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Post-incorporation obligations: CAC tightens noose on defaulting firms

By BusinessNews Staff on August 11, 2014

Last week, the Corporate Affairs Commission (CAC) began the enforcement of the provisions of the Companies and Allied Matters Act, (CAMA) on post-incorporation obligations of registered companies, reports Festus Akanbi

One cheering news from the World Economic Forum recently held in Nigeria was the rising enthusiasm of foreign business promoters, including a number of Nigerians in the Diaspora to bring in billions of dollars as investments into various sectors of the Nigerian economy.
Prior to the forum, one key area of challenge was the bureaucratic bottlenecks associated with doing business with many governmental agencies in the country.

However, participants at the all-important business gathering were able to extract a commitment from the Minister of Industry, Trade and Investment, Dr. Olusegun Aganga, that the agency saddled with the responsibility of registering businesses in the country, the Corporate Affairs Commission (CAC), had been retooled to meet the emerging demands.
But while efforts are being put in place to sustain the new dispensation in business registration, the commission said it was ready to enforce all regulations on post registration obligations by registered companies.

A statement by its Director, Public Affairs, Mr. Churchill Williams, last week, said mere registration was not an end in itself, adding that companies and businesses defaulting in compliance with the provisions of the Companies and Allied Matters Act, (CAMA) would soon face severe sanctions.

Crackdown on Defaulters
He disclosed that already, the Corporate Affairs Commission had set up a special enforcement committee which had commenced a crackdown on the operation of such companies.
“The special enforcement committee had completed the first phase of the on-site examination exercise in the Federal Capital Territory and had visited various markets, shopping malls and held collaborative meetings with relevant organisations to sensitise the public on the post incorporation obligations of registered companies and the consequences of operating unregistered businesses,” Williams said, adding that “A total of 474 companies were penalised for non-compliance during the exercise in the Federal Capital Territory. The next phase of the enforcement will be carried out in the 36 states of the federation.”

Under the provisions of the Companies and Allied Matters Act, CAMA, every company, business names and Incorporated Association/Non-Governmental Organisation (NGO) are required to file annual returns every year which informs the Commission of the status of a registered entity. Such defaulting companies face the risk of being struck off from the register of companies.

In addition, under Section 548 of CAMA, all companies are required to display their registered names and registration numbers at their offices. Furthermore, under Section 553 of CAMA, every banking or insurance company or deposit, provident or benefit society is required to prepare and display in a conspicuous manner their statements of affairs twice in a year.
Companies complying with the provisions of CAMA stand the benefit of enjoying unhindered treatment of their post registration filings with the Commission whereas filings from defaulting companies are rejected outrightly until they update their records.

Default
For decades, many companies whose names appear in the Registry of Companies with the Corporate Affairs Commission (CAC) fail to pay annual corporate taxes or file annual returns.
According to a public affairs analyst, Dr. Boniface Ahunwan, the statutory requirement for payment of annual taxes and return of evidence of such payment to the CAC is not only a mechanism to generate revenue for government but a veritable means of ascertaining whether an incorporated company is in business or is moribund.

Dormant companies are not only a loss to government in terms of potential revenue but also a hindrance to the registration of new companies who share the same or similar corporate names. It is not uncommon for unscrupulous agents to incorporate companies in the names of world-famous brands in the expectation that when such famous brands come to Nigeria, they could sell the incorporated names to the actual users of such names at a huge profit.
Late last year, the Commission threatened to strike out the names of about 45,000 companies from its registers for failing to file returns since their incorporation.

The Registrar-General, who disclosed this while presenting the commission’s report to the Annual General Conference of the Nigerian Bar Association in Calabar, Cross River State, wondered why the firms had refused to file their annual returns despite several reminders.
This, according to him, was a violation of the Companies and Allied Matters Act, 1990.
Mahmud, in a statement by the commission’s spokesperson said the exercise had resumed and about 45,000 companies that defaulted in the filing of their annual returns since incorporation despite several reminders would soon be struck off from the register.
As part of efforts to meet the expectation of its customers and standardise its processes, the CAC said it had also introduced the Companies Regulation, 2012.

Mahmud said the regulation, which was approved by the Minister of Industry, Trade and Investment, pursuant to Sections 16, 585 and 609 of the CAMA, was intended to fill some of the gaps in the substantive provisions of the Act.

He added that the regulation now required every director and subscriber of companies under Part ‘A’ and Trustees of Association under Part ‘C’ to submit recognised forms of identification.
These are the information page of travel passports, drivers’ licence and national identity card as proof of their identity before registration.

The new requirement, the statement said, would help to check cases of underage directorship, fake identification and fulfil national and international obligations under different anti-money laundering and counter terrorism legislation.

[This Day]

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