More Revelations On The New CAMA 2020

Mr. Garba Abubakar, the  Registrar-General of  Nigeria’s Corporate Affairs Commission (CAC), has thrown more light on the intricacies, complications and the convolution of the recently passed into law Companies and Allied Matters Act (CAMA) 2020.

The interview conducted was by Business Day and was published on the 8th September 2020

Find here-in-under the details

  1. Differences between the new CAMA and the repealed Act.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  • Of this difference, 167 sections are completely new, while 91 were modifications of some of the provisions of the repealed law.
  • And unlike the repealed law that was divided into four parts, the new law is divided into seven parts.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. There are two new additional legal entities viz: limited partnerships and limited liability partnerships.
  • Major changes as it relates to companies.
  • Administrative Part and Composition of the Commission\

Additional board members that have been introduced;

  • The Federal Ministry of Finance as a member of the board,
  • the Institute of Chartered Secretaries and Administrators of Nigeria (ICSAN)
  • National Association of Small Scale Enterprises.

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

  • Other issues relating to companies.

There are many new changes 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.

  • Capacity to form a company:

Under the former law, to register a company, you will require a legal practitioner to depose your declaration that the requirements of the law have been complied with before that company can be registered. 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 is expected to reduce the cost of registration

  • The minimum share capital threshold for companies’ registration has been increased.

Under the old law, with N10, 000 share capital, you can register a private company. And the N10, 000 does not 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.

  • Allotment of Shares

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.

  • 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 co-operate bodies for shareholders.

So, with this, as an individual, you do not need a second person, not even your wife. You can register your company alone and it will have the same legal capacity as any company that has 1000 shareholders. It will have a separate legal personality from you, it can sue and be sued in its own name and it can exist in perpetuity. Even after you are gone, somebody else can take over and continue and it can hold an asset in its own name. This is a very good development because people have the freedom to use their own businesses.

In the past, only business names can have one person. The challenge with business names is that the business name dies with the owner because it doesn’t have a separate legal personality. But, in companies, it can exist in perpetuity. If you have any property in the name of the company, somebody can take over the company and indirectly, he also owns the property.

  • Small companies

The law has provided so many exemptions for small companies. We are taking into cognizance their own circumstance as ‘small’.

  • The strict requirement for annual audit and filing of annual financial statements, mandatory appointment of secretary, all these things have been removed.
  • A small company is a private company that has a turnover of not more than N100 million and net assets of not more than N50 million and the majority of shares have to be held by the directors of the company. And the government should not have an interest in that company, there shouldn’t be any foreigner or foreign company that has an interest.
  • Once you meet this requirement, you qualify as a small company.
  • Purpose of this new law is to align some of the provisions of this law, with the provisions of the Finance Act, as it relates to the turnover threshold because incidentally, the law says turnover of N100 million, net assets of N50 million or such other amount as may be set by the CAC.
    So, we intend to bring down the turnover threshold to N25 million to make it consistent with the Finance Act, so that we will have at least a predictable system. Anybody that knows that he is exempted from tax, is also exempted from this. Because, that is what brings regulatory arbitrage if you have a different standard for different regulators, but when we have a uniform standard, that will reduce cases of regulatory arbitrages.
    So, as soon as the law is gazetted, part of some of the regulation we are going to come up with will include this; it will provide for a lower threshold, in line with what obtains in the Finance Act.
  • The Beneficial ownership disclosure.

This is called “person with significant control.”

There is global attention on knowing the ultimate beneficiaries of companies, because companies by their nature have separate legal personality from their owners and the law allows a company to own another company.
So, sometimes it is difficult to know the ultimate individuals that are actually benefitting from these companies. And because of concerns about corruption, money laundering and others, global attention has shifted to lifting the veil to know those persons that are actually benefitting. There is a focus on the extractive sector under the EITI, the Open Government Partnership Commitments, there is also the financial action task force recommendations, all these international bodies, as part of the condition of membership. Members are supposed to have a registered beneficiary of owners of these companies.

  • There are provisions under the new CAMA Act that allows for mandatory disclosure of persons with significant control. If you own shares up to a threshold of five (5) percent or voting rights of 5 percent, or, while by virtue of your position, either as a shareholder or otherwise, you control the employment of the majority of the directors, or, under any guise, you have any form of authority as to the manner the company is managed, then you fall within the definition and you must disclose your status.
    You are required to provide the information to the company within 14 days of falling into this category and the company has a window of 30 days to file this information with the Corporate Affairs Commission (CAC).

This is a new requirement as I said and the Commission is required to establish registered beneficial owners.

The register will be publicly available

  • Other issues relate to public companies, by their name, any member of the public can own shares in a public company. The governance framework until now, was not robust, was not strict and the checks and balances were not stringent. Although different regulators had issued corporate governance code, you have a lot of unregulated areas where companies operate on their own.

Incidentally, the new law now provides that every public company must have a minimum of three independent directors and the law has enshrined the qualifications of these independent directors. Some of these qualifications are:

  •  he shouldn’t be the director himself or his relative shouldn’t be an employee of the company, whether past or present;
  • he shouldn’t have made or received any payment for an amount above N20 million, and he or his relative shouldn’t have any shares or interest in that company of up to 30 percent.

So, if you fall into this category, you are not qualified as an independent director. This will ensure checks and balances. Since you are not affiliated to any of the major shareholding blocs, the assumption is that you will have the level of independence to actually operate objectively and call to question any issue that you are not actually satisfied with. This will bring better governance, particularly in our public companies.

  • Being a multiple directors in public companies, and the combination of the role of chairman and chief executive.

Under the new law, one individual cannot combine the offices of chairman and chief executive. This is to ensure checks and balances. You cannot be a director in more than five public companies, and even where it is less than five, you have to disclose those public companies that you are serving as a director.
This will actually ensure transparency so that you don’t end up being a director in a company whose activity conflict with each other. You use the knowledge you derive from one company to the benefit of the other. So, if you disclose that you are in company A & B, and they are in the same line of activity or trade, you may not be allowed.

  • General meetings.

Unfortunately, the changes for public companies are not significant because nobody anticipated COVID-19, nobody thought we will be in an era where the whole world was at a standstill for months, where nobody could go anywhere. And people were forced to hold meetings electronically, so we didn’t anticipate this kind of scenario, we didn’t make provisions for electronic meeting for public companies.

But private companies can hold their meetings electronically, but moving forward, this is one area of the amendment that we are going to look at so that we can have a quick amendment of this area to allow for an electronic meeting by public companies in a manner that will ensure participation of all shareholders and in a manner that will not be manipulated by the presiding officers.

  • The issue of dividends.

Under the repealed law, there is no limit to when you recover unclaimed dividends. Now, after 12 years, the dividend will revert to the company and it will be distributed to the members as profit. And the law has also provided that companies should publish in two national newspapers the names of people that have not claimed their dividends.

Some people have raised concerns on this, on the issue of data privacy. The data privacy relates to personal information about your date of birth, address and other things, not just name. I don’t see anything wrong in publishing names of shareholders in companies, at least that will be publicly available and anybody that sees his name or the name of his late father or uncle can go for his money and provide proof. Some have raised concerns that fraudsters may take advantage of that and claim the money. I don’t think anybody will pay you without proper scrutiny and you have to provide nexus between yourself and the deceased.

  • Annual General meetings for small companies

For small companies, they are exempted from annual general meetings. They don’t have to hold formal annual general meetings. And, as I have said, they are exempted from the mandatory requirement of audit and appointment of secretary.
Then, the issue of a company seal is now optional, because this was one area of concern under the ease of doing business, a company need not have a seal. So, any document signed by a director or secretary, whether or not it has a seal is deemed to have come from an authorised source.

  • Insolvency

Another significant change for companies relates to the insolvency framework.

Under the former law, immediately a company is at the verge of insolvency, the company was always at the mercy of the lenders. There was no provision for the company to initiate on its own, any resolution mechanism that will ensure that issues of insolvency are resolved on its own terms. They are always at the mercy of the lenders. And we have seen from the various reports, most companies that go through the process of receivership, they hardly survive, they end up being wound up.

We now have a new provision on company voluntary arrangement that will allow the company to approach the court, to appoint an administrator, who is independent of the lenders to manage the affairs of the company, to pay the liability and preserve the assets.

From this, CAC will be accrediting insolvency practitioners; this was not part of the former law. This will actually minimize the high turnover of companies, the hostile process will be minimized and we will see more companies surviving insolvency because you have an independent person who is accountable to all the parties, not just one party.

Where the creditor appoints, it’s the creditor that dictates in most cases how the receiver will conduct himself. So, this is a good approach and it will go a long way in helping some of these small companies that may have this kind of issues.


On business names, we also have more elaborate provisions on business names. It’s a name that allows you to trade under a name and style, there is no distinction between you and the business.


The difference between part C and part B and A is that registration under part C is not mandatory.

You have a choice if you feel you can run your association on your own, without registration, go ahead and run your association. Whether a donor will give you contribution is another issue, or whether your congregation will agree with you is another issue, but you have the freedom.

But, where you agree to submit yourself to registration, then you must be subject to the oversight of that regulatory body. The fact that this law has not changed in the last 30 years does not make what we are doing right.

The provisions in the repealed law on associations were just a replica of what we had in the Land Perpetual Association Act which was a pre-1900 law. Developments globally on registration of associations and charities have moved beyond anybody’s imagination and in any case, these organizations are not for profit, there are physical issues involved. So, there has to be a lot of scrutiny on how the income and property of these associations are managed and there is to be a clear separation between the income of this associations and the income of the founders and the trustees.

The trustees are the legal representatives, they are mere trustees and they have a fiducial relationship. They are not supposed to benefit personally from the income the Organization is making outside their out-of-pocket expenses, where they engage in activities on behalf of the association. They’re not supposed to share whatever income is made.

CAC will not arbitrarily remove or suspend a trustee. First, there has to be a petition, or there may be circumstances where there are reasons to believe that there are infractions. CAC will have to give an opportunity to the trustees to respond before you can take any further action. Even where they respond and you are not satisfied with the response or where you feel it is necessary for them to step aside, to allow for unfettered investigation, then you can suspend them, otherwise, you leave them in office. This power is not absolute, CAC has to exercise this power judiciously because we can be challenged.

In Part C of that Amendment, is there any provision that gives CAC power to tell a church to decide who will be appointed as a member of the trustee? All these things are governed by the constitution if the members agree that this should be the trustees or governing body, once they meet the qualification criteria; that they are of sound mind, they have not been convicted for any offence involving fraud or dishonesty in the last five years, they have not been declared bankrupt and they are not below 18 years. Once you meet these qualification criteria you can be a trustee. If, it is the decision of the members to make members of the same family or father and son trustees, so be it. But, the snap there is, for most of the organizations, you will see that they may have a congregation of 500,000 to one million, but on the record, the membership may not be more than five or six. By law, it’s the members that will make the decision. If you are attending congregation either in a mosque or church and you do your worship there, you are not necessarily a member of the legal association, you may not exercise any power of voting or removing anybody.

The advice I’ll give is that people should read some of these constitutions. If somebody invites you to join, you need to know your rights, you need to know what the association constitution entails. But, the bottom line is, the organizations are supposed to be guided by their constitution and by law.

CAC will exercise its powers judiciously and if there is any petition against anybody, CAC will not just act on the basis of the petition from one side without hearing from the other side. Finally, our actions are subject to judicial review. So, even when CAC suspends, an aggrieved person can go to court and challenge the action of the CAC.

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