On Friday, August 7, 2020, President Muhammadu Buhari signed the landmark Companies and Allied Matters Bill, 2020, recently passed by the National Assembly, into law.
The acronym CAMA (Companies and Allied Matters Act) will be used to refer to this legislation in subsequent paragraphs.
CAMA repeals and replaces the extant Companies and Allied Matters Act, 1990.
After 30 years, CAMA introduces several corporate legal innovations geared toward enhancing ease of doing business in Africa's most populous country.
If you want to know what this business reform law means in the simplest terms there are, especially for aspiring Medium and Small scale entrepreneurs and the private sector, here goes….
1..It will cost a lot, lot less to register a business with this new law.
Under Section 223 (12) of the new Act, filing fees for Registration of Charges payable to the CAC (Corporate Affairs Commission) has been reduced to 0.35% of the value of the charge.
This is expected to lead to up to 65% reduction in the registration of a new business these days.
2..You can now float a business where you are the single shareholder. Before now, the law says you needed at least two shareholders to start a company.
This made people bring in all sorts of phony characters and unknown names with no known addresses into the business registration process; and led to sharp practices across the board.
Section 18 (2) of the new CAMA allows for single-member/shareholder companies. Essentially, it permits the establishment of a private company with only one (1) member or shareholder.
3..The new CAMA recognises virtual meetings and the role of technology in how we eat, work and play. Which makes it more revolutionary than most.
It makes provisions for electronic filing, electronic share transfers, e-meetings as well as remote general meetings for private companies in response to the disruptions to close contact physical meetings by the COVID-19 pandemic.
This means that the law allows the board of directors of a company to hold meetings from different locations on the planet via video technology, and arrive at a decision. That decision will be recognised in court and will be seen as binding on the entire organisational set-up.
The new CAMA provides that certified true copies of electronically filed documents are admissible in evidence, with equal validity as the original documents.
Section 176(1) of the new CAMA provides that instruments of transfer of shares shall include electronic instruments of transfer.
4..According to Section 402 of the new CAMA, small companies or any company with a single shareholder are no longer mandated to appoint auditors at the annual general meeting to audit the financial records of the company.
CAMA now provides for the exemption in relation to the audit of accounts in respect of a financial year.
5..This law says procurement of a Common Seal is no longer a mandatory requirement. With the previous Act, every company was required to have a common seal regulated by the Articles of Association.
6..The new CAMA replaces Authorized Share Capital with Minimum Share Capital. This means that owners of a business do not need to pay for shares that are not needed at a specific time.
7..The appointment of a Company Secretary is now optional for private companies. According to Section 330 (1) of the new CAMA, the appointment of a company secretary is only mandatory for public companies.
8..The new legislation requires the disclosure of persons with significant control of companies in a register of beneficial owners. This will significantly enhance corporate accountability and transparency.
9..The new CAMA protects the minority shareholder and guarantees enhanced business rescue reforms for insolvent companies.
10..The law also permits the merger of Incorporated Trustees for associations that share similar aims and objectives.
11..The new CAMA introduces the concept of Limited Liability Partnerships (LLPs) and Limited Partnerships (LPs). This allows for organisational flexibility and tax status of a partnership with the limited liability of members of a company.
12..Section 307(1) of the Act says one person cannot be a director in more than five (5) public companies at a time.
13..Section 265 (6) restricts firms from appointing a director to hold the office of the Chairman and Chief Executive Officer of a private company.
The director has now got to choose one, curbing some of his powers and reducing executive recklessness.