Nigeria had its major business regulation guideline in 1990 through the Companies and Allied Matters Act (CAMA) of 1990. However, the beauty of legislation or laws is the ability to amend or reform it to align with current realities or economic situations within a country.
Though, CAMA 1990 had a detailed regulatory guideline and framework for businesses and companies, it was amended only once, in 2004 (CAMA CAP C20, 2004), but this amendment did not address current realities of business operations in the twenty-first century such as global economic meltdown and recession, technology and innovation, changing business administrative dynamics, future of work and bureaucratic problems of owning a business in Nigeria.
After thirty years, CAMA 1990 was repealed and replaced with CAMA 2020, following two years of legislative and executive reviews ensuring that it addressed some of the current realities of doing business in Nigeria. Here is an analysis of how the new act (with 870 sections), signed into law by President Buhari on August 6 will benefit or affect business operations in Nigeria.
The obvious gains
Unlike before when it was mandatory for two or more persons to go into business, Section 18 of the new act states that one person may form and incorporate a private company, a clause which makes it easier for SMEs and startups. Section 19 also stipulates that individuals not more than twenty can come together to do business and make profit without registering their business, this is a major win for SMEs and startups looking to collaborate without the need to re-register their limited partnership.
Lawyers or notary public which have become necessary evils during business registrations with the Corporate Affairs Commission (CAC) have been jettisoned, Section 40 states that signature of applicant or the agent can attest to the declaration made by the applicant.
The total fees payable for registration with CAC has been reasonably slashed to 0.35% of the value of the charge under Section 223 (12) while Appointment of secretaries have become optional for private companies and SMEs, under Section 330 and yearly audit of account is now optional for SMEs and companies with single shareholder (section 402). These are essential incentives that can enable startups to grow, amass productivity and widen profit margin.
In a bid to insulate technology into business dealings, Section 240 allows private companies to conduct Electronic or Virtual General Meetings, provided it follows provisions of the companies’ articles. Electronically filed document (Section 861) and electronic share transfer (Section 176) have also become admissible through this new Act. The foundation of Nigeria’s future of work may have just been laid with this new addition as it could be used to restructure working remotely [for companies].
Section 265 (6) stipulates that the Chairman of a public company should not act as the Chief Executive Officer of the same company. This is a welcome development to curb abuse of power and duplication of duties. Also, to avoid conflict of interest, Section 330 restricts a director from holding up to five multiple directorships in different companies.
In sections 119 and 120, persons who hold significant control in any type of company are now required to disclose their involvement with the company within fourteen days of gaining such control, this removes the veil of secrecy and replaces it with transparency and accountability for business operations. CAMA 2020 provisions entails international business practices.
The accompanying problems
The Minimum Share Capital (MSC) has been increased from ₦10,000 to ₦100,000 for private companies and ₦500,000 to ₦2,000,000 for public companies, this capital adjustment covered foreign exchange (FOREX) fluctuations but CAMA 2020 still makes it harder for private companies to shift their services, businesses that want to change operations or services still have to re-incorporate as a new company rendering new services.
Section 394 of the new Act has amended small companies turnover to ₦120,000,000 (6000% increase) and asset value capped at ₦60,000,000 (6000% increase) to make-up for inflation rates and FOREX fluctuations, this creates a wide profit margin that clogs company’s transition from small businesses to medium scale and others.
While some sections of CAMA 2020 are sketchy on mergers, it also creates loopholes [registration of businesses as corporations rather than enterprises] that will shift loyalties of businesses from state governments to the federal government and inevitably create tax turf war, if startups explore these loopholes.
Section 839(7) of this new act empowers the Corporate Affairs Commission to remove trustee(s) of NGOs, Churches, labour/trade unions etc under certain conditions. This however negates citizens’ constitutional freedom of association and hinders democratic practices, hence, the need to reconcile CAMA provisions with existing laws [including MDA acts and laws] to avoid ambiguity, contradictions and illegalities.
This article conveys the views of the author and not necessarily that of the trustees, staff or members of Ominira Initiative.