Introduction
As already established, the Companies and Allied Matters Act (“CAMA”) 2020 allows companies registered in Nigeria to have a single shareholder and single director under section 18 (2) of the Act. A striking game-changing innovation of the single shareholder structure pursuant to the Act has been that single shareholder companies are not required to hold mandatory annual general meetings.
The Act, taking effect from 2020 as at the time it was enacted, it purportedly denied private companies that were incorporated prior to the 2020 to enjoy a uniformity for such benefits accruing to a single shareholding structure.
Relatively, The Federal High Court in Primetech Design and Engineering Nigeria Limited (“Primetech”); and (ii) Julius Berger Nigeria Plc (“JBN”) V. the Corporate Affairs Commission (“CAC”) Suit No: FHC/ABJ/CS/665/2023 has laid to rest the loggerhead between the Corporate Affairs Commission (CAC) and pre-CAMA 2020 entities (companies) seeking to transition to single shareholding in its landmark decision delivered on July 30, 2024.
The Case
In the above-mentioned case, Primetech being incorporated in 2011 as a private company with two shareholders namely: JBN and another shareholder notified the CAC of the change in its shareholding structure and requested that the change be reflected on its corporate records on the Companies Registration Portal (“CPR”) following a transfer of the shares held by the other shareholder to JBN.
The CAC refused to register and record the changes on the premise that section 18(2) of CAMA 2020 does not apply to private companies registered prior to the commencement date of CAMA 2020 (as the section only applies to private companies registered after the enactment of CAMA 2020).
Contending further, the CAC argued that the provisions of section 18(2) of CAMA 2020 cannot be relied upon to reduce the shareholding of an existing private company to one shareholder as such will be a ground for winding-up of the company under section 571(c) of CAMA 2020.
Ruling
The FHC held that the application of section 18(2) of CAMA 2020 is not limited to only private companies incorporated after the commencement date of CAMA 2020 noting that CAC’s contentions will defeat a literal interpretation of section 18(2) of CAMA 2020 and the ease-of-doing-business intentions of the legislature which is manifest in section 18(2) of CAMA 2020.
Further debunking the position of the CAC in interpretation of section 571(c) of CAMA 2020, the FHC noted that the legislature took into account, the fact that some companies are allowed to have only one shareholder, that is, private companies pursuant to section 18(2) of CAMA 2020.
Transition and Implication
The above ruling has changed the narrative that only private companies incorporated from 2020 can enjoy the priviledge of single shareholder structure further granting private entities incorporated prior to the enactment of CAMA 2020 Act to have a single director subject to certain conditions i.e. they must be private companies and their annual turnover and net assets value are not more than NGN120 million and NGN60 million respectively. However, Foreign owned companies cannot be single director companies.
Conclusion
The above ruling is unarguably laudable as it has created an avenue for individuals and corporate entities (especially foreign investors) who want to establish wholly owned entities in Nigeria t do so seamlessly.
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