The Bill reflects several key provisions which include:
Single Member Companies: By this Bill, provisions which make it possible for a single person to form a private company is being introduced for the first time in Nigeria. This provision is consistent with what is obtainable in several other progressive economies such as the United Kingdom, India and Singapore.
Limited Liability Partnerships: From a careful review of the provisions of the Bill, a new form of legal entity known as Limited Liability Partnerships was formed. The essential feature of a Limited Liability Partnership is that it combines the organizational flexibility and tax status of a partnership with limited liability for its members.
Financial Assistance: Companies will now be permitted to provide financial assistance to their shareholders under the new Bill. The current position is that a company and its subsidiaries are prohibited from giving gifts, loans, indemnities, credit or other assistance, for the purpose of aiding a person to purchase the company’s shares, where such financial assistance would result in a reduction in the net assets of the company or result in the company having no assets. The proposed Bill reflects a market friendly advancement from the current position. It also improves companies’ chances of attracting much needed investment, since there are now provisions in the Bill which enable shareholders/potential shareholders have access to funds which in turn enable them invest in such companies.
Reduction in Share Capital: In order to ease the process of doing business, amendments have been proposed in the Bill to the process by which a company can reduce its share capital, by enabling private companies to reduce share capital of such companies if a special resolution to that effect is passed, without the added burden of applying to court for a confirmation of the reduction.
Resolving Insolvency: The Bill introduces a company rescue and insolvency legal regime which is not focused on a company’s demise, but on rescuing companies from insolvency through inclusion of an insolvency framework. An effective insolvency regime in Nigeria have a dual aim: to save viable businesses, and to ensure that non-viable businesses can quickly exit the market, allowing deployment of assets to more productive firms. It will see to the following benefits: lower costs of credit; increased access and availability of credit; improved creditor recovery; strengthened job preservation through reorganization and business rescue; promotion of entrepreneurship; and other benefits for small businesses.
Company Secretary: The Bill is seeking to further ease the regulatory burden of companies by making provisions which limit the requirements to appoint a Company Secretary to public companies, thereby making it optional for small companies and companies with one shareholder.
Annual General Meeting: Pursuant to the provisions of the Bill, small companies would no longer be mandatorily required to convene and hold Annual General Meetings.
Minority Shareholder Rights: The Bill is geared towards enhancing minority shareholder rights. It proposes to regulate related-party transactions and shareholders access to judicial redress. It also protects the shareholders rights in corporate governance as a proxy for Nigeria’s overall corporate governance standards and ease of access to financing from capital markets. Shareholders to bring actions both in respect of a company and any of its subsidiary companies and other companies related to the parent company.
Beneficial Ownership: The Bill has provisions which mandates the disclosure of beneficial interests in a company’s shares and prescribes punitive measures for failing to disclose such interests. In this regard, where a person holds interests on behalf of another in a nominal capacity in a company, both parties (the owner and the nominal holder) are required to disclose the beneficial interests to the company in question.
Exemption from Audit: The Bill has provisions which exempt small companies from appointing auditors. Specifically, the Bill exempts a company from appointing auditors: (i) if it has not carried on business since its incorporation; or in a particular financial year; and (ii) where the company’s turnover is not more than N10m and its balance sheet total is not more than N5m.