On 7th August 2020, the President of Nigeria assented to and signed into law the Companies and Allied Matters Act, 2020 (“CAMA 2020”) – the primary legislation for corporate practice in Nigeria which has now repealed the 30 year old Companies and Allied Matters Act, 1990 (“CAMA 1990”). As expected, the enactment of CAMA 2020 has garnered a lot of reactions and expectations that it will modernize Nigeria’s companies’ law and practice and also promote the ease of doing business in Nigeria. Nigeria is currently ranked 131 out of 190 countries on the World Bank’s Ease of Doing Business 2020 Index, climbing 15 places from its previous position of 146. It is expected that the introduction of CAMA 2020 will improve Nigeria’s standing in the ease of doing business index. As should be the case, CAMA 2020 introduced novel provisions, concepts and practices which will be reviewed and discussed by practitioners and stakeholders in the coming weeks. In this blog post, we briefly discuss a key issue addressed in CAMA 2020 – the introduction of a new look Corporate Affairs Commission (“CAC”), which play a key regulatory role in corporate practice in Nigeria.
The importance of a strong and effective institutional and regulatory framework in the introduction, implementation and enforcement of policies and laws cannot be overstated. It has been recognized that a strengthened institutional framework is paramount for the actualization of sustainable development. Goal 16 of the United Nations Sustainable Development Goals expressly captures the need to “build effective, accountable and inclusive institutions at all levels”. Given the importance of strong and effective institutions in the quest to achieve sustainable development, the new look CAC introduced by CAMA 2020 must therefore be commended.
Establishment of a Governing Board
Section 2(1) of CAMA 2020 established a Governing Board for the CAC responsible for performing the functions of the CAC. This was not the case under the repealed CAMA 1990, which only provided for members of the CAC but not a duly established governing board with clearly stated functions.
The functions of the Governing Board as provided in Section 4 of CAMA 2020 include reviewing and providing general policy guidelines for performing the functions of the CAC in accordance with international commercial best practice, exercising general oversight on the administration of the CAC, reviewing and approving the strategic plans of the CAC, considering management reports and advising the Minister charged with responsibility for trade on the reports.
The requirement for the Governing Board to review and provide policy guidelines in accordance with international commercial best practice is a welcomed provision, which will go a long way in institutionalizing international commercial and corporate best practices in Nigerian corporate law and practice. In addition, the oversight functions conferred on the Governing Board over the affairs of the CAC will hopefully lead to an effective and efficient CAC. It is expected that by reviewing the strategic plans of the CAC and considering management reports of CAC, the Governing Board will ensure that the CAC delivers on its inherent responsibility of contributing to the quest to improve the ease of doing business in Nigeria in order to facilitate the sustainable development of Nigeria.
Membership of the Governing Board
Section 2(2) of CAMA 2020 sets out the membership of the Governing Board. Although the membership of the Governing Board of the CAC as provided in CAMA 2020 largely corresponds with the membership of the CAC as set out in CAMA 1990, CAMA 2020 expanded the composition of the Governing Board.
In addition to the composition contained in CAMA 1990 (that is, Chairman, the Registrar-General of the CAC and one representative of each of the business community, legal profession, accountancy profession, Manufacturers Association of Nigeria, Securities and Exchange Commission, Federal Ministry of Industry, Trade and Investment and Federal Ministry of Justice), the Governing Board will also have the benefit of the experiences and expertise of one representative of each of the Institute of Chartered Secretaries and Administrators of Nigeria, Nigerian Association of Small and Medium Enterprises and Federal Ministry of Finance. The incorporation of individuals representing critical segments of the Nigerian economy and corporate practice will no doubt improve deliberations of the Governing Board and policies guidelines introduced by the Governing Board. Particularly, the requirement for the appointment of a representative of the Nigerian Association of Small and Medium Enterprises must be applauded given the importance of micro, small and medium enterprises to the development of Nigeria.
While applauding the establishment of the Governing Board and its expanded composition, it is important to note that the retention of the Minister’s powers to, with the approval of the President, remove any member of the Governing Board “if the Minister is of the opinion that it is not in the interest of the Commission for the member to continue in office” without stating any objective criteria may negatively impact the independence of the Governing Board and give rise to questions on the independence of the Governing Board in the discharge of its functions.
CAC – Expanded Functions
Another interesting provision of CAMA 2020 is the expanded functions of the CAC. Section 8 of CAMA 2020 provides for a new responsibility of the CAC to arrange or conduct an investigation into the affairs of incorporated trustees where the interest of members or public so demands. This new function of the CAC in respect of incorporated trustees and the potential impact it will have in relation to the thorny issue of the regulation of non-governmental organisations (NGOs) in Nigeria will be considered in more detail in subsequent blog posts and newsletters.
CAC – Now Conferred with the Powers to Make Regulations
Under the repealed CAMA 1990, the powers to make regulations were conferred on the Minister and not the CAC. However, Section 867 of CAMA 2020 has changed this position with the CAC now conferred with the powers to make regulations. However, the regulations made by the CAC is subject to the approval of the Minister.
The promulgation of CAMA 2020 should improve Nigeria’s standing in the ease of doing business index and lead to increased foreign direct investments into the Nigerian economy. The enactment of CAMA 2020 must therefore be applauded notwithstanding any identified shortcomings.
 See section 3(2) of CAMA 2020 and also, section 3(2) of CAMA 1990.
 See sections 16, 585 and 609 of CAMA 1990.
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