UNDERSTANDING THE NEW COMPANIES AND ALLIED MATTERS ACT (CAMA) 2019 PT 3
The New Companies and Allied Matters Act (CAMA) 2019 was signed into law by President Buhari on the 7th of August 2020. The CAMA 2019 repeals the Companies and Allied Matters Act, 1990, and its subsequent amendments. It also introduces new provisions that promote the ease of doing business in the country as well as reduce regulatory hurdles.
This third part discusses the exemption from audit for some companies, Annual General Meetings, Multiple Directorship in public Companies, provision for electronic meetings, Companies Common Seal and the introduction of Limited Liability Partnerships under the new CAMA.
Exemption from Audit
Section 402 ( 1)of the new CAMA exempts companies that have not carried on any business since incorporation or whose turnover in a financial year is not more than N10,000,000 and the balance sheet total does not exceed N5,000,000, from the mandatory need to ensure their accounts are audited. Please note that Banks, Financial Institutions, and Insurance Companies are not exempted from auditing their accounts. Under the old CAMA, every Company was mandated to appoint an auditor at the Company’s Annual General Meeting who will audit the account of the Company. This is another clause aimed at supporting small and medium scale businesses and the ease of doing business. The Company is to maintain its financial records prepared by the directors, but the Company cannot be forced to employ the services of an auditor to audit its account as doing so may be at an extra cost and thus create hardship for the small business which is trying to get on its feet.
Company Annual General Meeting (AGM)
Section 137 of the new CAMA gives exemption to small companies and companies with a single member from conducting annual general meetings.
Section 307 (2) of the new CAMA restricts any person from being a director in more than five (5) public companies at a time. The section also prescribes a daily penalty in an amount to be determined by the Commission, for any person in breach of this section This clause is aimed at reducing conflict of interest and to ensure the commitment of the director to his Company. A person that holds a directorship position in more than one Company is under a duty to disclose the same to the Companies.
By the provisions of Section 240 of the new CAMA, private companies can hold their general and board meetings electronically so long as the meetings are conducted in accordance with their Articles of Association. This will give legal effect to a practice that has already been adopted by many companies. Currently the World is battling the Corona Virus (COVID 19) which has ended thousands of lives around the globe, consequently, there is the need to reduce physical interactions to its barest minimum. Moreso, we are in the age of technology where physical meetings are no longer indispensable, as they can be done from anywhere with the use of virtual platforms. This is a very welcomed development as it is in line with global trends and it will also help organizations to save time and cost thereby enhancing efficiency and productivity.
Company Common Seal
The new CAMA makes ownership of a common seal optional for all Companies. Under the old CAMA, Company seal was mandatory for all Companies and was viewed as the signature of a Company. However, under the new CAMA, it is no longer mandatory and signing of the Company’s documents or correspondences by the directors/secretary of the Company will suffice.
Limited Liability Partnerships
The new CAMA also introduces a new form of legal entity known as a Limited Liability Partnership (“LLP”). By this provision, two or more persons desirous of carrying on a lawful business with a view to profit may form or incorporate a limited liability partnership under the Act as a legal entity separate from that of its partners having perpetual succession. For such limited liability partnerships, at least one of the partners must be resident in Nigeria. Upon registration, a limited liability partnership becomes a body corporate that by its name is capable of suing and being sued, holding property, and having a common seal (if it decides to have one) among others. A Limited Liability Partnership is suitable for Lawyers, accountants, engineers, and other professionals that intend to go into partnership and give their partnership a perpetual succession.
Conclusively, the new Companies and Allied Matters Act 2020 is a very business friendly law aimed at promoting business, reducing unnecessary regulatory bottlenecks and introducing innovation in the Corporate Sector.