On Friday 7th of August 2020, President Muhammadu Buhari, gave assent to the Companies and Allied Matters Act 2020 (CAMA 2020) which repealed the Companies and Allied Matters Act 1990 (CAMA 1990). CAMA 2020 introduced salient changes to the administration of companies in Nigeria. One of such changes is with respect to the share capital requirements of companies. This article takes a cursory look into changes made to the concept of share capital and highlights the steps needed to be taken by existing companies in order to comply with the provisions of the new Act.
From Authorised Share Capital to Minimum Issued Share Capital
Under CAMA 1990, companies were required to have a prescribed authorised share capital. The minimum share capital which a private company limited by shares could be registered with was N10,000 and N500,000 for a public company limited by shares[1]. Companies would frequently register with a higher authorised share capital than the prescribed minimum, but could not allot more shares than their registered authorised share capital. In addition to the above requirement, not less than 25% of the share capital was required to be issued or taken by the subscribers of the memorandum[2].Where companies needed to allot more shares than their registered authorised share capital, the shareholders would have to agree to the increase at the general meeting of the company. In order to avoid the frequent exercise of this process, companies would set their authorised share capital at a level that was much higher than the company’s needs at the time. The practical implication of this was that companies would pay stamp duties and CAC filing fees on the entire authorised share capital notwithstanding that all the shares may not be allotted. This effectively led to a front loading of costs to the company and made the process of registration more expensive for companies.
Under CAMA 2020 however, companies are no longer required to have an authorised share capital which accommodates unissued shares.. In fact, the concept of “authorised share capital” has been dispensed with, instead, companies are now required to have a minimum issued share capital without room for any unissued share capital. The requirement under CAMA 1990 for companies to issue a minimum of 25% of their share capital is now redundant as the company’s entire share capital will always be fully issued.
For record purposes, upon an increase in share capital, a notice of the increase is to be submitted to the Corporate Affairs Commission (the CAC) within 15 days of the passing of the resolution authorising the increase. The notice shall be furnished with particulars such as the class of shares affected by the increase, and the conditions on which the new shares have been, or are to be issued.[3] In filing the notice, under the Companies Regulation 2021, companies are not required to pay filing fees to the Commission[4].
Changes have also been made to the threshold of the authorised (now minimum issued) share capital of companies. By virtue of section 27(2) of CAMA 2020, a private company must have a minimum issued share capital of N100,000 while a public company must have a minimum issued share capital of N2 million. Accordingly, companies will now pay applicable stamp duty and filing fees at the time of share issuance. Where a company increases its issued share capital after the initial share issuance, the increase will only take effect if 25% of its issued share capital (including the increase) has been paid up[5].
What does this mean for existing Companies?
With respect to existing companies that may not have issued all of their authorised share capital, CAMA 2020 does not specify a timeframe within which those shares must be issued. However, the Companies Regulations 2021, made under CAMA 2020 provides in Regulation 13(1) that: –
‘Where at the commencement of the CAMA 2020, a company has unissued shares in its capital, the company shall not later than 30th June, 2021 fully issue such shares.’
The Regulation further provides that;
‘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’.
How Can Funmi Roberts & Co. Assist
Funmi Roberts & Co is a full-service law firm with depths of proven experience and expertise in the corporate commercial space. We are therefore well positioned to advise corporate clients on their compliance with the provision of CAMA 2020 and the Companies Regulations 2021. Specifically, we can help companies with the preparation of all documents required to effect the allotment of the unissued shares, ensuring that such allotment is in consonance with the constitutional documents of the Company and any other agreements entered into by the Company. We can also assist with the filings and prescribed payments required to be made at the CAC and will ensure that the process is successfully and timeously concluded.
For further information on how we can be of service or related to notable changes in the Companies and Allied Matters Act 2020, please contact us at info@funmirobertsandco.com
[1] See Section 27(2)(a) Companies and Allied Matters Act (CAMA) 1990; Section 27(2)(a) CAMA 2004
[2] See Section 99(1) CAMA 1990; Section 27(2)(b) CAMA 2004
[3] See Section 127(2)(6) CAMA 2020
[4] See Regulation 13(2) Companies Regulation 2021
[5] See Section 128 (1) (a) CAMA 2020
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For further information, please contact:
Kemi Oladipo
Partner
+234 802 301 7307
kemi@funmirobertsandco.com
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Abi Odeinde
Partner
+234 818 213 4386
abi@funmirobertsandco.com
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Biola Johnson
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