Corporate Law in Nigeria

Introduction

Corporate law in Nigeria is primarily governed by the Companies and Allied Matters Act (CAMA) 2020, which repealed and replaced the CAMA 1990. The Act establishes the legal framework for the incorporation, regulation, and dissolution of companies in Nigeria. The Corporate Affairs Commission (CAC) serves as the principal regulatory authority responsible for company registration, regulation, and supervision. CAMA 2020 introduced significant reforms to modernize Nigerian corporate law, including provisions for single-member companies, electronic filing, beneficial ownership disclosure, and enhanced corporate governance standards.

Types of Companies

CAMA 2020 recognizes several types of companies. A company limited by shares is the most common form, where the liability of members is limited to the unpaid amount on their shares. A company limited by guarantee has members whose liability is limited to the amount they undertake to contribute to the company’s assets upon winding up. An unlimited company has no limit on member liability. Companies may also be classified as private or public. A private company is restricted from offering its shares to the public and is limited to 50 members (unless an exemption applies), while a public company may offer shares to the public and is subject to more stringent regulatory requirements.

Incorporation Process

Incorporation under CAMA 2020 requires the submission of the memorandum and articles of association, a statement of compliance, particulars of directors and secretary, the registered office address, and the requisite registration fee. Section 18 requires the company’s name to end with “Limited” or “Plc” as appropriate. The CAC may register the company electronically through the CAC online portal. Upon registration, the CAC issues a certificate of incorporation, which is conclusive evidence that the company is duly incorporated.

Corporate Governance

CAMA 2020 imposes comprehensive corporate governance requirements. Every company must have at least two directors (one for private companies with single membership) and a company secretary. Section 279 imposes a duty of care, skill, and diligence on directors, requiring them to act with the care that a reasonably diligent person would exercise in comparable circumstances. Directors must act in good faith, in the best interests of the company, and for a proper purpose. The Act codifies the fiduciary duties of directors, including the duty to avoid conflicts of interest, not to accept secret profits, and to declare interests in contracts with the company.

Share Capital and Dividends

The Act distinguishes between share capital, loan capital, and reserves. Section 124 prohibits a company from issuing shares at a discount. The company may issue preference shares, redeemable shares, or shares with varying voting rights, subject to the articles of association. Dividends may be declared only out of distributable profits, as defined by section 407, and the directors must certify that the company will remain solvent after payment of the dividend.

Meetings and Resolutions

CAMA 2020 modernizes the law governing company meetings and resolutions. Section 240 permits virtual meetings and electronic participation. Resolutions may be passed by written resolution without a meeting, subject to specified procedural requirements. The Act distinguishes between ordinary resolutions (simple majority), special resolutions (75 percent majority), and unanimous resolutions. Special resolutions are required for fundamental transactions including amendments to the memorandum and articles of association, variations of class rights, reduction of share capital, and voluntary winding up.

Beneficial Ownership and Transparency

CAMA 2020 introduced mandatory disclosure of beneficial ownership. Section 119 requires companies to maintain a register of beneficial owners and to disclose individuals who ultimately own or control the company. The CAC has issued regulations requiring the filing of beneficial ownership information, and failure to comply constitutes an offense. This provision aligns Nigerian corporate law with international anti-money laundering standards.

Winding Up and Dissolution

A company may be wound up voluntarily by its members or creditors, or compulsorily by court order. Section 588 lists grounds for compulsory winding up, including the company’s inability to pay its debts, just and equitable grounds, and failure to commence business within one year of incorporation. The court appoints a liquidator who realizes the company’s assets, pays creditors, and distributes surplus to members. The Act also provides for administrative dissolution by the CAC for companies that fail to file annual returns or comply with regulatory requirements.

Conclusion

CAMA 2020 represents a comprehensive modernization of Nigerian corporate law, introducing reforms that enhance corporate governance, transparency, and ease of doing business. The Act aligns Nigerian corporate law with international best practices while addressing local circumstances. The CAC’s ongoing digitalization initiatives have streamlined company registration and compliance, contributing to Nigeria’s attractiveness as a business destination.