Tuesday, August 11, 2020/ 10:52 PM / By
Stella, Toyin, Oluwatoba, Tosin & Ezomime of Banwo & Ighodalo / Header Image Credit: Daily Post Nigeria
On August 7, 2020, President Muhammadu Buhari assented
to the Companies and Allied Maters Act, 2020 (“CAMA 2020″), which repeals and replaces the Companies and Allied
Matters Act, 1990 (the “Repealed
Act”).
As noted in our earlier Newsletter which highlighted critical changes sought to be introduced
by the new regime, shortly after the repeal and re-enactment bill was first
passed by the National Assembly, this CAMA 2020 is undeniably a progressive
development in the Nigerian business and economic landscape and a big boost to
the Ease-of-Doing-Business (EoDB)
campaign of the Government.
CAMA
2020 provides a robust framework for reforming identified onerous legal, regulatory
and administrative bottlenecks which, for three decades, have made doing
business in Nigeria substantially difficult (particularly for Micro, Small and
Medium Enterprises (MSMEs)), and
impeded investments into Nigeria.
In
this article, we highlight key provisions in CAMA 2020 and their impact on
current and future commercial transactions as well as business entities,
generally.
1. Mergers, Acquisitions and Business Combinations
(A) Acquisitions
(i) Right
of first offer and other restrictions
CAMA 2020 introduces in
Section 22, a statutory “right of first
offer”. In essence, subject to the provisions of the articles of
association of a company, it is now prohibited for a member of a private
company to transfer shares in said company to a non-member, without first
offering the said shares to existing members.
Furthermore, a company
cannot, without the approval of all its shareholders, sell
assets having a value of more than 50% of the total assets of the company.
Also, a shareholder or a group of shareholders, acting in concert, cannot agree
to sell more than 50% of the shares of the company to a non-shareholder without
such non-shareholder agreeing to buy the shares of the other existing
shareholders on the same terms.
(ii) Provisions on Financial Assistance by
Company for acquisition of its shares
The definition of
financial assistance as it relates to a company’s acquisition of its own shares
has been updated in CAMA 2020 to include any other financial assistance given by a
company, the net assets of which are thereby reduced by up to 50%, or which has no “net assets”.
Whilst “net assets” was not defined in the Repealed
Act, the term has now been expressly defined in section 183 (3) of CAMA 2020 to
mean the “aggregate
of the company’s assets less the aggregate of its liabilities”; and these
liabilities include any charges or provision for liabilities in accordance with
the applicable accounting standards applied by the company in relation to its
accounts.
Additionally,
the exemptions to the financial assistance rule have now been expanded under
section 183 (3) (a) – (f) of CAMA 2020 such that a
company shall not be prevented from rendering financial assistance where:
(i) “it is done in pursuance of an order of
the court under a scheme of arrangement; a scheme of merger or any other scheme
or restructuring of a company done with the sanction of the Court”;
(ii) “its
principal purpose in giving the assistance is not to reduce or discharge any
liability incurred by a person for the purpose of the acquisition of shares in
the company or its holding company, or the reduction or discharge of any such
liability, but an incidental part of some larger purpose of the company, and
the assistance is given in good faith in the interests of the company”.
(iii)
Acquisition
by a company of its own shares (Share Buyback)
Section
184 (1) provides for the procedure for the acquisition by a company of its
shares and Section 186 outlines the persons from whom a company may buy back
its own shares which are: (a) the existing shareholders or security holders on
a proportionate basis; (b) the existing shareholders in a manner permitted
pursuant to a scheme of arrangement sanctioned by the court; (c) the open
market; and (d) by purchasing the securities issued to employees of the company
pursuant to a scheme of stock option or any other similar scheme.
Where a company buys back its shares, payment for the
share buyback shall be made from the distributable profits of the company.
(B) Mergers
(i) Hierarchical jurisdiction
between the Federal Competition and Consumer Protection Commission and the Corporate Affairs Commission (“CAC” or “Commission”)
Section 849 of CAMA 2020 provides
for the merger of associations, and states that two or more associations with
similar aims and objects may merge under
terms and conditions as the CAC may prescribe by regulation.
It is important to note that Section 105 of the Federal Competition and
Consumer Protection (“FCCP”) Act of 2018 establishes a hierarchical jurisdiction between
the Federal Competition and Consumer Protection Commission (“FCCPC”) and any relevant government
agency in a regulated industry, whereby the FCCPC takes precedence over and
above such relevant government agency in matters of mergers/business combination.
In addition to this, any regulation by the CAC on mergers will also be subject
to Guidelines jointly issued by the FCCPC and the Securities and Exchange
Commission (“SEC”) on the subject.
However, it is currently
unclear, if the merger of associations “properly so called and/or structured”,
would be subject to the jurisdiction of the FCCPC. Indeed, the definitions
attaching to the terms such as “associations”, “undertakings” or “business enterprises” will be key in
settling the FCCPC’s jurisdiction in this regard.
(ii)
Arrangement or compromise between two or more companies
Section 711 of CAMA 2020 provides for the power of the Court to order separate
meetings of companies on the application in summary of any of the companies to
be affected, where under a scheme proposed for a compromise, arrangement or
reconstruction between two or more companies or the merger of any two or more
companies, the whole or any part of the undertaking or the property of any
company concerned in the scheme is to be transferred to another company.
Members of the companies representing at least three quarter
in value of the share of members being present and voting either in person or by proxy
at each of the separate meetings must agree to the scheme before the Court can
sanction same.
The repeal by the FCCP Act of
Sections 118 – 128 of the Investments and Securities
Act (“ISA”), (which are the sections which hitherto
provided a legal framework for conducting mergers) created a gap in the
procedure for conducting same. This gap has now been plugged with Section 711 of
CAMA 2020 which provides a legal framework for mergers.
(iii)
Provisions
applicable to scheme or contract involving transfer of shares in a company
By
virtue of Section 712 of CAMA 2020, where a scheme or contract, not being a
take-over bid under the ISA involving the transfer of shares or any class of
shares in a company to another company, has, within four months after the
making of the offer in that behalf by the transferee company, been approved by
the holders of at least nine-tenth in value of the shares of the company (other
than shares already held at the date of the offer by a nominee for the
transferee company, or its subsidiary), the transferee company may at any time
within two months after the expiration of the said four months give notice in
the prescribed manner to any dissenting shareholder that it desires to acquire its
shares.
This
section, which was hitherto absent in the Repealed Act, replicates the existing
provisions of Section 129 of the ISA.
Moratorium on
creditors voluntary winding up in a scheme of arrangement
Under Section 717 of CAMA 2020,
no winding up petition or enforcement action by a
creditor (secured or unsecured) shall be entertained against any company or its
assets that has commenced a process of arrangement and compromise with its
creditors for six months, from the time that the relevant company, by way of
affidavit, provides all the requisite documents for
such arrangement or compromise, to the Court
However, a secured creditor may,
by application to the court, filed within 30 days of notice of the
arrangement and compromise, discharge the six months’ moratorium period if
certain conditions set out in section 717 (2) of CAMA 2020
are met; and provided that the company, upon the approval or consent shall file
a further affidavit updating the court of the dissipation of the said asset.
(v)
Netting
CAMA 2020 under Sections 718 -
721 introduces the concept of “Netting”. Specifically, Section 721
of CAMA 2020 states that the provisions of a netting agreement are enforceable
in accordance with their terms, including against an insolvent party, and,
where applicable, against a guarantor or other person providing security for a
party and shall not be stayed, avoided or otherwise limited by: (a) the action
of a liquidator; (b) any other provision of law relating to bankruptcy,
reorganisation, composition with creditors, receivership or any other
insolvency proceeding an insolvent party may be subject to; or (c) any other
provision of law that may be applicable to an insolvent party, subject to the
conditions contained in the applicable netting agreement.
(vi) Disclosure of
significant control and beneficial ownership
Whilst
under the Repealed Act, the obligations to disclose beneficial interest was
limited to where such interest was acquired in a public company, CAMA 2020 does
not make a distinction between disclosure required by a public company and a
private company.
Specifically,
Sections 119 and 120 of CAMA 2020, provide that persons who hold significant
control in any type of company are required to disclose particulars
of such control to the relevant companies within seven days of acquiring such
significant control. All affected companies must inform the Commission within
one month of receipt of the information, disclose the information in their
annual returns to the Commission and update their registers of members with the
appropriate details.
These
amendments are targeted at increasing transparency and combatting asset
shielding, and are particularly significant because they may mandate the
disclosure of beneficial interests in a company, even where such interests are
held through nominal holders or in trust. Accordingly, it would appear that holding
of shares by way of trust arrangements is now permissible under CAMA 2020 and the
Commission may be notified of such trusts.
(vii) Threshold
of substantial interest
Section
120 (2) of CAMA 2020 now provides that a person is deemed a substantial
shareholder in a public company if he holds under his name or by his nominee, shares
in the company which entitle him to exercise at least 5% of the
unrestricted voting rights at any general meeting of the company.
The
relevant company is mandatorily obligated to give notice to the Commission,
where (i) any person becomes a substantial shareholder, within 14 days of
receipt of the notice from the substantial shareholder or upon becoming aware
that a person is a substantial holder; and (ii) any person ceases to be a
substantial shareholder, within 14 days of becoming aware of such cessation.
2.
Financing
Transactions and Creation of Security
(a)
Floating Charges
Under
Section 204 of CAMA 2020, a person is deemed to have notice of a prohibition in
a floating charge where a notice indicating its existence is registered with
the Commission. Furthermore, Section 207 of CAMA 2020 provides that, notwithstanding any provision in the CAMA
2020 or any other law to the contrary, the holder of a fixed charge shall have
priority over other debts of the company including preferential debts.
(b)
Trust
Deeds
Notably,
the provision of the Repealed Act, which disqualifies a substantial shareholder
of a company from acting as trustee of a debenture trust deed has not been
replicated in CAMA 2020. Accordingly, it would appear that substantial
shareholders are no longer restricted from acting as trustees in a debenture
trust deed to which the company is a party.
(c)
Registration
of Charges created by Companies
Section
222 of CAMA 2020 stipulates that the total fees payable to the Commission in
connection with the filing, registration or release of a charge shall
not exceed 0.35% of the value of the charge or such other amount as
the Minister may specify. This provision introduces a significant
reduction in the fees payable for the registration of charges as same previously
cost N10,000 for every N1,000,000 or part thereof for private
companies and N20,000 for very N1,000,000 or very part thereof for public
companies.
Further,
Section of 223 of CAMA 2020 now imposes an obligation on the Commission to enter
in the register of charges, a notice indicating the existence of any provisions
in a floating charge that prohibit or restrict the company from granting any
further charge ranking in priority to, or pari
passu with, the floating charge.
(d) Avoidance or Attachments etc.
Section 577
of CAMA 2020 now includes a proviso, which contemplates that where a company is being wound up,
only a fixed charge holder (or any other validly created and perfected security
interest other than a floating charge holder) will now be able to enforce
security, sequestrate, attach or levy execution on the assets of the company.
(e) Application of bankruptcy rules in
certain cases
Section
656 of CAMA 2020 introduces a proviso that states that nothing shall affect the
power of any secured creditor to realise or otherwise deal with his security
during the winding up of an insolvent company registered in Nigeria.
3.
Company Restructuring -Restrictions on Distributable
Profits
Section
427 of CAMA 2020 restricts the profits of a company available for payment of
dividends only to, the company’s accumulated, realised profits (so far as not
previously utilised by distribution or capitalisation) less the company’s
accumulated, realised losses (so far as not previously written off in a lawfully
made reduction or reorganisation of capital).
In
essence, any part of a company’s profits utilised for purpose of capitalisation
shall not count in determining the amount of profits available for dividend
payment in a financial year. In the same vein, losses incurred by a company as
a result of a legally valid share capital reduction or business reorganisation,
shall not impair the amount of profits available for dividend payment in a
financial year.
4.
General Company
Operations
(a) Common Seal
By
virtue of Section 98 of CAMA 2020, it is no longer mandatory for a company to
have a company seal and companies now have the sole discretion to choose
whether or not to have one.
(b) Authentication via
Electronic Signature
In compliance with
modern technological capabilities and developments, as well as the provisions
of the Evidence Act, 2011, CAMA 2020 now provides that an electronic signature is deemed to satisfy the requirement for signing
and that the register of transfers shall include electronic
registers.
Additionally, a
document or proceeding requiring authentication by a company may be signed by a
director, secretary, or other authorised officer of the company, and need not be signed as a deed
unless otherwise specifically required by CAMA 2020.
(c) Validity of Improperly
Issued Shares
Under
the Repealed Act, where shares were improperly issued or allotted, the court
could upon being satisfied that in all the circumstances specified in the
Repealed Act that it is just and equitable to do so, validate the
issuance/allotment.
However,
Section 148 of CAMA 2020 now authorises the company itself to validate the
issuance/allotment of such shares by way of a special resolution.
Only
where the company refuses to do the above, will the affected party need to
apply to court.
(d)
Authority to
Allot Shares
The power to allot shares
remains vested in the shareholders of the company, whether private or public.
However, Section 149 of CAMA 2020 now restricts
the authority to delegate to directors, the powers to allot, to only
shareholders of private companies, subject of course, to any condition or direction that may be imposed in the
articles or by the company in general meeting. For the avoidance of doubt, the power to allot shares
cannot be exercised by directors, without more unless expressly authorised by
the shareholders at a general meeting or by the company’s articles.
Consequently, the authority to delegate the power to allot shares can no
longer be exercised by shareholders in public companies; and the power to allot
shares in public companies remains subject to the ISA.
(e)
Power to Vary Rights
The
Repealed Act already provides that the rights of a class of shares may be
varied with the consent, in writing, of the holders of three- quarters of the
issued shares of that class, or with the sanction of a special resolution
passed at a separate general meeting of the holders of the shares of the class.
However,
CAMA 2020 seeks to create a distinction by providing that the rights may only
be varied with the consent, in writing, of the holders of three- quarters of
the issued shares of that class, or with the sanction of a special resolution
passed at a separate general meeting of the holders of the shares of the class where the articles of the company do not
provide for the variation of those rights.
Furthermore,
Section 166 of CAMA 2020 states that any proposed amendment or inclusion of a
provision in a company’s Articles relating to the (variation of) rights attached
to a class of shares, shall require the written consent of the holders of ¾ of
the issued shares of that class.
(f)
Share
certificate
Due
to the amendment in Section 98 of CAMA 2020 which makes a common seal optional,
CAMA 2020 now provides that a share certificate may either be (a) issued
under the company’s seal (where the company has a common seal or (b) signed as a deed by the company.
(g) Exemption from audit
requirement
Every company, without
qualification, was required under the Repealed Act to appoint an auditor or auditors
at its AGM to audit the financial records of the company. However, Section 402
of CAMA 2020 exempts small companies
and companies that have not carried out business since incorporation (other
than an insurance company or a bank or any other company as may be prescribed
by the CAC) from the requirements of the law relating to the audit of accounts
in respect of a financial year.
(h) Public companies to
display their audited accounts on websites
In sync
with an existing requirement of the Nigerian Stock Exchange and the SEC, CAMA
2020 in Section 374(6) now requires every public company to keep its audited
accounts displayed on its website.
5.
Shareholder/Board
Meetings and Company Secretarial Matters
(a)
New Ordinary
Business to be transacted at an Annual General Meeting (AGM)
Under
Section 238 of CAMA 2020, disclosure of remuneration of managers of a
company has been added as part of the business transacted at an Annual
General Meeting (“AGM”), which shall
be deemed ordinary business. Additionally, Section 257 of CAMA 2020 also
provides that the compensation of managers of a company shall be disclosed to
members of the company at the AGM.
However,
Section 242 of CAMA 2020 appears to create a conflict with Section 238 of CAMA
2020, as it doesn’t include the “disclosure of remuneration of managers of a
company” as part of the business to be transacted as ordinary business at an
AGM where the notice of such an AGM indicates that a statement that the purpose
is to transact the ordinary business of an annual general meeting.
(b) Place of meetings
Further to Section 240 (2)
of CAMA, private companies are now permitted to hold
general meetings virtually. However, this amendment does not extend to public
companies. Consequently, public companies are still required to hold general
meetings, physically.
(c) Persons entitled to receive Notice of a General
Meeting of Public Companies
In
furtherance of the Commission’s mandate to regulate the management of
companies, Section 243 of CAMA 2020 includes the Commission as a party entitled
to receive notice of general meetings of public companies. Previously, this
requirement only applied to incorporated trustees.
6.
Directors and
Company Secretary
(a)
Powers and Duties of the Chairman
CAMA
2020 in Section 265(6) explicitly prohibits the office of Chief Executive
Officer and Chairman of a public company to be held by the same person. The
separation of these two (2) roles is in line with international best practices
and the Nigerian Code of Corporate Governance, 2018 (“NCCG”).
(b)
Minimum Directors
Section 271 of CAMA 2020
excludes small companies from the requirement of having a
minimum of two (2) directors. To this end, a small company is permitted to have
one (1) director.
(c) Independent directors in public company
Section 275 of CAMA 2020 stipulates that every public company must now
have at least three independent directors. Currently, the SEC Code of
Corporate Governance (for public companies) and the NCCG provides that
companies should have a minimum of one independent director. This provision of CAMA
2020 creates a higher threshold for this requirement and companies will be
mandated to meet this higher requirement of three independent directors
regardless of the requirement of the SEC Rules and the NCCG.
Furthermore, the
definition of an independent director must also be read in tandem with the NCCG
which provides even more stringent criteria that must be met, in order to
attain best corporate governance practices.
(d)
Duty of
Directors to disclose age and multiple directorship
CAMA
2020, in Section 278, makes provisions for the disclosure of multiple
directorships held by any person to be appointed as a director of a public
company.
This
amendment is in tandem with the provision of the NCCG and pertains mainly to
the ability of a director to discharge his functions given his multiple
responsibilities/commitments and also to inform the company of any potential or
existing conflicts of interest in respect of the multiple directorships. Additionally,
subject to subsection (3) of Section 307(2), a person shall not be a director
in more than five public companies.
(e) Appointment of
Company Secretary
Under the Repealed Act, every
company was mandatorily required to have a secretary. However, by virtue of
Section 330 of CAMA 2020, the appointment of a company secretary is not
mandatory but optional for small companies.
Whilst the purpose of this amendment is undoubtedly to
reduce cost and boost the ease of doing business in Nigeria, it is important to
strategically select a reputable firm for the provision of company secretarial
services, as this is pivotal to the overall success of every business.
(f) Register
of Secretaries
Whilst the Repealed Act required
all companies to have a register of secretaries, CAMA 2020 in Section 336
requires only public companies
to maintain a register of secretaries and Sections 337 & 338 provides for
the required particulars. This is expected to reduce the operational
requirements for private companies in furtherance of the ease of doing
business.
7.
MSMEs, NGOs, Incorporated
Trustees
(a) Merger of Associations
Section
849 of CAMA 2020 provides for the merger of associations. Two or more
associations with similar aims and objects may merge under terms and conditions
as the Commission may prescribe by regulation.
Also, CAMA 2020 in Section 831(ii) provides for the
treatment of any two or more associations having the same trustees to be
treated as a single association. This is without prejudice to the provisions of
section 850 on mergers of Incorporated Trustees.
This provision is expected
to facilitate effective supervision and regulation of registered association
with related operations. It is equally expected to promote accountability and
enforcement of compliance, as well as establish nexus between associations for
the purpose of determining control and ultimate ownership of property.
Additionally, it is noteworthy that regulation made by the CAC pursuant to
Section 849 of CAMA 2020, for the purpose of regulating the mergers of
associations registered under CAMA 2020, shall be subject to such other
regulation made by the FCCPC. This is in compliance with the provisions of
Section 164 of the FCCP Act, which state that the provisions
of any other enactments (including the ISA and the CAMA), regulations or
subsidiary laws relating to or connected with matters of competition and
consumer protection; are to be read with such modifications as are
necessary to bring them in conformity with the FCCP Act.
(b) Introduction of
Alternative to AG’s Consent
The
Repealed Act required all companies limited by guarantee not to be
registered with a share capital. This provision has been deleted from CAMA 2020.
However, it is unclear whether the intention is for companies limited by
guarantee to now be registered with share capital, and the applicable
authorised share capital, under the new regime.
Also,
Section 26 of CAMA 2020 maintains that the Consent of the Attorney General of
the Federation (“AG”) shall remain the primary pre-requisite for the
grant of registration of a company limited by guarantee.
However,
an alternative to the AG’s Consent has been introduced in the event that the AG
does not grant authority to the promoters within thirty (30) days (where there
are no objections or other cogent reasons for refusal). The alternative method
allows promoters to place an advert in three (3) national dailies and invite
objections within twenty-eight (28) days. Where there are no objections, CAMA
2020 empowers the CAC to assent to the application and register the company without
the AG’s Consent, after advertising the application in three
national dailies.
8.
Company Incorporated and
Incidental Matters
(a) Introduction of a Single
Individual’s Right to Form a Company
By
virtue of Section 18 of CAMA 2020, one person
may form and incorporate a private company by complying with the
requirements of CAMA 2020 in respect of private companies. This amendment will
enable small scale entrepreneurs to exercise
absolute control and authority over the operation and management of their
businesses.
(b) Minimum Issued Share
Capital (“MISC”)
Under
CAMA 2020, the minimum authorised share capital’ (“ASC”) has been
replaced with a requirement for companies to maintain a minimum issued share
capital, stated in its memorandum of association.
In
the Repealed Act, the ASC requirement was no less than N10,000 for private companies and no less than N500,000 for public companies. CAMA 2020 has increased the MISC to
a minimum of N100,000.00 in the
case of a private company and N2,000,000.00
in the case of a public company.
In
relation to the minimum contribution of members of a company limited by
guarantee, it is now a minimum of N100,000
as opposed to N10,000 in the Repealed
Act. In addition to this, Section 27 of CAMA 2020 has made
a significant exclusion of the provision requiring subscribers to the
memorandum to subscribe to a minimum of 25% of the ASC.
(c) Withdrawal/Revocation of Certificate of
Incorporation
Under
CAMA 2020, Section 41 empowers the Commission to withdraw or revoke any
Certificate of Incorporation issued where it is discovered that the certificate
was obtained fraudulently, unlawfully or improperly. The Commission can also
publish such information in the Federal Government Gazette.
(d) Re-registration of
Companies
The key addition to the provisions on the re-registration of companies
is the introduction of the option of re-registration of a public company as an
unlimited company, provided
that certain conditions are fulfilled as stipulated under section 75 of CAMA
2020.
(e) Exemption for Foreign
Companies
Under
the Repealed Act, a foreign company intending to carry on business in Nigeria
without fulfilling the requirement of the law regarding incorporation
in-country, had to apply to the President through the National Council of
Ministers, for exemption from the requirement to incorporate a separate entity
in Nigeria.
Under
section 80 of CAMA 2020, a foreign company can now file an
application for exemption directly to the Minister of Trade. After
obtaining the exemption, the foreign company is obligated to notify the
Commission within thirty (30) days failing which the foreign company will be
liable to a fine.
Additionally,
where an exempted foreign company fails to provide an annual report to the
Commission, the company will be liable to a penalty for every year of default
where currently no penalty is stipulated.
9.
Winding up and Liquidation
(a) Preferential Payments
Under Section 657 of CAMA 2020,
where a company is being wound up, priority must now be given to deductions
made from the remuneration of employees and contributions of the company under
the Pension Reform Act, and contributions and obligations of the company under
the Employees’ Compensation Act.
Furthermore, a company’s debts
shall rank equally among themselves after the expenses of the
winding up have been settled and the debts shall be paid in full, unless the
assets are insufficient to meet them, in which case they shall abate in equal
proportions.
(b) Fraudulent
Preference
Section
658 of CAMA 2020 expands the provisions on fraudulent preference under the
Repealed Act. Where a company at any time within the period of years ending
with the onset of insolvency (i.e. the time of presentation of a petition for winding up in the case
of a winding up by or subject to the supervision of the Court or, the passing
of a resolution for winding up in the case of a voluntary winding up)
or the period of three months ending with
the onset of insolvency does anything or procures anything to be done which has
the effect of putting a person, being one of the company’s creditors or a
surety or guarantor undue advantage shall be deemed a preference of that
person, and be invalid accordingly.
However, a preference given to any person is not
invalid unless the company, which gave the preference was influenced in
deciding to give it by a desire to produce in relation to that person the
aforementioned effect. Furthermore, the fact that something has been done in
pursuance of the order of a Court does not, without more, prevent the doing or
procuring of that thing from constituting the giving of a preference.
(c) Supplies
of gas, water, electricity, etc.
Section 665 of CAMA 2020
provides some form of protection for providers of essential services such as
gas, electricity or communication services to companies undergoing liquidation
by providing that the office holders guarantee, the payment of charges in
respect of such supply. However, such service provider cannot make the payment
of charges outstanding prior to the effective date a
condition for the supply of the services.
10.
Limited Liability
Partnerships (LLPs)
CAMA
2020 acknowledges LLPs as a business structure in Sections 746 – 810. This new
provisions develop our legal framework in line with that of other
jurisdictions, such as the United Kingdom and the United States of America.
Under the Repealed Act, partnerships were not considered a body corporate with
separate legal entity, and thus the liability of such partnerships were not
recognised under Nigerian law. However, CAMA 2020 rectifies this by including
extensive provisions governing and regulating LLPs.
11. Grandfathered/Savings Provisions – Status of Completed
Transaction & Outstanding Obligations
Section
869 (2) of CAMA 2020 contains saving provisions validating all matters either
completed or on-going under the Repealed Act. To this extent, all orders,
rules, regulations, appointments, conveyances, mortgages, deed or agreements
made, as well as resolutions passed, directions given, proceedings taken,
instruments issued, and anything done under the old regime which was in force immediately
before the commencement of the CAMA 2020; shall continue to have
effect as if made, passed, given, taken, issued or done under the new regime.
Whilst,
the CAMA 2020 does not contain express provisions on ongoing transactions or outstanding
obligations, it could be argued that the logical sequence would be for such
transactions, which have been commenced but not completed, to be continued and
indeed completed, in strict compliance with the provisions of the Repealed Act,
to the extent none of the required actions are not ultra vires CAMA 2020. Nonetheless,
in order to prevent any bottlenecks at the point of closing any transaction
which will require seeking approvals and/or filling relevant transaction
documents at the Commission, it will be prudent for advisers on ongoing
transactions to transition such on-going transactions such that they come within
the purview of CAMA 2020 to assure that same is not red flagged at the point of
filing the transactional documents with the Commission.
Finally,
Section 869 (7) of the CAMA 2020 provides that any individual, firm or company registered
under the Repealed Act, immediately before the coming into operation of the new
legislation, shall be deemed to be registered under and in accordance with the
Repealed Act.
The Grey Matter Concept is an
initiative of the law firm, Banwo & Ighodalo.
DISCLAIMER: This article is only intended
to provide general information on the subject matter and does not by itself
create a client/attorney relationship between readers and our Law Firm or serve
as legal advice. We are available to provide specialist legal advice on the
readers’ specific circumstances when they arise.
Footnotes
Follow the link to see our previous publication
on CAMA 2020
3 (a) a document setting out the terms intended to be proposed to
the creditors in an arrangement or compromise;
(b) a statement of the company’s affairs containing the
particulars of the company’s creditors and its debts and other liabilities and
of its assets;
(c)such other information as the
Court may require; and
(d) a statement that the company desires
a protection from a winding up process pending the completion of the arrangement
or compromise.
4 (a) the asset of the company sought to be enforced by the creditor does not
form part of the company’s pool of assets to be considered under the arrangement
and compromise proceeding;
(b) the asset sought to be enforced by the creditor is
a perishable good or commodity which may depreciate or dissipate before
expiration of the six months’ moratorium period;
(c) the secured creditor enforces its security over
the assets before receiving notice of the company’s proposed arrangement and
compromise; or
(d) the company consents in writing for a secured
creditor to enforce its right over the company’s asset within the six months’ moratorium period:
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Concept is an initiative of the law firm, Banwo & Ighodalo.
DISCLAIMER: This update is
for general information purposes only and does not constitute legal advice. If
you have any questions or require any assistance or clarification on how these
measures could apply to you or your business, please contact the following
persons above:
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