EVOLUTION OF COMPANY LAW IN NIGERIA :- A Review of the Companies and Allied Matters Act, 2020.


The law and practice of company law in Nigeria has a long history traced to the received English law. Therefore, the history of Nigeria's company law cannot be related, to the exclusion of the various mode of reception of English law in Nigeria, through the colonization process. Necessarily, there is the colonial and post-colonial history to tell of company law in Nigeria. 

The paper seeks to trace company law in Nigeria from the colonial reception of English laws to the latest development of company law(statutory) in Nigeria. It further examines up-to-date review of the recent Companies and Allied Matters Act, 2020 signed into law by President Muhammadu Buhari on August 7, 2020.

COMPANY LAW IN THE COLONIAL NIGERIA.

The company law journey in Nigeria kicked off in 1861 with the annexation of Lagos as part of British colony for the purpose of the administration of the colony. 

With the passage of the Supreme Court Ordinance of 1876, Section 14 of the ordinance provided for the application of English common law, the doctrines of equity and statutes of general application in force in England on July 24, 1874 in the protectorate.

Further, via the Supreme Court Proclamation 1900, establishing the Southern and Northern Protectorates made provisions for the application of English common law, doctrines of equity and statutes of general application. Similarly, the Supreme Court Ordinance 1914 empowered the enforcement of common law, equity and statutes of general application- in force in England on January 1, 1900 in the already amalgamated protectorate called Nigeria.

Hence, by the foregoing provision of the Supreme Court Ordinance 1914, English common law, doctrines of equity and statutes of general application in force in England on January 1, 1900 as they concerned to companies became applicable so far as local circumstances permitted.

Worthy of note, is the then existing statute of general application on company;- the English Company Act 1862, which was an Act of the Parliament of the UK regulating U.K company law. The Act which provided for the effect of incorporation of a company which may only be formed by a minimum of seven persons could not readily be applied in Nigeria due to local circumstances and thus, it became necessary that a local legislation on company law in Nigeria be made.

The first local legislation of company law in Nigeria was the Company Ordinance 1912. This Ordinance introduced into Nigeria, the idea of incorporating a company through registration. At its inception the Company Ordinance 1912 was originally limited to Lagos colony.
However, the Company (Amendment and Extension) Ordinance 1917  extended the application of the ordinance to other parts of the country.

The Ordinance however, witnessed the break-out of world war I which affected the fortune of the ordinance, since there no much business activities and the existing ones paralyzed during the war until the end of the war in 1918 which rejigged businesses. The end of the war in fact came with new improvements in business atmosphere in Nigeria.

The 1912 Ordinance could not cope with the new developments that came with the end of the war, hence, the need for a new legislation to deal with the development. On this note, the 1912 Company Ordinance and its amendment of 1917 were consolidated into the Company Ordinance 1922 with minor modifications. 

The Company Ordinance 1922 spanned from 1922 to 1968 with three amendments in 1929, 1941 and 1954 respectively; and was renamed Company Act 1963.

COMPANY LAW IN POST-COLONIAL NIGERIA.

At the attainment of independence and Republican stature in 1960 and 1963 respectively, there were significant improvements in the grassroot business activities. Thus, new laws were necessary to enhance and fit in with the boom in business activities. Hence, the Company Decree of 1968 was promulgated.

The Company decree 1968 was innovative in certain respects:
             i. It for the first time made it mandatory for foreign companies in to register in Nigeria before they could operate in Nigeria. 
             ii. It also introduced the idea of publication of Company Affairs, especially as it relates to Companies' accounts, shares, debentures, and meetings.

However, one fundamental criticism against the 1968 decree was that it lacked the required consultation of the view of stakeholders in respect of company affairs. Therefore, the decree could not be a reflection of the business exigencies and realities of the period.

Sequel to this, in 1987 Law Reform Commission was constituted with the responsibility of an extensive consultation with the stakeholders on company law and  practice. With the submission of recommendations and views of the law reform commission and its consideration by the Constituent Assembly on company law. The Companies and Allied Matters Act 1990 referred to as CAMA 1990 emerged as the fresh law for Company law. The CAMA 1990 Cap 59 of LFN is now contained in Cap C20(1) of LFN 2004 and Cap C20(1) LFN 2010.

The CAMA 1990 which lasted for three decades did not only provide for company affairs but also other allied matters like registration of businesses (Part B of the Act) and Incorporated trustees (Part C of the Act). 
Until its repeal, the Act was relevant for being comprehensive and for incorporatimg Common law rules, principles of equity and judicial decisions in respect of company matters and it for the first time established the Corporate Affairs Commission. 

A lot of the provisions of CAMA 1990 had been overtaken by events. There was therefore an urgent need to reverberate the company law in order to attract and retain foreign investors, and increase the ease of doing business in Nigeria and further upgrade the company law to global standard of business practices. Due to the pressing need for advancement of business activities in Nigeria and the need to command an economy built on ease of doing business with simplified start ups, non profits and social entrepreneurs, President Muhammadu Buhari on August 7, 2020 signed into law, the Companies and Allied Matters Act- CAMA 2020.


REVIEW OF CAMA 2020.

The CAMA 2020 is widely celebrated for its extensive improvements on the CAMA 1990 to suit the current business realities and economic reforms.

CAMA 2020 is divided into seven parts:
            PART A-: Corporate Affairs Commission.
            PART B-: Incorporation of Companies & incidental matters.
            PART C-: Limited Liability Partnership.
            PART D-: Limited Partnership.
            PART E-: Business Names.
            PART F-: Incorporated trustees.
            PART G-: Estabkishment of Administrative Proceedings Committee.

The significant innovations and improvements contained in the CAMA 2020 are considered below:

1. One-man Company.

The new Act by virtue of Section 18(2) provides that one person may form and Incorporate a private company with the requirements of the Act in respect of private companies. 

The Act however, retains the provision of two or more persons to form and Incorporate a company by complying with the requirements of the Act in respect of registration of the company (Sec. 18(1)), however subject to Sec. 18(2).

By consequence, the improvement is that one man is capable of only incorporating a private company and not a public company.

Worthy of note is that, one man capable of forming a private company under Sec 18(2) cannot be a minor and must be qualified. (See Sec. 20).

Section 18(3) now prohibits the formation or incorporation of a company for unlawful purpose.

2. Limited Liability Partnership.

Another innovation of CAMA is the introduction of Limited Liability Partnership. The Act extends more potent legal protection afforded companies to partnerships.

By Section 746, a limited liability partnership is a body corporate formed and Incorporated under the Act and is a legal entity separate from the partners, and with perpetual succession and the change in partners of a limited liability partnership does not affect the rights and existence of the limited liability partnership. Whereas, any qualified individual or body corporate may be a partner in a limited liability partnership  (Sec. 747) by subscribing their names to an incorporation document which shall be filed in the manner and with fees as may be prescribed by CAC from time to time.

3. E-registration. 

The new CAMA makes provision for electronic filing, electronic share transfer and virtual meetings for private companies. 
Section 860(1) provides that any document required to be filed with the commission for registration may be filed electronically and a certified true copy of such document is admissible in evidence.

Although, the commission has since adopted e-registration, there was no federal legislation to that effect but is now provided in the new Act.

4. Pre-action Notice and restriction on levy of execution.

Section 17 of the new CAMA now provides that no suit can be commenced against the commission before the expiration of a period of thirty days after a written notice of intention to commence the suit has been served upon the commission by the intending plaintiff and the notice is to state the cause of action, particulars of claim, reliefs sought.

By consequence, it is safe to say that this provision now forms part of the procedural laws to be reckoned with by courts in actions against the Corporate Affairs Commission.

5. Power of Minister to prescribe model Articles.

Section 33 now empowers the minister (commerce) to prescribe by regulations, model articles of association for companies. Whereas different model articles may be prescribed for different descriptions of companies.

6. Object Clause.

Section 35 of the new Act provides that the objects of a company are unrestricted unless a company's articles specifically restricts the objects of the company.

This provision complements the requirement to include object clause in the memorandum of association in Section 27(1)(c).

7. Minimum issued share capital.

The concept of 'authorized share capital' has now been replaced in Section 27 of the new Act with the concept of 'minimum issued share capital'. 

Section 27 (2)(a)has upwardly reviewed the minimum issued share capital from N10,000 to N100,000 in the case of a private company and from N500,000 to N2,000,000 in the case of a public company with division into shares of fixed amount.

Section 124 has extended the period required for a company whose issued share capital is less than required  minimum issued share capital, to six months (from the previous 30 days) to issue shares to an amount of the required minimum issued share capital one. It has further dispensed with the requirement of issuing at least 25 percent to be issued of authorised share capital. 

8. Non-mandatory use of common seal. 

Section 98 provides that a company may have a common seal but need not have one. 

9. Electronic signature.

Section 101 of the Act now recognizes electronic signature of a director, secretary or authorised officer of the company.

10. Annual General Meeting.

Small companies or companies with single shareholder are now exempted from the mandatory requirement to convene and hold annual general meetings (See Sec. 237).

CONCLUSION.

There is a tremendous improvement on company law in Nigeria as the company expands it's commercial energy.

It is unique that each company law or enactment over the years are made to conform with the business exigencies and realities at hand.

The CAMA 2020 has been lauded widely since it's passage for allowing ease of doing business and enticing SMEs, start ups and ultimately encouraging innovations.

©
Olufowose Samuel
AAUALAW
2020.

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