THE COMPANIES AND ALLIED MATTERS - Strachan Partners

THE

COMPANIES

AND

ALLIED

MATTERS

(REPEAL & RE-ENACTMENT)

ACT

2020

AUGUST2020

INTRODUCTION

The Companies and Allied

Matters Act (CAMA) Cap C20

Laws of the Federation 2004

was the principal business and

non-business

legislation

in

Nigeria for three (3) decades

since its enactment in 1990.

Global

developments

business

regulation

changes

to

the

HIGHLIGHTS OF THE

The

ACT

partners

The highlights of the Act are

organizational

flexibility of

as follows:

partnerships

and

I. Introduction of Limited

liability of companies to limit

Partnerships

business

(LPs)

Limited

&

Liability

by

the Act introduces LPs1 and

country lose out significantly

LLPs2

in foreign direct investment to

re-

and

President

Muhammadu Buhari on 7th

August

2020.

The

Act

introduces several novel and

commendable provisions.

as

new

corporate

business vehicles.

While the LPs mandate that at

and

least

typically

one

unlimited

partner

liability

have

(general

partner) and at least one

has

these

seen

the

LLPs

other

entities

operate

as

which

LPs

and

opposed

to

companies.

partner have unlimited liability

(limited partner), LLPs allow

Although these vehicles were

all partners limit their liability

available under the Partnership

in

as

Law of Lagos State 2009,

shareholders in a company.

debates have arisen as to the

LLPs are vested with a legal

constitutionality of the state

personality

legislation on the formation of

the

same

manner

possessing

the

properties and perform all acts

PART D of CAMA

Part C of CAMA

of

respect of private equity funds

their corporate name, acquire

2.

absence

other African jurisdictions, in

capacity to sue and be sued in

1

business development.

and

Bill was passed by the Senate

to

fuel

innovations

enactment of the CAMA. The

assented

and

In line with global standards,

This need resulted in the bill

on 10th March 2020

limited

in

Nigerian

and

risks

the

The

existing Act..

repeal

combine

Partnerships (LLPs) as new

the need for a reform of the

the

allows

business vehicles:

business environment led to

for

development

corporate bodies may perform

limited liability entities.

ii. Introduction of One

However,

Person

Companies

jurisdictions limit the number

(¡°OPC¡±)

&

Single

Directorship:

while

these

of OPCs a single person can

incorporate,

a

similar

provision is missing from the

Remarkably, one of the most

Act.

member

companies.

As

opposed to the requirement

of

a

minimum

of

two

members, a single person is

now able to incorporate a

company1.

Also, the Act permits small

companies to appoint a sole

director as opposed to the

previous requirement of a

minimum of two

directors2.

the

Requirement

Company

of

Secretaries

for Private Companies:

The previous Act mandated

significant proposed changes

is the introduction of single-

iii. Abolition of

every company to have a

This innovation is expected to

secretary.

drive

participation of

The 2020 Act solely retains

Micro, Small and Medium-

the mandatory requirement of

Scale

company secretary in relation

the

Enterprises

in

the

country¡¯s business space as, in

to public companies.3

addition to the fact that most

businesses are owned and

Due to the often closely-held

managed by individuals, the

nature of private companies,

limited

status

the Act appears to recognize

conferred on these persons

that the requirement of a

will

company secretary for private

help

courageous

transactions.

liability

spur

on

more

business

companies

represents

an

operational burden for these

companies.

This is consistent with the

Also,

position in several jurisdictions

separate

register

of

of the world, most notably,

secretaries.4

Formerly,

the

the

Kingdom and

Register of secretaries was

India under the Companies

merged into the register of

Act 2006 and Companies Act

directors and secretaries.

United

2013 respectively.

1

2

3

4

Section 18(2)

Section 271(1)

Section 336

Section 39(2)

the

Act

creates

a

iv.

Abolition

of

the

Requirement of Annual

General Meetings for

Small Companies under

In

furtherance

of

this

vii. Exclusion of the

objective, the Act seeks to

mandatory requirement

introduce insolvency models

on:

Several provisions of the Act7

Administration;

the Act:

Netting; and

Pursuant to Section 237 of

Company

the Act, small companies are

Arrangement

portray that a company need

Voluntary

burden on MSMEs operated

as

registered

mandatory

requirement

common

seal

is

that

Electronic Processes

documents can

be

validly

In

executed

vi.

This lessens the regulatory

companies

formerly required to hold

AGMs in each year.

not possess a common seal.

The implication of the non-

no longer required to hold

Annual General Meetings.

of common seal:

Recognition

a

bid

technological

to

of

reflect

advancements

and aid the ease of business

and

compliance

with

by

a

of

company

without affixing the company¡¯s

seal.

the

provisions of the Act, the Act

Further, Section 102 provides

v. Improved Company

expands the definition of

that

Rescue & Insolvency

certain terms to include the

directors/ a director and a

electronic versions such as the

secretary in the presence of an

inclusion

electronic

attesting witness suffices as a

registers2, signatures3, venue

means of valid execution of

of meetings4 and publication

company documents.

Regime1:

The

Act

introduces

an

insolvency regime which has a

dual aim to, on the one hand,

rescue viable businesses and

of

of accounts electronically5.

on the other hand, ensure that

Also, the Act provides for the

non-viable businesses can exit

electronic incorporation and

the market in good time.

registration of business and

1

Chapter 17 and 18

2. Section 176(1)

3. Section 101

4. Section 240(2)

5 Section 374(6

6 Section 41 and 42

7 Section 99, 171, 172, 192(1) and 840

non-business organisations6.

signature

by

two

viii. The establishment of

ix.

of

x. The introduction of

Administrative Proceedings

minimum issued share

an additional duty of

Committee(APC):

capital:

directors:

Section 27 introduces the

The Act mandates directors to

concept of minimum issued

consider the potential effects

share capital as a replacement

of

for authorised share capital.

company on the environment

The minimum issue share

in the company¡¯s immediate

capital

community 4.

The Act establishes the APC

to serve as a dispute resolution

platform for disputes arising

from the operation of the Act

and fair hearing of persons

alleged to have contravened

the provisions of the

Act1.

The decisions of the APC are

subject to confirmation by the

Commission¡¯s

Governing

Board and its decisions are

appealable to the Federal High

Court.

would aid in the reduction of

actions emanating from the

Act filed at the Federal High

Court. Also, in effect, it will

guarantee

expeditious

disposal of disputes arising

under the Act.

1 Section

is

N100,000

and

N2,000,000 for private and

public companies respectively

as opposed to N10,000 and

N500,000 in the previous

Act.2

In the case of a company not

The

the

activities

inclusion

of

of

the

this

provision is an attempt to

respond to the constant outcry

against the pollution of the

environment by companies.

having share capital (company

This is commendable as it

help

Introduction

851

2 Section 27(2)

3 Section 27 (4)

4 Section 305(3)

5 Section 307(3) & (4)

limited by guarantee), the total

xi. The limitation of

liability of

number

a member to

of

multiple

contribute to the assets and

directorships:

liability of the Company in the

The Act seeks to limit the

event of its being wound up

number of directorships an

shall not be less than N

individual can hold in public

100,0003.

companies.

The increase is a step in the

right direction as the monetary

The Act criminalizes the act

value of over 30 years ago is a

of being a director in more

wide margin from its current

than 5 public companies by

value. In light of current

any given individual5.

economic realities, the new

figures are more appropriate.

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