By Timi Olagunju Esq.
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Yesterday, August 7, 2020, President Mohammadu Buhari signed the Companies and Allied Matters Act – CAMA 2020 – into law, which was passed by the National Assembly.
This amendment is the first in 30 years and has some important amendments that startup owners and entrepreneurs must know and leverage.
These amendments to CAMA 2020 are explained below by section:
Section 18 (2): This provides that one person can now become a shareholder of a company, as against the previous requirement for two persons to form a company. In this context, the person cannot be a minor (a person below the age of 18).
Section 27: This section replaces ‘Authorized Share Capital’ with ‘Minimum Share Capital’. This implies that promoter(s) of a business are not required to pay for or allocate shares that are not needed at the specific time of incorporation.
Section 40 (1): There is the introduction of Statement of Compliance (SOC) signed by an Applicant (or agent), without the need for a Lawyer or Notary Public to attest to Declaration of Compliance (DOC). SOC is a requirement of the law that indicates that the applicant has complied with the registration and requirements.
Section 98: This section abolished the mandatory use of common seal, as its use by companies is now optional, NOT mandatory.
Section 119: This section emphasizes transparency in terms of control in a company. It requires that persons with significant control in a company disclose its shareholding to other shareholders. For example, anyone who has person(s) holding shares on their behalf as trustees or proxies, whilst being shareholders themselves in same company, are expected to disclose such relationship for transparency.
Section 223 (12): There is a significant reduction of Filing Fees for Registration of Charges to 0.35%, which implies a reduction of cost in fees relating to charges.
Section 265 (6): Firms cannot appoint one (1) Director to hold the office of Chairman and Chief Executive Officer of a private Limited Liability Company.
Section 307 (1): One single person cannot be a Director in five (5) different Public Limited Liability Companies.
Section 330: Private Limited Liability Companies are now exempted from appointing Company Secretary.
Section 402: Small companies or companies having one shareholder are NOT mandated to appoint auditors at AGMs to audit their financial records. These companies are exempted from auditing accounts in respect of a financial year.
Section 434 – 549; 718 – 721: Insolvent Companies can now be rescued from distress and liquidation, instead of winding up through the following options: Voluntary Arrangements, Administration, and Netting.
Section 849: The new Act extends merger beyond LLCs to Incorporated Trustees. This implies that two or more NGOs, social entrepreneurs with different registered organizations, with similar goals can merge to form one (1) single organization.
Section 861: This section validates the recognition for electronic filing of documents, electronic share transfer, and electronic meetings for Private Limited Liability Companies (LLC). In another provision (section) of the same law, you can now hold or attend Virtual AGM (Annual General Meetings) from anywhere in the world.
Finally, the new Act, introduces Limited Liability Partnerships and Limited Partnerships, which combines flexibility and tax status of a partnership with the status of limited liability for members of a company. This implies that Startups are not stuck with the option of setting up a Company, but also enjoy the benefits of partnership which a partnership agreement (including vesting agreement, and founders agreements) beyond the regular Articles and Memorandum of Association, whilst still protecting their personal assets from being sold in claims for debts, liability, or creditors.
If you have questions, comment here or reach out to me via @timithelaw on Twitter
Timi Olagunju is a tech lawyer and policy consultant. He can be reached via: timithelaw@gmail.com or on Twitter @timithelaw.
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