President Muhammadu Buhari has signed the Companies and Allied Matters Bill 2020, which was recently passed by the National Assembly.
Femi Adesina, a media aide to the president, disclosed this in an official statement. It has been corroborated by the Personal Assistant to the President, Bashir Ahmad, via his Twitter handle.
The President’s action on the document annulled the extant Companies and Allied Matters Act, 1990 and replaced it with the newly passed bill. The extant bill had become outdated and had adversely affected the ease of doing business in the country.
This is the most significant business legislation in Nigeria for the past 30 years.
The statement revealed several corporate legal and technological innovations geared toward enhancing ease of doing business in the country.
Summary of the innovations in the new Act:
- 1. E-registration: companies can now be registered electronically. This reduces the previous time lag between application to the Corporate Affairs Commission and the actual registration. With this anyone with basic computer skills can now incorporate a company in Nigeria online.
- This also provides for electronic filing, electronic share transfers, virtual board meetings as well as remote general meetings for private companies in response to the disruptions to close contact physical meetings due to the COVID-19 pandemic.
- Electronic signature is also now acceptable.
- 2. Provision of single member/shareholder companies: the minimum number of shareholders required to set up a private company has been reduced from two to one. This implies that a single person can now incorporate a private company.
- This allows entrepreneurs to register their small businesses with ease. With the previous act, sole proprietors had had to use proxy co-founders or director to incorporate their business.
- This also aligns with global best practices as seen in buoyant economies like that of UK and Singapore.
- 3. Filing fee reductions: which will make it easier and cheaper for small and medium-sized enterprises to register and reform their businesses in Nigeria.
- 4. Creating limited liability partnerships (LLP) and limited partnerships (LP) to give investors and business partners alternative forms of carrying out their business in an efficient an way.
- This combines the organisational flexibility and tax status of a partnership with the limited liabilities of the members of a company.
- 5. Statements of Compliance will replace “authorised share capital” with minimum share capital to reduce costs of incorporating companies. Common seal of companies has also become optional.
- 6. Statutory audit of accounts is now optional for Incorporated companies that are yet to commence operations or with turnover of less than N10m & balance sheet size of not more than N5m for a financial year. This exempts banks & insurance companies or as prescribed by Corporate Affairs Commission (CAC).
- 7. Annual General Meeting (AGM) has become optional for companies with one shareholder.
- 8. Companies can now buy back their own shares.
- 9. The Corporate Affairs Commission has been empowered to cancel name conflicts and fraud without having to go to court.
- 10. Enhancement of the minority shareholder protection and engagement. It introduced enhanced business rescue reforms for insolvent companies and permitting the merger of Incorporated Trustees for associations that share similar aims and objectives.
- 11. Restriction on multiple directorships in public companies: the act prohibits a person from being a director in more than five public companies at a time.
- 12. Exemption from the appointment of Company Secretary: the appointment of company secretary has become optional for private companies. It is still mandatory for public companies.
- 13. Procurement of company seal is no longer mandatory: this amendment is in line with international best practices as most countries have expunged the requirement from their laws.