CAMA 2020: What it is, what it is not – CAC registrar-general

Garba Abubakar, Registrar General of Nigeria’s Corporate Affairs Commission (CAC), in this interview with John Osadolor and Harrison Edeh, speaks on the controversial

Companies and Allied Matters Act (CAMA) 2020. He gives a blow-by-blow explanation of the various sections of the Act and what makes it different from the CAMA 1990.

Talk to us through some of the new developments in the new CAMA at it replaces the one of 1990.

As you may be aware, on the 24th of July, 2020, Mr President assented to the new Companies and Allied Matters Act (CAMA) bill which repealed and replaced the CAMA Act 1990. The new law will soon be gazetted and it’s supposed to take effect immediately after it is gazetted. There are major developments in the new law that will change the face of our company’s regulation and supervision framework.

Let me start with the major areas of differences between the new CAMA and the repealed Act. The new law has 870 sections as against 612 sections in the former law. This means we have 258 new sections. Of this difference, 167 sections are completely new, while 91 were modifications of some of the provisions of the repealed law. And unlike the repealed law that was divided into four parts, the new law is divided into seven parts.

Under the old law, the law provided for only three legal entity types; companies, business names and incorporated trustees. We now have two new legal entity types that have been added; we have limited partnerships and limited liability partnerships. These are new legal arrangements that were alien to our law before, but they have now been introduced and they are consistent with what obtains globally.

My approach will be to discuss the different sections. I’ll highlight some of the major changes as it relates to companies. I will start from the administrative part of the law and even the composition of the commission.

We have additional board members that have been introduced; we now have the federal ministry of finance as a member of the board, the Institute of Chartered Secretaries and Administrators of Nigeria (ICSAN) will also be on the board and the National Association of Small Scale

Enterprises. This will bring the membership of the board to about nine (9).

Then, other issues related to companies. So many changes have been introduced in line with the ease of doing business initiatives of the government and to strengthen the legal framework and provide for greater disclosure by registered entities

On the ease of doing business, some of the major changes that I will highlight relate to capacity to form a company and access to registration services. Under the former law, to register a company, you’ll require a legal practitioner to depose your declaration that the requirements of the law have been complied with before that company can be registered. Although, over the years, the commission had tried to introduce regulatory measures to reduce the impact of the provision, particularly on small entrepreneurs that may not afford the services of a legal practitioner. But, what the law has done now is that the owner of the business or agent can simply sign a statement of compliance that you have met the requirements of the law, it doesn’t have to be under any statutory declaration. So, with that, CAC can go ahead and register.

But, if you decide to use a legal practitioner in the registration process, the window for statutory declaration is still there. This will actually reduce the cost of registration because, in the ease of doing business measurement criteria, the World Bank is looking at the totality of the cost, not just statutory fees that you are paying. While calculating the cost of the registration they factor all the monies that you ordinarily pay to agents or intermediary to do the registration.

So, this approach is now optional. You can do it yourself if you choose. But, we recognize that not everybody has the time to do it themselves, there are people that have the resources. But, the concern is about the small entrepreneurs, they may not even have the capital, they may even have to borrow the money to even pay the registration fees. Such kind of person should not have the additional burden of having to engage a professional.

Secondly, the minimum share capital threshold for companies’ registration has also been increased. Under the old law, with N10, 000 share capital, you can register a private company. And the N10, 000 doesn’t mean that you have to provide the money, at least, that is the authorized share capital. The assumption is that you can have other sources of running your company, you can borrow and run your company, you don’t have to bring the capital at the point of registration except if the company is coming to a close.

Under the old law, all you are obliged to share among the shareholders is 25, you can leave 75% unallotted and this can remain in your books for an inordinate period. This means that when you have new investors you can give them those shares. The new law says no, whatever share you register, you must distribute it at the point of registration, to cure any mischief that may arise.

But, that doesn’t remove your right to increase the share capital whenever you intend to. And, the essence of this is that you don’t have to spend money registering share capital that you may not have any immediate need for. So, if all you require is N100, 000 to operate, you don’t have to register a company with N500, 000 share capital, just register with N100, 000. When you are ready to increase, if you have grown to a size that necessitates an increase, then you increase and pay at the point of this increase. So, this is the analogy.

Then, the concept of the one- man company, until this new CAMA, to register a company, you require a minimum of two persons; shareholders and directors, they could be individuals or cooperate bodies for shareholders. Over the years, in the course of discharge of our statutory responsibility here, we’ve come across cases where companies were faced with a challenge, particularly 2-man companies when the principal owner dies.

In most cases, we discover that the second person was included merely to satisfy legal requirements. In actual sense, he doesn’t even know how this business is being run, he doesn’t contribute anything. But because on the record he is a shareholder and a director, you can’t do anything without his consent and knowledge. So, in most cases, you have hostile succession process when the principal owner dies, and at the end of the day, you’ll discover that the estate of the deceased is always at the receiving end, because one person who never partook in the running of the business can hold him to ransom, simply because somebody decided to put his name there to satisfy other requirements.