THE NIGERIAN PRESIDENT SIGNS A NEW COMPANY LAW
On Friday, 7 August 2020, President Muhammadu Buhari signed the Companies and Allied Matters Act 2020 (CAMA) into law; thereby introducing significant changes in the legislation governing the affairs of companies in Nigeria. The new law replaced the previous company law which was enacted in 1990.
The major highlights of the new company law include:
- The introduction of the statement of compliance (an attestation that the requirements of the Act have been complied with) to be signed by the applicant or his agent. The statement of compliance will be accepted as enough evidence of compliance. This does not discredit or replace the declaration of compliance which is signed by a Legal practitioner and attested before the commissioner for oaths and notary public.
- The provisions for authorized share capital in section 27(2) of the Act has been replaced with minimum share capital. Therefore, the revised provision now requires a minimum share capital of not less than N100,000 for a private company and N2,000,000 for a public company.
- The new law introduced the provisions for the incorporation of Limited Liability Partnerships (LLPs) and Limited Partnerships (LPs); allowing for the combination of the organizational flexibility and tax status of partnerships with limited liability for its members.
- The introduction of S18(2) now allows one person to form a private limited liability company. However, Section 18(3) prohibits the formation of a company for an unlawful purpose.
- It is no longer mandatory for a company to have a common seal. However, where a company has a common seal, the design and use shall be regulated by the company’s Articles of Association.
- Companies with a single shareholder and small companies are no longer mandated to appoint auditors to audit their annual financial statements. Based on the new law, small companies are private companies with turnover and net assets of not more than N120 million and N60 million respectively; none of its members is an alien or government, government agencies or nominee; and the directors hold at least 51% of its equity share capital.
- The new provisions now allow electronic filing, electronic share transfer, and e-meetings for private companies.
- The new company law restricts companies from appointing a director to hold the office of the Chairman and Chief Executive officer of a private company.
The changes introduced by the new company law will have a positive impact on companies as well as improve the ease of doing business.
Please watch this space for our detailed analysis of the new company law.