By Innocent Anaba
Ozofu Ogiemudia is a partner in the law firm of Udo Udoma & Bello-Osagie. In this interview, she speaks on how Companies and Allied Matters Act, CAMA 2020 will transform the business community and what stakeholders must do to benefit from the Act. Excerpts.
The legal and Business community received with joy the news of the President’s assent to the new Companies and Allied Matters Act 2020. You were involved in the process. Can you tell us more about this?
In May 2017, I was asked to chair the technical advisory committee (TAC) to the Nigerian Senate on the review of bills to amend the Companies and Allied Matters Act, Cap C20, LFN 2004 (CAMA 2004) and the Investments and Securities Act 2007. The TAC submitted a draft bill for the repeal and re-enactment of the CAMA 2004 to the Senate in February 2018.
That bill was passed by both houses of the 8th National Assembly but did not receive the President’s assent. A revised bill was re-introduced with amendments, and passed by the 9th National Assembly, before being assented to by the President on 7th August 2020.
The signing of the CAMA 2020 has been received with much excitement in the legal and business communities. This is because the CAMA 2020 is one of the most impactful statutes of our time, and is designed to enhance the ease of doing business in Nigeria, especially for micro, small and medium-scale enterprises which are the engine of the Nigerian economy.
The Act is the product of a collaborative effort amongst various stakeholders including the NBA SBL, the CAC, the Presidential Enabling Business Environment Council and the Nigerian Economic Summit Group under the National Assembly Business Environment Roundtable.
It is the culmination of several years of hard work and reflective of the commitment of the government and the private sector to progressive legal reform through smarter regulation. There are several other tremendous provisions in the act.
What are some highlights of the CAMA 2020 that we should look forward to?
The CAMA 2020 introduces a lot of long-awaited changes into Nigerian company law. I will highlight some of the most impactful changes. It is now possible to have single shareholder/single director companies. This is available to small companies.
Single-member and director companies will make it possible for business owners who currently trade as sole proprietors to register a company without the need to bring in new owners/directors at the initial stage, and continue to run their business as before but with benefits of limited liability and access to credit.
The threshold for defining small companies has been increased, to enable more companies qualify as small companies and therefore enjoy the benefits conferred on small companies by the CAMA 2020. Under the CAMA, a small company was a company that, amongst other criteria, had a turnover of not more than N2 million and a net asset value of not more than N 1 million.
Under the CAMA 2020, a small company is a company that, amongst other criteria, has a turnover of not more than N120 million and a net asset value of not more than N60 million.
There is no longer a concept of authorised share capital. Instead, companies are only required to ensure that they maintain the minimum issued share capital required under the CAMA 2020. Also, new entities have been introduced into our company law. These are limited partnerships and limited liability partnerships.
This will provide more options for investors, such as private equity funds, seeking to structure their holdings in Nigerian businesses. This innovation puts an end to concerns raised over the constitutionality of limited liability entities created by the states and whether their limited liability would be recognised when they conduct business in other states of the federation.
The cost of registering security interests at the CAC has been reduced by 65% for private companies and 82.5% for public companies. Prior to the CAMA 2020, the CAC filing fee for registering security interests was 1% of the secured amount (for private companies) and 2% of the secured amount (for public companies). Under the CAMA 2020, the CAC cannot charge more than 0.35% of the secured amount.
We understand that authorised share capital has been abolished. This sounds quite drastic and has several market participants concerned. Can you explain that provision?
Yes, the concept of authorised share capital has been removed by the CAMA 2020. I do not, however, think that this should cause any alarm. The aim of this amendment was for the share capital of the company to provide a more realistic reflection of the true state of affairs with respect to the capital of the company that has actually been issued and paid-up as the authorised share capital did not actually reflect this.
Another reason for this change was to eliminate the front-loading of costs associated with the creation of authorised share capital even where the company was not prepared to issue all of its authorised share capital. With the changes made by the CAMA 2020, companies will only pay CAC filing fees and stamp duty on the share capital that they have issued.
Companies are now only required to ensure that they maintain the minimum issued share capital under the CAMA 2020 and a quarter of their issued share capital is paid-up.
What innovations have been introduced by the CAMA 2020 to reflect the reality of the digital age that we are in?
The CAMA 2020 is being celebrated for bringing Nigerian company law into the digital age. This is a particularly welcome development in view of the ongoing COVID-19 pandemic which has created difficulties with respect to public gatherings for the purpose of holding physical meetings.
Under the CAMA 2004, all statutory meetings and annual general meetings of all companies are required to be held in Nigeria. This did not contemplate virtual meetings and the CAC had to come up with guidelines to help companies navigate the difficulties of holding meetings during the COVID-19 lockdown.
However, under the CAMA 2020, a private company may hold its general meetings electronically provided that such meetings are conducted in accordance with the articles of the company.
Other innovations that reflect the current digital age are: company records can be maintained in electronic format; electronic share transfer forms will be accepted by all companies; notices of meetings can be given by electronic mail to any member who has provided the company an electronic mail address; and any document required to be annexed to the annual return may be delivered to the CAC either in hard or soft copy.
There will be lots of learning and unlearning as a result of the CAMA 2020. How do you propose to help the market get a better understanding of the CAMA 2020 and all that has been changed by the Act?
Now that the CAMA 2020 has become law, and given my understanding of the background to most of the changes introduced by the Act, I intend to continue engaging with clients, colleagues and market participants on knowledge sharing and ways to best navigate the uncharted waters of the CAMA 2020.
The business and legal community will need to ‘unlearn’ some of the concepts that have governed Nigerian company law for three decades, such as authorised share capital, physical meetings, company seals, etc.
In their place, we will have to learn and understand the new concepts of minimum issued share capital, effecting share buy-backs, setting up limited partnerships and limited liability partnerships, mergers of incorporated trustees, company rescue processes, netting for qualified financial contracts and lots more.
The CAMA 2020 has expanded the CAC’s board to include more private-sector representation. With representation from both statutory bodies of accountants, the Institute of Chartered Secretaries and Administrators of Nigeria and the Nigerian Association of Small and Medium Enterprises, we expect that there will be a stronger voice from the Nigerian business community advocating for processes that will enhance the Nigerian business landscape and help position Nigeria as an attractive market for investment in Africa.