Earlier in the month, the President Buhari administration signed the revised Companies and Allied Matters Act (CAMA) into law. This is the first major update of our company laws since 1990 and it creates provisions that provide additional clarity while also reducing the burden of regulatory compliance.
For full disclosure, I have canvassed for some of the changes in the enacted law via different articles, letters and contributions to several industry-led initiatives in the past decade. As expected, I am positively biased towards most of the key changes and insertions into CAMA 2020. In fact, this was why I was initially reluctant to write this article as I would only be emphasising the positions I had shared previously.
Small companies and private companies, and their promoters, are probably the major beneficiaries of the new CAMA 2020. Private Companies can now be fully owned by a single member or shareholder. Small companies or any company with a single shareholder are no longer required to mandatorily appoint auditors. Private companies are no longer mandatorily required to appoint company secretaries.
CAMA 2020 has provisions that offer improved corporate governance compliance mechanisms. It restricts any individual from being a director in more than five public companies concurrently. CAMA 2020 offers an improved protection of minority shareholders by restricting firms from appointing a director to occupy the office of the Chairman and CEO of a private company. The best part of the updates is the improved governance of not-for-profit organisations in the new CAMA.
The new CAMA now requires five persons as members of the audit committee of the public companies, with three slots being for shareholders’ representatives and two slots being for executive directors. This helps to enhance the independence of the audit committee as against the previous CAMA that required six members of equal representation.
The new CAMA 2020 also offers some provisions to improve the ease of doing business in Nigeria. Remote and virtual annual general meetings are now expressly recognised in the law. E-fillings, electronic share transfers and e-meetings for private companies are now recognised. The use of a common seal is no longer mandatory.
I have read about the views of some religious leaders and professional government critics on some of the sections of the CAMA and I believe that those views, at best, are unconscious distortions of the CAMA and the spirit behind the law. Some of the views, however, are baseless sensational distortions of facts and can be likened to those uninhibited and thrash debates that is usually seen at the beer parlour. I am going to make an attempt to share my views on some of the key contributions and issues raised by those leaders.
There is this spurious allegation that CAMA 2020 has exempted Chinese companies from registering in Nigeria, while all other foreign companies are required to register. Sections 78 and 79 of CAMA 2020 are almost the same text with the Sections 54 and 55 of the CAMA 1990. I have searched for the word “Chinese” or “China” in the entire 870 sections without any such finding. Section 78 of CAMA expects all foreign companies intending to do business in Nigeria to register. Therefore, this allegation about Chinese companies is a fake uproar and only came from the imagination of the person that started it.
There is also the allegation that suggests that section 863 of CAMA 2020 is indirectly criminalising about 21 million people in the informal sector. I am not a lawyer, but my interpretation and understanding of section 863 is totally different. Section 863 provides that a person or association of persons “shall not carry a business in Nigeria as a company, limited liability partnership, limited partnership or under a business name without being registered under the Act”. From my understanding, this section does not suggest that an individual cannot carry on a business in their individual capacity using their real legal names. Therefore, players in the informal sector are allowed to carry on business without registration provided that certain conditions contained in the CAMA (including the old 1990 version) are satisfied.
As mentioned above, my understanding of Section 814 suggests that you do not require any registration with CAC if anyone is doing business in their true names. For example, I don’t need any registration if I choose to do business as Oluwole Oluyemi, but if I am desirous of naming my business as Triple-O, then I am required to register. Section 19 also does not require any partnership of less than 20 people that are formed for the purpose of carrying on a business for profit or gain to mandatorily register such organisation.
As a chartered accountant and member of the Institute of Chartered Accountants of Nigeria (ICAN), I felt personally insulted with the insertion of Business Recovery and Insolvency Practitioners Association of Nigeria (BRIPAN) in the CAMA 2020. Section 705 was enumerating the requirements for operating an insolvency consultancy practice and specifically mentioned BRIPAN while embedding other professional organisations such as ICAN and the Nigerian Bar Association as “any other professional body” that may be recognised by the Corporate Affairs Commission (CAC). I believe that this insertion was unnecessary and was only a result of unnecessary cronyism.
There have also been several wrong interpretations of the governance of the not-for-profit organisations. I heard of the Bishop that suggested that the new CAMA abrogates too many powers to the CAC that enables CAC to casually (without any cause) replace the Trustees of the not-for-profit organisations, including churches. It must be noted that section 608 of the old CAMA of 1990 provides for the dissolution of any NGO by the court based on the petition raised by the trustees, members or CAC on certain grounds.
Section 593 of the old CAMA also requires that the financial statements must be audited and published where contributions are collected. These same governance mechanisms are now embedded in the new CAMA 2020, especially through section 839 which empowers the CAC to suspend the Trustees of an association and appoint interim managers, but based on an order of the court.
The above powers, however, can only be exercised in situations where the CAC believes that there has been any misconduct or mismanagement, or it is necessary or desirable to protect the property of the NGO, or to secure proper application of the property towards achieving its objects, or in the case of fraudulent activities or where the dissolution is in the public interest. Based on CAMA 2020, the CAC and/or the petitioners shall present all reasonable evidence or such evidence as required by the Court in respect of the petition.
It is worthy to note that the above powers given to the CAC is similar to the role of the Charity Commission in the United Kingdom, where some branches of Christ Embassy Church and MFM Church have been under “interim management” appointed by the Charity Commission based on some alleged financial infractions. The Charities Directorate, an arm of the Canada Revenue Agency, operates with similar powers in Canada. Of course, the improved governance requirements offered by CAMA 2020 tend to tame some of the religious entrepreneurs in Nigeria, and hence, the “noise” is not unexpected.
I have noticed that the old and more established churches are not part of those leading the complaints and resistance to the improved governance clauses introduced in the CAMA 2020. Church organisations such as the Catholics, Anglicans, Methodist, Baptist and FourSquare were built on the foundations of governance transparency and accountability. CAMA 2020 would help to enhance the necessary corporate governance structures in the Nigerian Pentecostal churches as they learn from these organisations.
My home church, St James’ Anglican Church of Ijebu Igbo (the largest town in Ijebuland) is a great example of the above mentioned governance model. The Parish Council which includes accomplished professionals and retirees always review authorises and track major expenditure of the Church. The financial reports of the Church, showing the names of all contributors and the amounts received, are published and shared to all members annually. The Church Vicar cannot unilaterally approve any expenditure or veto any project. In addition, members of the Parish Council are elected annually by members of the Church based on their perceived integrity, honesty and leadership skills.
The CAMA 2020 remains the governing law for organisations operating in Nigeria, and compliance is mandatory. Everyone must learn to submit themselves to governing authorities and the law. Religious organisations and not-for-profit organisations should seek to improve their internal governance systems and then work with others to ensure that the regulatory framework is strengthened to avoid abuse by the public servants.
In conclusion, I am challenging my friends and colleagues who are critics of the new CAMA to publish the constitution, the organogram and the latest audited financial statements of their religious body or NGO before throwing stones at the new CAMA 2020. We need to challenge issues based on data and facts, and not relying on baseless arguments that are likened to the beer parlour discussions.
Oluyemi is a chartered accountant, management thinker, writer, public speaker, impact investor and, investment and strategy advisor to high net worth individuals, business leaders and senior executives of ambitious and forward-leaning organisations.
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