A few months ago, the
Nigerian parliament (the Senate) passed the Bill for an Act to Repeal the
Companies and Allied
Matters Act 2004 (CAMA) and enact, in its place, the Companies and Allied
Matters Act 2018 (the “Bill”). The Bill is now awaiting presidential assent for
it to become law.
[Afroleopa is happy
to provide a copy of the Bill upon request]. This
post only addresses some aspects of the Bill that particular affect IP and
creative entrepreneurship.
Some key points of
departure from the existing CAMA include:
(1) Provision
for the establishment of single member companies and in the case of small
companies, provision for single directorship. Small companies are private
companies with turnover of N2million or less; net assets of N1million or less;
no foreign or government agency membership and whose directors between
themselves hold not less than 51% of the company’s share capital. The existing
CAMA requires all companies to have at least 2 directors and 2 shareholders.
(2) Exemption
of small companies from the requirement to appoint a company secretary. The
existing CAMA requires all companies to appoint a company secretary.
(3) Exemption
of small companies from the requirement of appointing auditors where it has not
carried on business since incorporation or in a particular financial year or
where its turnover is not more than N10m and its balance sheet total is not
more than N5m.
(4) Requirement
of disclosure in the case of individuals who hold shares on behalf of other
persons.
(5) Removal
of stringent and mandatory timelines for holding Annual General Meetings in the
case of small companies.
(6) Removal of Attorney General’s (AG) Consent for
Company Limited by Guarantee and its place, the requirement to publish the application for
registration in three national newspapers. The existing CAMA required the
consent of the Attorney General for the registration of companies limited by
guarantee.
(7) Removal
of the requirement for an order of the Federal High court for reduction of
share capital in the case of private companies.
Comments
A key aspect of
IP management is the establishment of business and ownership structures.
Business structures are established in accordance with extant company laws.
Therefore, the provisions of the CAMA in the case of Nigeria are crucial to IP
management in many respects. By extension, many of the proposed changes to the
CAMA as reflected in the Bill will have relevance for the IP community. Some IP
perspectives on the Bill:
(a) Single Member Companies: According to the existing CAMA, each company
must have at least 2 shareholders and 2 directors and individuals seeking to do
business in a name outside their own legal name may only do so as a business
enterprise under Part C of CAMA
(Section 573 of CAMA). Consequently, creators, designers, artists, authors and other copyright owners are constrained to either register their entrepreneurial
bent through a business enterprise or involve another individual (usually managers, family members, legal advisers)
as
co-shareholder and co-director. The Bill provides individual creators with the opportunity to
establish their own incorporated companies as sole shareholders and sole
directors. This means that individual creators would now enjoy the benefits of incorporation
whilst retaining the powers to solely pilot their affairs as far as their
creativity directs. As sole shareholders and directors, individual creators can
now provide both entrepreneurial and artistic direction to their companies
without interference from other persons who are not part of their creative
activities. In addition, the purport of the sole shareholder and director
provision is the ability of individual creators to ‘monetise’ their creative
outputs in share capital aiding valuations and succession.
(b) Lifting the veil
of incorporation: The significance of incorporation under company law in
Nigeria is that such company is recognised as a legal person separate from its
shareholders. Accordingly, any claims arising from the company’s activities
would be brought against the company itself and not against its shareholders
unless circumstances necessitate the lifting of the veil of incorporation. The courts
may, upon application “lift the veil of incorporation” and hold the directors of
a company liable where the directors have used the corporate shield of the
company to commit an illegality or fraud. The single member company proposed in
the Bill will also enjoy separate legal personality from its single member
despite having one known shareholder (who may be a director as well). However, it
may be easier to lift the veil of incorporation of a single member and director
company because there is no other person within such company that may be held
responsible as the acting mind of the company. IP owners may find themselves
personally liable for the actions of their companies in such instance.
(c)
Monetary thresholds: The Bill provides several monetary thresholds
(for example, turnover of N2million or less; net assets of N1million or less)
for companies to qualify as small companies, which may enjoy exemptions, such as
non-requirement of appointment of auditors and company secretaries and removal
of strict timelines for AGMs. From an IP perspective, this raises several
questions: Given the various streams of income from song-writing, endorsements,
streaming and licensing, will copyright owners such as composers, music artists,
publishers etc. (continue) to qualify as small companies? Will the status of a
company change each financial year, depending on its turnover and assets? Given
the rate of inflation, will the monetary threshold not become obsolete
standards for the size and status of companies?
(d)
Companies limited by guarantee: The Bill proposes a deletion of the
requirement under the existing CAMA for companies limited by guarantee to
obtain the AG’s consent for registration purposes. The Nigerian
Copyright Act requires all aspiring collecting societies to be incorporated
as companies limited by guarantee. This meant that aspiring collecting
societies have needed to procure the AG’s consent in order to even commence the
application process to the Nigerian Copyright Commission for approval to operate
as collecting societies. This change now obviates this requirement and may open
the door for more application for approval to operate as collecting societies.
(e) Disclosure
of beneficial ownership: The
Bill requires holders of beneficial interests in shares to disclose such
interests to the company. But, what would be the point of disclosing such
interests if the company and other shareholders are not able to take any action
with the knowledge of such disclosure? For instance, would the holder of
beneficial interest be required to transfer such interests to the actual owner
or to the company?
No doubt, the
Bill has several provisions that would greatly benefit IP owners, especially
creative entrepreneurs. But, in making adjustments to enjoy the benefits of the
Bill, IP owners and creative entrepreneurs would also do well to be aware of
how best to maximize the benefits.
