will be regarded as a
small company if: Compliance Matters
. It should be noted that the • It is a private company External Audit of Financial
threshold for determining a
substantial shareholder remains • Its turnover is not more than Statements
5% of the unrestricted voting rights N120, 000, 000 (one hundred Section 402 exempts small
at any general meeting of the and twenty million naira) in a companies and companies that are
company. year yet to commence business from
Power to Allot Shares • Its net assets value is not more the external audit of their financial
than N60, 000, 000 (sixty million statements. This expemption is not
Section 149 of the Act re-eneactes naira) or such amount as may available to insurance companies,
the power of shareholders to allot be fixed by the Commission banks, or any other company
the shares of a company. However, from time to time as may be prescribed by the
the extant Section additionally • None of its members is a Commission.
provides that, in relation to a private foreigner
company, this power may be • None of its members is a
delegated to the directors, subject government, government
OVERVIEW OF THE COMPANIES AND
ALLIED MATTERS ACT 2020
Restriction on Sale of Assets up shares of a company may be Financial Assistance by a
and Transfer of Shares of a purchased by the company, and Company for the Purchase its
Private Company the terms of purchase shall provide Own Shares
for payment for the purchase;
Section 22 (2) of the Act authorizes • within seven days after Just like the repealed law, CAMA
a private company to restrict the the passing of the special 2020 prohibits financial assistance
transfer of assets as well as its resolution, the company shall by a company to a person for
shares. The repealed Act placed cause to be published in two acquisition of its own shares.
a restriction on transfer of shares national newspapers, a notice Section 183 of the Act states that
(and not assets) and did not specify of the proposed purchase by where a person is acquiring or
a limit to the quantum of shares the company of its own shares; is proposing to acquire shares
that could be transferred to non- in a company, it shall not be
members. However, CAMA 2020 • within 15 days after the lawful for the company or any of
provides that: publication in two national its subsidiaries to give financial
• a private company shall not, newspapers, the directors assistance directly or indirectly for
without the consent of all its of the company shall make the purpose of that acquisition
members, sell assets having a and file with the Commission, before or at the same time as the
value of more than 50% of the a statutory declaration of acquisition takes place.
total value of the company’s solvency, to the effect that the The Act however provides
assets. company is solvent and can exceptions to the general as a
pay its debts as they fall due, private company is not prohibited
• a member shall not sell his and that after the purchase of from giving financial assistance
shares in the company to a its shares, the company shall where the acquisition of shares in
non-member, without first remain solvent and able to pay question is or was an acquisition
offering those shares to existing its debts as they fall due; of shares of its own subsidiary or
members; and member • a company may not purchase holding company provided that:
its shares if, as a result of the
• a group of members acting purchase, there would no • the financial assistance may
together, shall not sell or longer be any issued shares only be given if the company
agree to sell more than 50% of the company other than has net assets which are not
of the shares in the company redeemable shares or shares thereby reduced or to the
to a person who is not then held as treasury shares. extent that they are reduced, if
a member, unless that non- The Act provides a window for the assistance is provided out
member has offered to buy all creditors and shareholders who of distributable profits;
the existing members’ interests dissent to the resolution approving • the financial assistance is
on the same terms. shares buyback and requires approved by special resolution
that within a period of six weeks of the company in general
following the publication in two meeting; and
Additional Conditions for national newspapers, any of the • the directors of the company
Purchase by Company of Its company’s creditors may make proposing to give the financial
Own Shares (Shares Buyback) an application to the Court for an assistance and, where the
The Act l retaines the right of order setting aside the resolution. shares acquired or to be
a company to buyback its own Also, a dissenting shareholder who acquired are shares in its
shares. On terms similar to the did not vote in favour of the share holding company, the directors
repealed law. d buyback shall also have the right to of that holding company
seek an order of court setting aside shall, before the financial
Additionally, the Act requires a the resolution. The ability of the assistance is given, make a
special resolution by members of company to proceed with the share statutory declaration in a form
the company for shares buyback. buyback shall depend on the order prescribed by the Commission.
Furthermore, Section 184 (2) of the of the court, where applicable.
Act provides that only fully paid
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