Nigeria’s company law has undergone significant changes in recent years, aimed at making it easier to do business, improving corporate governance, and aligning with global best practices. The Companies and Allied Matters Act (CAMA) 2020 is at the heart of these reforms. Whether you’re a business owner, investor, or legal professional, understanding these changes is crucial for navigating Nigeria’s evolving business environment.
In this article, we’ll explore the key reforms in company law and how they affect businesses in Nigeria.
What is the Companies and Allied Matters Act (CAMA)?
CAMA is Nigeria’s principal legislation governing the registration, operation, and regulation of companies, businesses, and non-profit organizations. Originally enacted in 1990, the Act underwent its first major review in 30 years when President Muhammadu Buhari signed CAMA 2020 into law on August 7, 2020.
This reform was introduced to promote a more efficient corporate environment, improve ease of doing business, and make Nigeria’s economy more competitive globally.
Key Reforms Introduced by CAMA 2020
Here are the most significant changes to company law in Nigeria:
a. Single Shareholder Companies
Under CAMA 2020, a company can now be registered with just one shareholder. This is a game-changer for small businesses, as entrepreneurs no longer need to find additional shareholders to start a company.
b. Electronic Filing and Documentation
CAMA 2020 introduces electronic filing, registration, and documentation. This reform simplifies the process of registering and managing a company, allowing business owners to complete processes online without physical visits to the Corporate Affairs Commission (CAC).
c. Small Companies Defined and Exemptions Granted
Small companies are now explicitly defined based on turnover (not exceeding N120 million annually) and net assets (not exceeding N60 million). These companies enjoy several exemptions, including:
No mandatory requirement for a company secretary.
Audited accounts are no longer compulsory.
Simplified filing requirements.
d. Dormant Companies
CAMA 2020 recognizes the concept of dormant companies, which are businesses that have no significant accounting transactions during a financial year. These companies must be registered as dormant and comply with specific requirements.
e. Virtual Meetings
With the rise of technology, companies can now hold virtual meetings. This is particularly beneficial for companies with directors or shareholders in different locations, reducing the costs and logistics associated with physical meetings.
f. Reduction of Filing Fees
The new law reduces filing fees for company registration, making it more affordable for small and medium enterprises (SMEs) to formalize their businesses.
g. Statement of Compliance
Entrepreneurs can now file a Statement of Compliance instead of hiring a legal practitioner to handle their company registration. This eliminates a barrier to entry for new businesses.
h. Beneficial Ownership Disclosure
To enhance transparency, companies are now required to disclose individuals with significant control (25% or more of the shares). This reform is part of Nigeria’s efforts to curb money laundering and corruption.
i. Corporate Governance Improvements
The reforms introduce stricter rules for governance, including clearer guidelines for appointing directors, protecting minority shareholders, and avoiding conflicts of interest in company management.
How These Reforms Impact Businesses
The reforms in CAMA 2020 have far-reaching effects, especially for SMEs and startups:
Lower Costs: Reduced fees and exemptions for small companies lower the financial burden of compliance.
Increased Efficiency: Electronic processes and online filing save time and make company management less cumbersome.
Enhanced Transparency: Beneficial ownership disclosure improves accountability and strengthens trust with investors.
Greater Flexibility: Virtual meetings and single-shareholder companies give businesses more operational freedom.
Challenges with Implementation
While the reforms are beneficial, implementation hasn’t been without challenges:
Awareness: Many business owners are still unaware of the changes or how to take advantage of them.
Technical Issues: The online registration system has faced occasional technical glitches, causing delays.
Compliance Costs for Larger Companies: Bigger corporations may find the new governance requirements and disclosures demanding.
How to Stay Compliant
To take advantage of the reforms and avoid penalties, businesses should:
Regularly update their knowledge of CAMA 2020 provisions.
Ensure proper documentation and timely filing with the CAC.
Seek legal or professional advice when necessary.
Conclusion
The company law reforms introduced by CAMA 2020 are a step in the right direction for Nigeria’s business environment. They simplify processes, promote transparency, and provide opportunities for businesses to thrive. However, business owners must stay informed and compliant to fully reap the benefits.
Whether you’re starting a new business or managing an existing one, these reforms offer a chance to operate more efficiently in today’s competitive market. Stay proactive and embrace the changes for long-term success.
