The evolving policy on ease of doing business in Nigeria received a boost recently when the Senate passed a Bill to repeal and re-enact Companies and Allied Matters Act (CAMA). The legislation is intended to make Nigeria’s business environment as competitive as its counterparts around the world. It is, essentially, a regulatory framework to promote the ease of doing business and reduce regulatory hurdles. This new legal framework is coming 28 years after the passage of the original Companies and Allied Matters Act and will make Nigeria among the best countries in Africa to do business. Presently, Nigeria ranks 145 out of 190 countries in the World Bank’s Ease of Doing Business ranking, which rates countries on the basis of the ease with which one can open, conduct and close down businesses.
Analysts perceive this bill as a landmark reform by the Senate which will expectedly provide significant benefits to companies by reducing red tape and making it easier to comply with regulatory obligations. The bill contains significant changes that are aimed at encouraging investments and, in particular, allow small businesses and startups thrive, lower costs and ease regulatory burdens.
By the provisions of the bill, the change will make it possible for the over 75,000 private companies limited by shares which are established in Nigeria every year be able to incorporate more easily. What this means is that registration of businesses will not be as tedious as it used to be in the repealed CAMA. The benefits derivable from this development are many. Primarily, it will result in savings in professional fees and add substantial improvements to the ease of doing business in Nigeria by comparison to competitors in the continent.
Furthermore, the Bill will give impetus and possibly spur more young people to start new enterprises. Among the changes which will benefit those aspiring to start a company is the ability of a single person to incorporate a company. This, in our view, is commendable because allowing new, young and innovative start-ups the opportunity to operate as separate legal entities without the risk of loss of their personal assets is one good way of expanding the economy and generating the much talked about employment.
What this also entails is that small companies will no longer be required to have a company secretary or hold Annual General Meetings thus removing the requirement for statutory declaration of compliance.
Even more fundamental, in our opinion, is the fact that minimum share capital required for companies to be registered has been reduced to encourage more investments in small companies. With the bill, individuals will no longer need a lawyer to register a company as the bill makes provision that facilitates and enhances the registration and compliance with the e-Registration and filing system.
We consider it as innovative the introduction of Limited Liability Partnership (LLP), a new form of legal identity for businesses in Nigeria, targeted at increasing foreign investment in the country as well as give legal backing to enable Nigerians register their businesses from anywhere in the country through e-Registration system. Because as a new business vehicle, it will act as a step towards converting the informal, undocumented sector into a formal and regulated regime. The incorporation process is less stringent and formal as compared to a limited liability company.
The bill as passed by the Senate makes provisions for new regulations to revive ailing companies. What this entails is that a company can now reach compromises on its debts and for businesses which are nearly insolvent a new process for administration has been introduced which will enable such businesses to keep running under the supervision of an Administrator for a period of 12 months.
For a country like Nigeria in urgent need of investors, to say that ease of doing business plays a crucial role in the economic growth is tantamount to stating the obvious. The processes, rules, and regulations set up by the government or government agencies can either help promote a business-friendly environment or hold businesses back from their entrepreneurial ambitions.
This newspaper agrees with the Senate President, Dr Bukola Saraki that this is a pro-business law that demonstrates the audacity of Nigeria to move businesses in the country into a new era of success and development. With the passage of CAMA, Nigeria is saying to the rest of the world that she is ready for business and the government is ready to support small scale industries to promote innovations, and encourage enterprise on a sustained basis.