Reforming The Business Climate In Nigeria: Critical Changes Introduced By The Companies And Allied Matters Bill, 2018

Exemption from Audit & Annual General Meeting

Every company, without qualification, is required under the 1990 Act to appoint an auditor or auditors at its Annual General Meeting (“AGM”) to audit the financial records of the company. This mandatory provision has now been modified, in section 403 of the CAM Bill, to exempt a set of companies from the requirements of the law relating to the audit of accounts in respect of a financial year.

Hence, a company (other than an insurance company or a bank or any other company as may be prescribed by the CAC) shall be exempted from appointing auditors to audit its annual accounting records if; (1) it has not carried on any business since its incorporation; or (2) it is a small company as defined under the CAM Bill.

In like manner, a small company and/or any company having a single shareholder (Single Member Company) is exempted, in section 238(1) of the CAM Bill, from the requirement of holding AGM.

Appointment of a Company Secretary – Optional for Private Companies

Under the 1990 Act, every company is mandatorily required to have a Secretary. This requirement has changed under the CAM Bill, which in section 331, has restricted the appointment of a Secretary to only public companies. Appointment of a Company Secretary is henceforth not mandatory but optional for private companies. This is expected to lessen the regulatory burden of MSMEs and Single Member Companies.

Prescription of Model Articles for adoption by companies

Every company is required to register an Article of Association prescribing regulations for the company, in consonance with the form and contents prescribed in the 1990 Act. However, in accordance with the provisions of sections 32, 33 and 34 of the CAM Bill, a company may elect not to register an Article of Association, in which case it will be deemed to have adopted the Model Articles prescribed in the CAM Bill for a company of its description.

Provisions for Limited Liability Partnership (LLP) & Limited Partnership (LP)

The CAM Bill creates a new form of legal entity known as a Limited Liability Partnership (“LLP”), which is to exist separately from its members as a body corporate. An LLP is unique in that it combines organizational flexibility and tax status of a partnership with the limited liability of members of a company. In an attempt to safeguard the interest of those dealing with LLPs, it is provided that company law and insolvency law shall apply to LLPs with appropriate modifications. In like manner, disclosure of significant control in a LLP is also required.

The CAM Bill equally provides for the establishment of a Limited Partnership (“LP”). The unique feature of a LP is that it must, at any point in time, have at least one general partner and one limited partner. Other than this, an LP is not materially different from the common form of partnership. LPs are run by one or two partners, known as general partner(s) while other contributor(s), known as limited/silent partner(s) provide capital but do not take part in managerial decisions. This form of business entity is the most suited for private equity (PE) funds. Notably, Lagos State, in a bid to bridge the gap in the 1990 Act created a legal framework for forming LPs through the enactment of the Partnership Law of Lagos State some years back; thereby attracting foreign portfolio investments to Nigeria. The provisions for LP in the CAM Bill has not only resolved the constitutional issue around the legislative competence of the Lagos State House of Assembly to make a law in respect of entities with limited liability but has also provided legal framework for other States of the Federation to play host to LLPs and LPs.

Reduction in Filing Fees for Registration of Charges

The total fees payable to the CAC in connection with the filing, registration or release of a charge in respect of a company is prescribed, in section 223(11) of the CAMA Bill to be a maximum of 0.35% of the value of the charge or such other amount as the Minister of Trade and Investment may specify in a Gazette. This is expected to lead to up to a sixty-five percent (65%) reduction in the associated cost payable under the regime in operation pursuant to the 1990 Act.

Merger of Incorporated Trustees

Under the new regime introduced by the CAM Bill (section 850), two or more associations (Incorporated Trustees) with similar aims and objects may merge under such terms and conditions as may be prescribed by the CAC from time to time.