BACKGROUND
The Corporate Affairs Commission (CAC or the "Commission") is the apex regulatory body for companies in Nigeria and is charged with the responsibility of administering the Companies and Allied Matters Act 2020 ('CAMA 2020')1 , including the Registration, Regulation and Supervision of Companies, Firms, Business Names, and Incorporated Trustees registered under the Act.
In July, 2016, President Muhammadu Buhari in pursuance of a declared goal to improve Nigeria's Ease of Doing Business ratings, inaugurated the Presidential Enabling Business Environment Council (PEBEC). The goal of PEBEC is to make Nigeria a progressively and sustainably easier place to do business.
As at 2020, Nigeria ranked 131 among 190 economies in the World Bank's annual ratings on Ease of Doing Business (EDB).2 Essentially, The EDB index ranks countries against each other based on how conducive the regulatory environment is to business operations.
In order to improve Nigeria's ranking on the global EDB, the Commission, published the Draft CAC Operations Checklist 2021 (the 'Checklist") in October 2021. The Checklist simplifies the operations of the Commission and provides a practical guide to accredited and non-accredited users of the Commission's services in order to enable seamless transactions with the Commission.
KEY INNOVATIONS OF THE CHECKLIST
- Registration of Companies/Limited Liability Partnerships by Foreigners.
The 2021 Checklist now provides that Foreigners may use Nigerian addresses as service address with no requirement to provide a proof of residency. 3 This is a major step forward in comparison with other jurisdictions which are seen to have more stringent measures with respect to the requirement of providing proof of residency. The removal of this requirement in Nigeria facilitates a more investor-friendly and seamless business registration process.
Small Companies: Directors and Secretaries
The Companies and Allied Matters Act 2020 has defined a Small Company as a private company limited by shares, which has no foreign members or government membership with a turnover of not more than N120 million, a net assets value of not more than N60 million, and one where the directors hold at least 51% of the share capital.4
The previous CAC Operations Checklist published in July 2020 made it mandatory for all companies (including small companies) to have at least two (2) Directors. However, the 2021 Checklist5 now reduces the required number of directors to one (1) for small companies. Similarly, the 2021 Checklist also exempts small companies from appointing a company secretary.6
These amendments now align with international best practices (such as those applicable in the United Kingdom) and reduces the burden and associated costs on small companies and potential Small Medium Enterprises.
Names: Incorporated Trustees
An Incorporated Trustee is a non-business organization and is covered in Part F of Company and Allied Matters Act 20227 . Incorporated Trustees involves any community of persons bound together by custom, religion, kinship or nationality or anybody or association of person established for any religious, educational, literary, scientific, social, development, cultural, sporting, or charitable purpose.
Previously, the initials of the benefactors could be used as the name in the registration of an entity as an Incorporated Trustee. However, the 2021 Checklist introduces a new dimension - it is now required that any entity which could either be a foundation, school, church, non-governmental organisation etc, proposed to be registered under Part F (Incorporated Trustees) and in the personal name of the benefactor(s), must state the name(s) of the benefactor(s) fully and sufficiently as the name of the entity to be registered as an Incorporated Trustee, to facilitate an easy identification of the benefactors. 8
The implication of this is that initials are no longer acceptable. For Instance, an individual cannot make an application to register a foundation as "A.J. Waziri Foundation", the proper name should read thus "Ayomide Jamil Waziri Foundation".
This is a commendable innovation as it creates an atmosphere of ease in the identification of benefactors who have registered under Part F of CAMA 2022 as an Incorporated Trustee. It also helps the general public identify the benefactors of the registered Incorporated Trustee.
Registration of Companies Limited by Guarantee
Under CAMA, the consent of the Attorney General of the Federation (AGF) is required to establish a Company Limited by Guarantee. Before the 2021 Checklist, there was no stated timeline within which the AGF was expected to give his consent or objection. As expected, this was a huge disadvantage as it discouraged individuals from registering such entities, elongated the registration process and led to uncertainty amongst business owners.
The 2021 Checklist retains the requirement of consent of the Attorney General of the Federation to register a company limited by guarantee. However, it provides an important addition that where the AGF does not grant the authority or does not communicate his decision within 30 days, the promoter shall publish the application for registration in three (3) National newspapers and invite objection to reach the Commission not later than 28 days after the date of the last publication. Where there is no objection to the application, the Commission is expected to approve the application and register the Company. 9
This is a welcome development and reduces the bureaucratic bottlenecks that often clog the registration process of Companies Limited by Guarantee.
CONCLUSION
As highlighted above, the 2021 Checklist is a welcome development and a step towards the right direction. The document is a commendable innovation as it provides an easy guide to facilitate the understanding of the service processes/requirements for the registration of business entities and creates an atmosphere that promotes the ease of doing business transactions in Nigeria.
We expect that the 2021 Checklist will be reviewed on a continuous basis to keep up with the evolving digital trends and international best practices.
The information provided in this article is generic in nature and not made to address specific circumstances. Therefore, legal assistance is recommended to assist interested individuals navigate the different considerations and respective needs.
LIST OF AUTHORITIES
- Company and Allied Matters Act 2020, Cap C20 LFN 2004
- Draft CAC Operations checklists 2021
- CAC Operations checklists Guidelines 2020
Footnotes
1 Companies and Allied Matters Act 2020, Cap C20 Laws of the Federation of Nigeria , 2004. Section 1.
2 ‘ Ease of Doing Business In Nigeria'(Trading Economics) < https://tradingeconomics.com/nigeria/ease-of-doing-business#:~:text=Ease%20of%20Doing%20Business%20in%20Nigeria%20is%20expected%20to%20reach,accor ding%20to%20our%20econometric%20models > accessed February 9, 2022
3 Draft CAC Operations Checklist 2021, (Part B). Paragraph 10./ (Part C) Paragraph 12
4 Companies and Allied Matters Act 2020, Cap C20 Laws of the Federation of Nigeria 2004. Section 394(3)
5 Draft CAC Operations Checklist 2021, (Part B). Paragraph 3.
6 Draft CAC Operations Checklist 2021, (Part B). Paragraph 4
7 Companies Allied Matters Act 2020, Cap C20 Laws of the Federation of Nigeria 2004. Section 823
8 Draft CAC Operations Checklist. Part A (Notes), Para 7
9 Draft CAC Operations Checklist. Part B, Paragraph 14,
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
