The signing of the Companies and Allied Matters (CAMA) Act 2020 into law could be the regulatory tonic to galvanise the estimated 41.5 million Micro, Small and Medium Enterprises (MSMEs). According to experts, MSMEs can draw sufficient strength from some of the key provisions and changes introduced by the new law. However, despite its capacity to push possibilities into the hands of MSMEs wishing to achieve scale and emerge competitive, there are flip sides to the new law. Assistant Editor CHIKODI OKEREOCHA reports.
At the last count, there were 41.5 million Micro, Small and Medium Enterprises (MSMEs) in Nigeria, with about 99 per cent of them belonging to the micro sub-sector. According to a 2017 report by the National Bureau of Statistics (NBS) and the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), the 41.5 million MSMEs account for over 95 per cent of all the businesses in the country.
MSMEs, the survey said, also contribute 50 per cent to the Gross Domestic Product (GDP) and account for 86.3 per cent of employment (59.6 million jobs). However, despite these heart-warming statistics, the consensus of industry operators and stakeholders is that MSMEs are not sufficiently galvanised to play their widely-acknowledged role as bedrock of industrialisation and driver of inclusive economic development.
According to them, Nigeria has not been able to leverage a vibrant MSME sector to create jobs and drive growth. This is because ofissues around lack of supportive infrastructure, lax and or regulation, multiple taxation, limited or no access to credit etc. have continued to hold operators in the MSME sector down and hurting their competitiveness.
However, the recent signing of the Companies and Allied Matters (CAMA) Act 2020 into law has opened a new window of opportunities for MSMEs to thrive. This is because some of the key provisions and changes introduced hold prospect of turning around the fortunes of MSMEs, as they gave practical and active fillip to existing and prospective MSMEs.
For instance, CAMA 2020 introduced new provisions to reflect modern commercial realities as well as reduced compliance costs and regulatory hurdles for businesses in Nigeria.This will help Nigeria’s quest to improve its ease of doing business index.
It was signed into law on August 7, 2020 by President Muhammadu Buhari, after it was recently passed by the National Assembly. The new Act repealed and replaced the Companies and Allied Matters Act, 1990, 30 years after the previous law was signed.
Although the new law has been the butt of controversy and scathing criticisms, mostly by churches, CAMA 2020 is said to be the most important business regulation in Nigeria, as it has significant impact on doing business, competitiveness, attracting investments, and economic growth.
For instance, Partner & Head, Tax and Regulatory Services, PricewaterhouseCoopers, (PwC Nigeria), Mr. Taiwo Oyedele, described CAMA 2020 as “A good legislation,” noting that the new law made provisions for a single member/shareholder companies whereby a private company can be established with only one member or shareholder.
Oyedele, who spoke, last week, at the virtual PwC’s “Capacity Enhancement Workshop for Journalists”, in line with COVID-19 protocols, also said filing, share transfer and meetings could be done electronically by private companies, just as virtual Annual General Meetings (AGMs) could be held for companies.
CAMA 2020 also exempts small companies or companies with single shareholders from appointing auditors. Also, appointment of a company secretary is optional for private companies
It also made provisions for a single member/shareholder companies whereby a private company can be established with only one member or shareholder. Also, authorised share capital has been replaced with minimum share capital.
This means that promoters of a business do not need to pay for shares that are not needed at a specific time with the introduction of minimum share capital provision.
CAMA 2020 also exempts small companies or companies with single shareholders from the requirement to appoint auditors. Also, the requirement for appointment of a company secretary is optional for private companies.
Oyedele also pointed out that the new law allowed the introduction of limited partnerships and limited liability partnerships in Nigeria which provides the organiaaational flexibility and tax status of a partnership with the limited liability of members of a company for partnerships.
The PwC’s tax head, in his presentation entitled: “CAMA 2020: Nigeria’s Competitiveness and Ease of Doing Business,” also said the new law “Protects minority interest even as it has administrative arrangements to rescue a company or help it achieve better results.”
Indeed, for a company in distress, the Act introduced a framework to keep it alive as against allowing the company to become insolvent on the company’s voluntary arrangements, administrations and netting.
Oyedele, however, stated that there was the need to gazette the law in line with the authentication law with a future commencement date to facilitate ease of transition.
He emphasised the importance of effective implementation, and noted the need to harmonise CAMA with other laws such as the Companies Income Tax Act (CITA), which, according to him, still requires audited accounts by all companies regardless of size.
“In addition, more flexibility is required for foreign companies who wish to operate business in Nigeria such that a branch registration should be permitted while incorporating a subsidiary will be optional.
“It is also necessary to ensure that the new law is constantly reviewed with more frequent amendments or re-enactment say every five years,” Oyedele advised.
To underscore the pivotal role of the CAMA Act 2020 in stimulating MSMEs, The Convention on Business Integrity/Integrity Organisation (CBi), last week, organised a free virtual training for MSMEs to educate them and highlight the requirements of the new law for different types of businesses.
CBi, established in 1997, with the mission of promoting ethical business practices, transparency and fair competition in the private and public sectors, said the aim of the training was to enable MSMEs, “which are crucial and known contributors to employment, economic and export growth of nations” to comply with the CAMA regulation.
CBi CEO Mr. Soji Apampa said the training became necessary, particularly in view of the fact that the novel COVID-19 pandemic, which has ravaged the entire globe, negatively impacted businesses all over the world, especially MSMEs.
To drive home this reality, CBi, citing a new survey by FATE Foundation, dubbed “The Impact of COVID-19 on Nigeria MSMEs”, said three out of every 10 MSMEs in Nigeria will not survive through the coronavirus pandemic.
Noting that the survey showcased how bad businesses in the segment had been negatively affected since the outbreak started, CBi said it had become imperative that MSMEs have strategies, relevant and practical information/tools as well as new skills to stay afloat and navigate through these stormy times.
“We believe that businesses should be abreast of relevant regulations and laws that are operational within their territory of operations to enable them comply with all relevant laws. Also, the new CAMA has business-friendly provisions that will benefit MSME at this period and post – Covid-19,” CBi said.
However, MSMEs were not the only participants at the training, which held on September 3, 2020; other interested businesses that wanted to comply with CAMA 2020 and relevant regulations in the country also participated.
Intermediate Associate at Perchstone & Graeys, Ms. Tomilola Tobun, said based on some of its provisions, CAMA 2020 is a game-changer. She said, for instance, that under the new law, virtual meetings are acceptable; no need to appoint auditors.
Tobun, who was one of the facilitators at the training, also said under Section 424 (2), there is no need for MSMEs and other businesses to submit accounts for filling annual returns.
Another facilitator and Director-General, Lagos Chamber of Commerce and Industry (LCCI), Dr. Muda Yusuf, described the CAMA 2020 as “A welcome development”, citing the 0.35 per cent reduction in filling fees, and the provision that the appointment of auditors is not compulsory.
He, however, said beyond CAMA, “We should look at other legislations like the Companies Income Tax Act (CITA) to bring them up to date with current realities.”
Noting that there are still some archaic provisions in the legislations, Yusuf said there was the need to regularly review the nation’s laws, particularly those that relate to business.
The flip sides
Exciting as the new law is, there are flip sides. “Virtual meetings reduce cost, but moving meetings to the virtual space means loss of business for Small and Medium Enterprises (SMEs) in the rental and hall decoration business,” Yusuf said, for instance.
Pointing out that SMEs in the catering services will also suffer, he added that with the reduction in the need for travels to attend AGMs and other important company meetings, the aviation/travel sector would be affected.
He also said the new law could pose a threat to SMEs in the printing and publishing sector who print audit reports and other documents required for company meetings. “In all, there are winners and losers,” he stated.
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