In a bid to facilitate the ease of doing business in Nigeria for economic growth and development, the federal government of Nigeria through the Corporate Affairs Commission (CAC) decided to amend some sections of the Companies And Allied Matters Act (CAMA) to fix some errors and omissions in the Act that has been an albatross to the progress of corporate organisations especially micro-Small & Medium Enterprises (SMEs).
Having done some work therein, experts from the fields of development economics, corporate management and administration and other stakeholders identified yet some grey areas causing conflicts and confusion between CAMA 2020 and Companies Regulations 2021. The Specific areas of interest by stakeholders are section 124 of The Companies And Allied Matters Act 2020 (CAMA) and section 13 of Companies Regulations 2021 issued by CAC.
Bothered by the little but very significant areas of conflict, the Institute Of Chartered Secretaries and administrators of Nigeria (ICSAN) took up the burden by engaging the Commission and other stakeholders in a webinar recently to fix the issues. At the forum, with the Registrar General of CAC, Alhaji Garba Mohammed in attendance the theme: “Are existing companies prohibited from having uninsured shares after June 30, 2021 under Section 124 of CAMA?”
For ease of reference, the controversial sections are reproduced below.
Section 124 (1-3) of CAMA 2020 provides:
124. (1) Where, after the commencement of this Act, a memorandum delivered to the Commission under section 36 states that the association to be registered is to be registered with shares, the amount of the share capital stated in the memorandum to be registered shall not be less than the minimum issued share capital.
(2) No company having a share capital shall, after the commencement of this Act, be registered with a share capital less than the minimum issued share capital.
(3) Where, at the commencement of this Act, the issued share capital of an existing company is less than the minimum issued share capital, the company shall, not later than six months after the commencement of this Act, issue shares to an amount not less than the minimum issued share capital, while
Section 13 (1-3) of the CAC Companies Regulations 2021 provides thus:
13. (1) Where, at the commencement of the Act, a company has unissued shares in its capital, the company shall not later than 30th June 2021 fully issue such shares.
(2) Notice of issue delivered to the Commission for registration shall be exempted from payment of filing fees.
(3) Where a company to which this regulation applies fails to comply with this regulation, the company and every officer of the company shall be liable to a daily default penalty as prescribed by the Commission.
At the session, stakeholders noted that there is a conflict between section 124 of CAMA which merely provides that all existing companies must issue shares to an amount not less than the minimum issued share capital (N100,000 for a private company and N2.0 million for a public company) within six months after the commencement of Act, and section 13 of the Companies Regulations 2021 which mandates all existing companies to fully issue their unissued shares not later than June 30, 2021, even when they have more than the minimum issued share capital prescribed by CAMA.
They also expressed the view that there is no provision in CAMA compelling existing companies to fully issue their unissued shares, and that section 13 of the Companies Regulations 2021 requesting existing companies to fully issue their unissued shares not later than June 30, 2021, is inconsistent with the provisions of CAMA and should be amended accordingly. Stakeholders noted the following points as some of the strategic and contractual reasons why companies have unissued shares:
(a) Unissued shares are used for settlement of contractual obligations to investors;
(b) Unissued shares are used in the implementation of the employees share scheme;
(c) Unissued shares are also useful to companies on the grounds that they are easier to reclassify, consolidate, subdivide, convert or reduce, and to satisfy other strategic obligations, etc.
More so, experts noted that the provision of section 13 of the Companies Regulations 2021, would not enable them to achieve the above objectives and that the section should be amended to facilitate the ease of doing business in the country.
In a patriotic manner, the Registrar General confirmed that there were gaps with CAMA 2020 and amendments which needed to be closed. He noted that pending the amendment of CAMA, the CAC decided to use the Companies Regulations to reflect the spirit of the law through the definition of “share capital” in section 868 of CAMA as “means the issued share capital of a company at any given time.”
In view of the concerns expressed by the stakeholders on the conflict, Mohammed
stated that CAC has agreed as follows: “Affected companies should apply to CAC for extension of time to fully issue their unissued shares with reason and CAC would undertake to promptly grant the required extension without any penalty;
“To make it easier for all stakeholders, CAC also agreed to give a general moratorium of two (2) years for affected companies to comply without any penalty;
“CAC promised to advertise the above concessions on its website and national newspapers to ensure that all stakeholders are aware and take advantage.”
Given the above, corporate organizations are enjoined to take advantage of the considerations offered by CAC particularly the extension of time to do the needful as and when due. In the light of the above, every stakeholder in the Nigerian project is charged to do his bid no matter one’s area of operation, all geared towards the promotion of the welfare and well-being of citizens