What Is a Company under Cama

In particular, the reformed CAMA 2020 law, among other things, has made the creation and operation of companies more transparent and profitable by operationalizing electronic platforms that integrate the tax administration and the Corporate Affairs Commission (CAC). Given that Nigeria is largely dominated by small and medium-sized enterprises (MSMEs), facilitating business registration or start-ups will bring more businesses into the formal space. It will also increase the government`s tax revenue. The Act has 870 sections and is divided into 7 parts, compared to 612 sections in the repealed 1990 Act. 167 articles were completely new, while 91 articles were amended. Due to the new minimum capital rule, companies that do not yet have to issue their unissued shares in full will be up to 31 years old. December 2022 have a deadline to do so, otherwise they will be subject to a daily default penalty as required by company regulations. Therefore, existing companies must make consistent changes to their articles, rules and regulations to comply with the new requirements and reflect the company`s equity stake. As part of a 12-part series, Udo Udoma & Belo-Osagie will provide an overview of the provisions of CAMA 2020 and highlight the changes introduced to Nigerian corporate law by this groundbreaking legislation. Notwithstanding the provisions of such laws, the credibility of an entity is often enhanced by the existence of a report by an independent statutory auditor on whether an entity`s financial statements present fairly the financial position of that entity. It is therefore important for companies, regardless of size, to consider auditing, as it allows for transparency and ultimately increases users` confidence in financial statements. Introduction of electronic signature – As part of the second stage of the section 101 provision of CAMA 2020, documents requiring authentication by a company can be signed electronically by designated/authorized employees of the company, which will be accepted as satisfying the signature requirement. This provision means that documents no longer need to be physically signed by authorized employees of a company, but can be signed electronically from any part of the world by authorized employees who may not be physically present.

The restriction set out in point (a) is new and concerns a proposed sale of assets of a private company. The restriction in paragraph (b) is a right of first refusal for all shares that a shareholder wishes to transfer to non-shareholders, and (c) is essentially a mandatory take-over bid requirement triggered when a non-member acquires 50% of a private corporation. However, the wording of CAMA 2020 provides sufficient flexibility for companies to decide whether or not to include these provisions in their articles of association and to indicate in the articles whether these restrictions would apply. In order to achieve the objective of facilitating the establishment and operation of enterprises in Nigeria, certain provisions and exemptions have been adopted for small enterprises and private enterprises. In order to determine whether or not a business qualifies for these provisions, it must first be determined whether such a business falls within the definition of a small business and/or a private business under CAMA 2020. · Reduction of the Company`s share capital by cancellation of all unissued shares (subject to industry-wide minimum share capital) Electronic name reservation – In accordance with the provisions of § 31 (1), natural or legal persons wishing to form a company can now electronically request the reservation of the names of their proposed companies. Although this provision is only explicitly taken in the context of CAMA 2020, the practice of electronic name reservation was introduced by the Commission a few years ago based on the recommendation of the Presidential Enabling Business Environment Council (PEBEC) to achieve its objective of facilitating business operations in Nigeria. Exemption from the business secretary requirement – Previously, all businesses were required to appoint business secretaries at the time of registration, but small businesses were exempt from this mandatory requirement by the provisions of Section 330 of CAMA 2020. This provision means that small businesses no longer have to go through the rigors of using the professional services of business secretaries before they can register a business. Therefore, harmonization of what constitutes a small business in Nigeria under CAMA, CITA and other relevant laws and regulations is necessary to ensure consistency and confidence among taxpayers and stakeholders and to eliminate the resulting conflicts. The new Companies and Related Matters Act 2020 (CAMA), which recently came into force, and the resulting 2021 Company Regulations have introduced several reforms in the way business organisations are to be regulated in Nigeria.

One of these reforms is the introduction of a «minimum issued share capital». However, as the company grows and ceases to be a small business, it must appoint additional directors, as only small businesses can only have one director. For more information, please contact companysecretary@aluko-oyebode.com Some of the key targeted provisions include: These characteristics of a small business according to CAMA 2020 differ significantly from the tax classification of businesses. The Finance Act 2019 (Amendment to the Corporate Income Tax Act) introduced the tax classification of companies into small, medium and large enterprises. Differences in the basis for identifying small businesses under CAMA and ITAC have led to confusion. For example, while a business with revenues of $110 million is considered a large business under ITAC for tax purposes, the same business may be considered a small business under CAPA if all other conditions are met. The impact of conflicting definitions of small businesses under ITAC and CAMA also impacts the documentation required to file annual business tax returns. Replacement of authorized share capital with minimum share capital – The provisions of section 27 of the AMLA 2020 replaced the mandatory required share capital under the CALA 1990 with the requirement of a minimum share capital for corporations.

Previously, companies had to have an authorized share capital of at least a certain amount, 25% of which had to be issued to the company`s shareholders at the time of registration. This provision has now been replaced by the requirement that companies must have a registered capital originally issued for registration, which must be at least N100,000 for private companies and N2,000,000 for public companies. According to CAMA 1990, the minimum registered capital allowed was N10,000 for private companies and N500,000 for public companies. Section 124 of CAPA 2020 provides that any corporation with unissued shares must issue shares up to an amount of at least its minimum share capital no later than six (6) months after the start of CAMA 2020. The Companies Regulation 2021 extended the compliance date until 30 June 2021 at the latest. It should be recalled that the former CAMA applied the «authorized share capital» rule in 1990. Section 99 of the former AMLA 1990 required each corporation to have a required authorized share capital, 25% of which must be issued to shareholders. The previous CAMA 1990 also set the minimum share capital allowed at N10,000 for private companies and N500,000 for public companies. This issued authorized share capital of at least 25% gave companies the opportunity to hold unissued shares for future allocations through future investments in the company. The Lagos State Partnership Act in relation to partnerships under Parts D and E of CAMA 2020. As part of CAMA 2020, it will be possible for a person to start a private business.

These corporations are exempt from the quorum provisions of the Act relating to the quorum of meetings and the adjournment of meetings. Previously, a corporation was allowed to issue preferred shares, which could be redeemable or non-redeemable. However, under Section 147 of CAMA 2020, companies are now prohibited from issuing non-redeemable preferred shares to shareholders. This means that all issued preferred shares must be redeemable. (b) a member shall not sell his shares in the corporation to a non-member without first offering those shares to the existing members. Introduction of Limited Liability Partnerships and Limited Partnerships under Parts D and E – With the provisions of Parts D and E of CAMA 2020, the U.S. concept of limiting member liability in a partnership agreement can now be adopted by individuals or companies who wish to establish business relationships without being personally liable under the partnership agreement. The essence of these provisions is simply to integrate the concept of limited liability of corporations into partnerships, thereby creating partnerships having the character of a corporation with legal personality and eternal succession.