An Overview of the Companies and Allied Matters Act (CAMA) 2020 – ICAN – PensionNigeria

An Overview of the Companies and Allied Matters Act (CAMA) 2020 – ICAN

Introduction

The Companies and Allied Matters Act, 2020 (“CAMA, 2020”) was signed into law by President Muhammadu Buhari on the 7th of August, 2020. It rides on the successful enactment of the Finance Act which fundamentally repositions the Nigeria Tax Legislations and the enactment of the Federal Competition and Consumer Protection Act of 2019 which represents Nigeria first general consumer protection and anti-competition law.

Undoubtedly, the recent amendment of the CAMA changes the general outlook of doing business in Nigeria and hopefully, the practicability of its provisions will further ease the nature of doing business.

Examining Innovations in CAMA 2020

Provision for Single Membership for a Private Company (Section 18(2) CAMA 2020)

In the previous CAMA 1990, there must be a minimum of two (2) Shareholders/members before any Company (Private and Public) can be duly incorporated. This is a welcome innovation as, single individuals intending to form a company no longer have to come under the clog of a Business Name and consequentially, they enjoy the benefits of an Incorporated Company such as having landed property(s), the ability to sue and be sued in the Company’s name and transacting behind the veil.

Replacement of Authorised Share Capital with Minimum Share Capital (Section 27(2) CAMA 2020)

The old position with respect to the Share Capital of a Company was that; companies must meet a minimum Authorised Share Capital before incorporation which shall be N10,000 for Private Companies and N500,000 for Public Companies.

This extant 2020 CAMA replaces Authorized Share Capital with “Minimum Issued Share Capital”. The implication of this is that the promoter(s) of a business are not required to pay for or to allocate shares that are not needed at the specific time of incorporation.

The new position of the law is that upon incorporation, private companies must have an initial issued share capital of at least N100,000 in nominal value from its share capital while for public companies, N2,000,000 in nominal value of its share capital must have been issued. In addition to this, 25% of the issued share capital of a company must be paid up at all times.

Provision for Electronic Filing, Electronic Share Transfer and E-Meeting for Private Companies (Section 175(1) and 240)

The CAMA 2020 provides for the electronic submission/filing of incorporation and other documents as well as the use of electronic signature. This provision is in line with the Evidence Act and the realities of technological advancement. It also gives full effect to the current online registration regime by the CAC.

This section validates the recognition of electronic filing of documents, electronic share transfer and electronic meetings for Private Limited Liability Companies (LLC). The general meetings of a Private Company may now be held virtually by the provision of Section 240 CAMA 2020.

Reduction of Filing Fees on Charges (Section 222(12))

Under the previous provision of CAMA, the fee for filing and registration of charges as applicable to both private and public companies were 10,000 on every 1,000,000 (1%) and 20,000 on every 1,000,000 (2%) respectively. There is a significant reduction of filing fees for registration of charges to 0.35% which implies reduction of cost in fees relating to charges.

Introduction of Statement of Compliance (SOC) Section 40(1) CAMA 2020

The previous provision of CAMA was to the effect that a legal practitioner shall depose to a statutory declaration stating that the requirements for the registration of a company have been complied with. This provision has been replaced with the Statement of Compliance which can be signed by an Applicant or his/her agent confirming that the requirement of the law as to registration have been complied with.

The Statement of Compliance (SOC) can be signed by an applicant (or agent), without the need for a lawyer or notary public to attest to Declaration of Compliance (DOC). (SOC) is a requirement of the law that indicates that the applicant has complied with the registration and requirements.

Restriction on the Role of Chairman/Chief Executive Officer of a Public Company Section 265(6) CAMA 2020

By virtue of the above section, Public Companies are now restricted from appointing a director to hold the office of the Chairman and Chief Executive officer of the Company simultaneously. This provision creates a system for checks and balance, and thereby protecting the interests of minority shareholders in the company.

Restriction on Multiple Directorship in Public Companies (Section 307(1))

In furtherance of the need to check to improve the scheme of Corporate Governance in Nigeria, the 2020 CAMA provides for the restriction of any person from being a director in more than five (5) Public Companies at a time.

Procurement of a Common Seal is no longer a Mandatory Requirement (Section 98)

This section abolishes the mandatory use of common seal, as its use by companies is now optional, NOT mandatory. Thus, an authorized signature of a company is now sufficient execution of any contract undertaken by a company.

Company Secretary in a Small Company (Section 330(1))

In the previous Act, the appointment of company secretary was mandatory for all companies. This position has now been amended to exclude small companies from the statutory obligation to appoint a company secretary. Against this backdrop, the CAMA, 2020 only makes it optional for small companies and so it should be stated that the importance of company secretary cannot be downplayed as it ensures the effective administrative running of the company.

Note: A small company is a Private Company whose turnover is not more than N120,000,000 or such amount as may be fixed by the Commission; whose net asset value is not more than N60,000,000 or such amount as may be fixed by the Commission, whose members are non-aliens; whose member is not a Government or a Government Agency, Corporation or nominee; and in the case of a Company having a Share Capital, whose directors holds at least 51% of its equity Share Capital. Section 394(3) CAMA, 2020.

Directors ( Section 246)

In compliance with the Code of Governance for companies, directors for Public Companies are now mandated to not only disclose their age at appointment but also disclose other directorship appointment in other public companies. Further to this, CAMA, 2020 now mandates Companies to have at least three (3) independent directors at all times. While the aforesaid is restricted to just Public Companies. Small Companies are now allowed to have a minimum of one director as against the compulsory two (2) directors as contained in CAMA, 2004.

Audit Obligation (Section 402)

Generally, every company is mandated to appoint auditor or auditors to audit their financial records and statement in respect of a financial year during the Annual General Meeting of such companies. This is no longer the case as, small Companies or Companies that have not carried on business since incorporation (excluding insurance companies and banks) are now exempted from such obligation.

Small companies or companies having One (1) shareholder are not mandated to appoint auditors at AGMs to audit their financial records. These companies are exempted from auditing accounts in respect of a financial year. Additionally, Public Companies are now obligated to upload their audited financial statement on the company’s website.

Introduction of An Extensive Insolvency Regime (Sections 718-721)

The CAMA 2020 introduces the concept of corporate voluntary arrangement. This procedure allows a company to settle its debts by paying only a proportion of the amount which it owes to its creditors. The Act also allows a company to come to an arrangement with its creditors on the payment of its debts. This rescue mechanism serves to allow an insolvent entity to continue to carry on its business.

Provision for the Suspension of Trustees, Incorporated under Part F of CAMA 2020 as Incorporated Trustees, Section 839(1)&(2)

This innovation has raised an uproar in recent times, especially by members of Religious Bodies. The provision of Section 839 is as regards the Suspension and Removal of Trustees and, the Appointment of Interim Managers. By virtue of Section 839 suspension of Trustees may be done by the Court and the Commission.

Suspension by the Court.

Suspension of the Trustees by the Court is provided for under Section 839(2) CAMA, 2020. Such suspension may be ordered upon the Petition of:
i. the Commission; or
ii. one-fifth of the members of the Association.
The Petitioners are also required to present all reasonable evidence or, evidence as requested by the Court in respect of the petition before such Order for the appointment of Interim Manager(s) may be made.

Upon the Petition of the Commission or one-fifth of the members, and where the Court orders the suspension of Trustee(s), officers etc of an Association, the said suspension must not exceed twelve (12) months, Section 839(6) CAMA 2020. Upon the appointment of Interim Managers, the Court with the assistance of the Commission may make provisions with respect to the functions to be performed by the Interim Managers. S. 839(3) CAMA, 2020.
The Court refers to ‘the Federal High Court’. Section 863 CAMA 2020

Suspension/Removal by the Commission

By virtue of S.839 (1), (5) and (7) the Corporate Affairs Commission may Order the Removal or Suspension of the Trustees of an Association.

The grounds by which the Commission may suspend or remove Trustees are as follows:

1. Reasonably belief that there is or has been any misconduct or mismanagement in the administration of the Association. This extends to the employment for;

a) Remuneration or reward of persons acting in the affairs of the Association, and

b)other administrative purposes, of sums which are excessive in relation to the property which is or is likely to be applied or applicable for the purpose of the Association.

2. Where it reasonably believes that it’s necessary or desirable in order to:
a) Protect the Association’s property,
b) Secure the proper application for the Association’s property towards the achievements of the Association’s objectives, purposes or to secure the coming of the property into the Association,
c) Public interest; or

3. Where the affairs of the association are being run fraudulently.

Upon the enquiry into the affairs of the Association and if satisfied as to the grounds stated above, the Commission may suspend or remove any Trustee(s) found liable. S. 839(7a).

It should be noted that:
By the provisions of Section 839, the Court has no express authorization to remove a Trustee but the Commission has the express authorization to remove a trustee.

However, only the Court, by Order, has an express authority to replace a removed Trustee. See S. 839(8).

The power of the Commission to suspend and remove the Trustees of an Association and to appoint Interim Managers can only be exercised with the approval of the Minister (Minister charged with the responsibility for trade- S. 868 CAMA).

The major and basic yardstick in the determination of the legality or otherwise of any law is whether; it is repugnant to Natural Justice, Equity and Good Conscience.

In examining whether the provision of Section 839 is repugnant to natural justice or not, the two (2) fundamental principles of natural justice, which are: nemo judex in causa sua and audi alteram partem are to be considered in the light of its provision.

It is a trite principle that no one can be a judge in his own case (nemo judex in causa sua). From the wordings of S. 839(1)&(5), the Commission may upon ‘reasonable belief’ of misconduct or mismanagement of the administration of the Association, unduly dealing with the property of the association and on grounds of public interest suspend the Trustees of an Association and appoint interim managers.

The implication is that, the Commission can arbitrarily and on its own accord suspend the trustees of a religious body. This means that the Commission can allege and convict at the same time. “He who alleges must prove; and not convict”.

More onerous is the provision of S. 893(7) where the Commission is vested with the power to remove trustees on the grounds stated in S.839(1)&(5). The Commission is not a Court of Law and has no power to determine whether a Religious body is guilty of the said allegations which the Commission has suo motu raised.

This also defeats the presumption of innocence as provided in Section 36(5) of the 1999 Constitution of Nigeria – the grand norm and, the defeats also the very tenet of fair hearing.

The grounds stated in S. 839(1) are vague and thus, the Trustees of the Association and by extension – the Association, are left at the mercies of the Commission. It begs the question of – what amounts to misconduct or mismanagement? What exactly is the yardstick of reasonable belief under that sub-section? With these questions left unanswered by the Act, the power vested on the Commission remains unjustifiable, unlawful and repugnant to natural justice. Also, this provision fails as a good law as it is ambiguous; leaving its interpretation at the mercies of the Commission.

The provision of S.839(1),(5)&(7) also, does not give the Trustees in question the opportunity to be fairly heard (audi alteram partem). The suspension provided for is predicated upon reasonable belief.

Although S.839(7) states that the suspension or the removal of the Trustees shall be made upon the enquiry into the affairs of the said Association, there is still no yardstick as to the nature of the enquiry which may lead to the suspension or removal of the Trustees, in order to determine whether such enquiry may suffice as fair hearing.

Assuming without conceding that Section 839(7) dispenses with the need for fair hearing and while we acknowledge the quasi powers of the Commission, the Commission cannot be the Complainant and the Judge at the same time – of which the section attempts to empower the Commission with.

While we understand that one of the intent of the Law makers is to ensure that the Associations, bodies etc. incorporated under Part F of CAMA 2020 as Incorporated Trustees are put under certain measures of check to ensure that fraud, misconduct and malpractices are not perpetrated through these Associations, Religious bodies etc.; the concerns of Religious bodies and other Associations, NGOs etc. are not unfounded.

With the prevalent happenings in Nigeria today; where the Police and other forces saddled with the responsibility and duty of protecting the lives of citizens are used as forces against anyone who speak against the Government of the day or persons with high standing, the provision of Section 839, particularly Section 839(1), (5) and (7) is quite dicey as the Commission can be seen as a tool of the Government, used to hunt anyone under such bodies or associations which ventures to err any opinion unfavourable to the Government of the day or to persons of high standing in the society.

Prior to the making and assent of this Act, Associations, NGOs and particularly Religious Bodies have had various effective means and mechanism of resolving disputes and any allegation against any Trustee(s) of their Association. The concern of religious bodies that – there is an attempt to put them under secular control is not unfounded.

The courts have not been rendered incapacitated and have adequate power to adjudicate, should matters escalate or should any member or members of the Church or other Associations find their Trustee(s) wanting on any ground and members can write a petition to the Court where they believe that the Court should intervene.

The provision of Section 839(2) which gives one-fifth of the members of an Association the power to petition the Court is a welcome and laudable provision as it seeks to protect the interest of the minority of a registered Association or body.

Having stated the above, it is our opinion that, the provision of Section 839(1), (5) and (7) CAMA, 2020 is onerous, arbitrary, and repugnant to equity and natural justice and should be expunged as it runs contrary to provisions of the 1999 Constitution of the Federal Republic of Nigeria – which remains the grand norm.

Section 839(2) CAMA, 2020 which empowers the Court to suspend the Trustees of an Association and appoint Interim Managers upon the Petition of one-fifth members of the said Association or body or upon the Petition of the Commission and upon satisfying the Court with all reasonable evidence or evidence as may be called by the Court, is sufficient to honestly, equitably and lawfully check the activities of Associations or Bodies incorporated as Incorporated Trustees under Part F of CAMA 2020.

Conclusions
The amendments made to the Companies and Allied Matters Act will have a positive effect on the Nigerian landscape in terms of doing business both domestically and internationally. It is hoped that the practical administration of the CAMA, 2020 by the CAC will help ease the strain of doing business in Nigeria and further improve flexible filing processes of the documents by individuals.

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