In 1990, Nigeria administered a framework for its business environment through the Companies and Allied Matters Act (CAMA), which was amended in 2004. After thirty years of making legislative and executive adjustments to the CAMA Act, in August 2020, President Buhari assented to the CAMA, a new law finally addressing the intricacies of doing business in modern-day Nigeria. This new act, which repeals CAMA 1990, is innovative and revolutionary for business operations. Take a look down below to find out how it will affect SMEs, startups, and incorporated businesses.
Under the new rule, a single person can now incorporate a business or private company in Nigeria, as stipulated in Section 18. Moreover, Section 19 allows no more than twenty people to go into business without the need to incorporate it. These are significant wins for individual startups, SMEs, and business owners that want to collaborate on ventures. For instance, Section 40 jettisoned the mandatory clause that a lawyer or notary public must sign or attest to declarations made by businesses during registration with the Corporate Affairs Commission (CAC), replacing it with a signature of the applicant or the agent. Another section also reduces the total fees payable to the CAC for filing to 0.35% of the value of the charge, and Section 330 states that the appointment of secretaries is optional for private companies as opposed to being mandatory before. This makes business registrations much easier for startups and SMEs.
CAMA also sets a new stage for the future of Nigerian businesses and work through technology. Section 240 allows private companies to hold electronic meetings, Section 861 approves electronically filed documents, and Section 176 states that electronic share transfer is now admissible. These new rules reduce work commute while giving legal backup to remote work.
Furthermore, in section 402, the yearly audit of accounts has been made optional for small businesses, giving them room to grow. Sections 119, 120, 256, and 330 also focus on the abuse of power, duplication of duties, and conflict of interest during business operations while promoting transparency and accountability. However, the new act also increases the Minimum-issued Share Capital (MSC) of private companies by 1000%, while the turnover and asset value of small companies was raised to 6000% due to Section 394. Although it makes up for inflation rates and foreign exchange fluctuations, it leads to a profit margin problem that clogs companies' transitions from small businesses to medium scales.
Overall, CAMA 2020 has put forward mostly major improvements to the company regulation and practice in Nigeria. This will enhance productivity and promote ease of doing business in the country, benefiting many SMEs.
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