What is the time limit for a company’s annual returns in Nigeria and the impact of the inactive status on CAC’s (Corporate Affairs Commission or the “Commission”) website?
CAC encountered so many digital difficulties in implementing CAMA (Companies and Allied Matter Act) 2020. Some of the glitch CAC encountered are yet to be resolved. A good example of an unresolved glitch is the company’s inactive status on CAC’s website.
Section 421(1), CAMA 2020 provides a forty-two-day time limit after the annual general meeting for the year for Companies – except small companies – to deliver their annual returns to CAC in the appropriate form.
So, what is the material event that triggers a default to deliver annual returns to CAC? S.371(1), CAMA 2020, holds the key. It provides that every company, except companies with only one member and small companies, shall in each year hold a general meeting and not more than 15 months shall elapse between the date of one general meeting and the next general meeting.
Public liability companies must hold their statutory meeting (general meeting) within six months of the incorporation date. Other companies except small companies and a company that has a single member or shareholder must hold a general meeting not more than eighteen months from the date of incorporation.
Clearly, the forty-two days’ time limit is from the date of the first general meeting or statutory meeting or from the date of the last annual general meeting (“AGM”), whether or not extended by the commission under s.237(1)(b), CAMA 2020.
A problem arises concerning the due date for a small company to deliver its annual return to the Commission under CAMA 2020 because small companies are not required to hold AGM. This is a manifest legislative oversight.
CAC’s website is still configured under the old CAMA regime that required companies to file annual returns in Nigeria not later than 30th June of each year.
Time limit for Companies’ Annual Returns
Expectedly, CAMA 2020 protects small companies and companies that have a single shareholder or member. Indeed, it would be needless box-ticking for a single-member company to hold an AGM.
What is the meaning of a small company under CAMA 2020? Evidently, the following conditions render a company a small company under CAMA 2020:
- it is a private company
- its turnover is not more than 120,000,000NGN or such amount as may be fixed by the Commission from time to time
- its net assets value is not more than 60,000,000NGN or such amount as may be fixed by the Commission from time to time
- none of its members is an alien
- none of its members is a government, government corporation or agency or its nominee; and
- in the case of a company having share capital, the directors between themselves hold at least 51% of its equity share capital.
In practice a small company runs into problems concerning the due date for its annual returns. A small business must not hold an AGM. – Henceforth, AGM may include statutory general meeting or the first general meeting.
The elaborate wordings of s.237 capture small companies, PLC, limited by guarantee, and companies other than small companies. It does not apply to a company with a sole member.
Companies are required to deliver annual returns in Nigeria to the Commission not more than forty-two days from the AGM, and a small company must not hold an AGM, we find nothing in CAMA 2020 that specify the time limit for a small company to file its annual returns.
We submit that the time limit for small companies to deliver annual returns to the Commission is 31st December of each year.
Under s.417, CAMA 2020, every company shall, at least once in every year, make and deliver to the Commission an annual return in the required manner. This is not effective within the year of incorporation.
Every other company must file its annual returns within forty-two days from the date of the last AGM. Under s.227, CAMA 2020, an AGM must be held within fifteen months of the last AGM.
Therefore, where the last AGM is held on 1st January of the preceding year, except where the Commission extends the time for an AGM, the current year’s AGM must be held not later than 1st March.
In our example above, the annual returns must be delivered to the Commission on not more than the twelfth day of May in the current year. Otherwise, each director, company secretary, the company and other officer would be liable to the applicable fine.
Companies’ Inactive Active Status
On fourteenth February 2021, the Commission issued a disclaimer that a company’s inactive status on its website results from default in filing annual returns in Nigeria.
To our mind, the Commission’s disclaimer shows a manifest lack of understanding of the clear provisions of the CAMA 2020 that we cited above.
When can CAC render a Company’s status inactive?
We submit that the Commission may render a company’s status on its website inactive after forty-two days from the date of the company’s last AGM – except where the company have obtained an approval extend the time of the AGM.
Or after 31st January of each year when a small company has failed to deliver its annual returns for the preceding year to the Commission.
A complaint to CAC may resolve the inactive status against a company’s profile on the Commission’s website. Prospective investor who are not conducting preliminary due diligence through Nigerian Counsel or Solicitors may not know any better and it may affect preliminary evaluation on the company’s governance ranking.
So, the inactive status on a CAC’s website may hurt a company. The Commission should immediately correct this glitch in the interest of the ease of doing business and promoting investment in Nigeria.