President Muhammadu Buhari’s recent ascent to the amended Companies and Allied Matters Act (CAMA) 2020 is timely and commendable. The new Act comes with a lot of benefits to the economy. Nigeria’s financial market will receive an additional boost to spur economic development and reposition the country as a preferred destination of capital. The new CAMA has repealed and replaced the 30-year old one which was promulgated in 1990 to regulate the formation and management of companies in Nigeria.
The new Act will be a game-changer for business in Nigeria as it is expected to usher in some innovations that will improve significantly the ease of doing business in the country.
Apart from last year when Nigeria moved 15 places in the World Bank’s Ease of Doing Business index, the country was hitherto at the bottom rung of the critical instruments for successful business take off on the continent. The Companies and Allied Matters bill was proposed by the Corporate Affairs Commission (CAC) to help strengthen its supervisory and regulatory powers in line with global standards and practices.
We welcome the revised CAMA 2020 because medium and small enterprises can leverage on its aspiration to deepen the Nigerian financial market, especially at this critical time of global economic uncertainties arising from the coronavirus pandemic, and transform it to be globally competitive and operationally excellent.
Interestingly, the new Act provides for the reduction of filing fees and other reforms that will make it easier and cheaper for small and medium-sized enterprises (MSMEs) to register and reform their operations. It is heartening that CAMA 2020 recognizes the fact that Nigeria is largely dominated by MSMEs estimated at over 25 million. Making registration easier for them will bring in more businesses into the formal sector. This will, in turn, enhance tax revenue for the government. This could be further enhanced by the fact that the amended Act has exempted SMEs from appointing auditors to audit their accounts.
Besides, Section 18 (2) of the amended Act 2020 allows corporate promoters of companies to establish private companies with a single member shareholding, create limited liability partnerships that will give investors and business people alternative forms of carrying out their business in an efficient and flexible way. It also gives ample room for innovating processes to ease the operations of companies, such as introducing Statement of Compliance, replacing “authorized share capital” with minimum share capital to reduce costs of incorporating companies, and providing for electronic filing, re-share transfers, e-meeting, as well as remote Annual General Meetings (AGMs) for private companies in response to the new normal induced by the novel COVID-19 pandemic.
Beyond this, CAMA 2020 requires the disclosure of persons with significant control of companies in a register of beneficial owners to enhance corporate accountability and transparency and ensure the minority shareholder protection and engagement, while restricting multiple directorships in public companies. Section 307(1) of the Act prohibits a person from being a director in more than five public quoted companies at a time. Henceforth, a director cannot hold the office of Chairman/CEO. Section 265(6) of the amended Act restricts private firms from appointing a director to hold the office of Chairman and CEO of the organization. Before now, a minimum of two directors was required to incorporate a private limited company.
We believe that the revised CAMA 2020 will lift the nation’s wobbling economy, improve Nigeria’s Gross Domestic Product (GDP), encourage local entrepreneurs, and boost foreign direct investment. The new CAMA is a positive sign that the Federal Government’s strategy to improve the business environment is on track. But more should be done to address the issue of multiple taxes, epileptic power supply, the exorbitant cost of clearing and transporting raw materials from the ports, weak infrastructure, incidence of smuggling, and inventory of unsold goods, and insecurity. With CAMA 2020 and the introduction of the Business Facilitation (Omnibus) Bill 2019 amidst other regulatory reforms expected to be signed into law by President Buhari, Nigeria will likely be an attractive destination of capital inflows.