KPMG Identifies a mismatch in the Act and Regulations on Companies Regulations, 2021 published by CAC
OpenLife Nigeria reports that as the Honourable Minister for Industry, Trade and Investment, Chief Niyi Adebayo, had, on 31 December 2020 approved the Companies Regulations 2021 (“the Regulations”), pursuant to Section 4 of the Companies and Allied Matters Act (CAMA) 2020.
However, there are grey areas to be addressed through legislation in order to dislodge a mismatch in the turnover threshold for smaller companies.
The Regulations, which was published by the Corporate Affairs Commission (CAC), replaces the Companies Regulations, 2012 issued pursuant to the repealed CAMA, 1990.
The Regulations includes provisions that are aimed at leveraging technology to automate certain CAC’s administrative processes, clarifying certain compliance requirements of the CAMA 2020, and providing a comprehensive governance and procedural framework, in line with global regulatory best practices. As a follow up, KPMG identifies areas to be reviewed.
To address this, KPMG, a global network of professional firms providing Audit, Tax and Advisory services, through a news letter made available to OpenLife Nigeria by Wole Obayomi, reflected on the development as presented below
“We commend the CAC for the timely issuance of the Regulations following the passage of the CAMA 2020. In order to achieve the priorities of CAMA 2020, including a seamless digital transition, the CAC has given registered entities up till 31 March 2021 to update and regularize their information and compliance status with the Commission. The automation of CAC’s processes is expected to expedite regulatory compliance and minimize the administrative costs associated with the erstwhile physical storage and processing of documents. However, there are still grey areas in CAMA 2020 which were addressed in the Regulations that can only be resolved by a legislative amendment. For instance, the mismatch between the turnover threshold stipulated for small companies in the Act and Regulations, respectively. Therefore, there may be challenges in the implementation of such conflicting provisions of the Regulations. Further, there are minor gaps in CAMA 2020 which may create compliance challenges for companies that the Regulations failed to address.
These issues include:
•The classification and treatment of irredeemable preference shares issued under the repealed CAMA 1990 given that companies are no longer allowed to issue irredeemable preference shares based on the amendments in CAMA 2020.
• How the register and data of LLPs created under the Partnership Law of Lagos State, 2009 will be recognised by the CAC considering the provisions of CAMA 2020. Will these LLPs be required to undergo fresh registrations with the CAC? Or will the CAC integrate their existing records with the Lagos State into its system?
• The timeframe for companies to disclose persons who held significant control in their companies prior to the commencement of CAMA 2020. • What fines or penalty are applicable to persons who fail to disclose their beneficial ownership/ significant control to investee companies based on the requirements of CAMA 2020?
• What are the guidelines for companies transitioning from small companies with respect to their current regulatory obligations under the CAMA 2020? We, therefore, expect subsequent legislative amendments to the CAMA 2020 and modifications to the Regulations to address the above noted gaps and align both the Act and Regulations with leading global regulatory practices. In the meantime, registered entities are encouraged to comply with the provisions of CAMA 2020 and the concomitant Regulations advancing its provisions, and update their records with the CAC accordingly”
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