The Companies and Allied Matters Act 2020 (CAMA 2020) is the single most significant legislation affecting businesses enacted recently. Although enacted two years ago, in 2020, the law still remains new for some reasons. Firstly, it came to replace a very old law (in force for three decades) which was enacted in 1990. Compared to that law, this law is still fairly recent. Another reason this law remains new is due to the novel provisions contained therein that have brought a new approach to business, made business easier in Nigeria, and amenable to technological advancements. Some of these novel provisions are as follows:
- New Corporate Structures: New entities such as limited partnerships and limited liability partnerships have been introduced by this law. These are in addition to the long existing corporate structures in place under the framework governed by this law. These new forms of partnership will provide more options for investors seeking to structure their holdings in Nigerian businesses as well as private equity and venture capital fund managers who typically adopt such.
- Single Shareholder/ Single Director Companies: A single director company is now a possibility under this law. This is available to small companies. Business owners who currently trade as sole proprietors can now register a company without the need to bring in new owners/directors at the initial stage, and they can continue to run their business as before but with added benefits of limited liability and access to credit. It is noteworthy though, that Private companies that do not qualify as small companies are permitted to have a single shareholder, however, such private companies must have at least two directors.
- Electronic Innovations: The new CAMA makes several provisions to reflect the realities of conducting business in this digital age, one of which is maintaining company records now in electronic formats. Also, electronic share transfer forms are now accepted by all companies. There are many other provisions that suggest that the new law carries along in it this perspective and philosophy of digitalization.
- Changes to Share Capital: The changes to share capital brought about by the Act is to the effect that there is no longer a concept of authorized share capital. This is an important feature of the new law, as it goes to the fundamentals of company registration in Nigeria. Instead, companies are only required to ensure that they maintain the minimum issued share capital required under the CAMA 2020 and that a quarter of their issued share capital is paid up. The aim of this amendment is 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; the concept of authorized share capital under the old law, did not reflect this. Another reason for this change is to eliminate the front-loading of costs associated with the creation of authorized share capital even where the company is not prepared to issue all of its authorized share capital.
These are some of the novel provisions contained in the Act, all of which changed the general outlook of doing business in Nigeria, since its enactment. Doing business has now become easier, for every class or kind of business venture, as the provisions are very practicable. Hopefully, micro, small and medium scale enterprises will take advantage of this law. It is also important to underscore that there are many other novel provisions which cannot all be captured in this piece.
For further information, please contact:
Mr. Paul O. Afabor
Tel: +234 907 036 0173 Fax: +1 646 536 8978