The Economic Impacts And Prospects Of Cama Law 2020 On Small And Medium Scale Enterprises In Nigeria

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The Economic Impacts And Prospects Of Cama Law 2020 On Small And Medium Scale Enterprises In Nigeria


Chapter One


Introduction

1.1 Background of the Study

Small and medium-sized enterprises (SMEs) or small and medium-sized businesses (SMBs) are businesses whose personnel numbers fall below certain limits. The abbreviation “SME” is used by international organizations such as the World Bank, the European Union, the United Nations and the World Trade Organization (WTO). SMEs have proven to enhance the economic growth of any country. They are being regulated and managed by a recognized government body known as the Corporate Affairs Commission (CAC).

The Corporate Affairs Commission (CAC) of Nigeria was established in 1990 vide Companies and Allied Matters Act no 1 (CAMA) 1990 as amended, now on Act cap C20 Laws of federation of Nigeria. It is an autonomous body charged with the responsibility to regulate the formation and management of companies in Nigeria. It carry out its functions through accredited members of Association of National Accountants of Nigeria, Institute of Chartered Accountants of Nigeria, Institute of Chartered Secretaries and Administrators of Nigeria (ICSAN) and the Nigerian Bar Association (NBA). It is headed by a Registrar-General. Prior to the enactment of CAMA, these activities were carried on under the Companies Act 1968. (CA 1948).

The role small and medium enterprises play in the development of country is very important. SMEs have greatly contributed to the Nigerian development in terms of employment, growth and development, and marketing of goods and services (Ayozie O, 2006). The Nigerian Government is turning to small and medium scale industries and entrepreneurs as a means of developing the economy and solving problems (Latinwo and Ayozie, 2010). A great percentage of all registered companies in Nigeria are constituted by small scale industries and they have been in existence for a long time (Ayozie, 2006).

Irrespective of the good work done by SMEs in Nigeria, there are several factors that militate against their effective and smooth functioning which government policies, cost of setting up and registering the business under CAC are most of its challenges.

Following the new CAMA Law 2020 assented by President Muhammadu Buhari on August 7th 2020, there has been unease and uproar over the Company and Allied Matters Act. The CAMA 2020 which has received commendations from the business community, as it is said to facilitate the ease of doing business in the country.

It is no longer news that the repealed Act was overdue for a change after 3 decades of provisions which became obsolete due to the dynamic nature of doing business globally. The new Act is expected to bring succour to businesses and promote ease of doing business.

Some business friendly provisions in the new law include; “Single member and shareholder companies –S.18(2) of the new CAMA now makes it possible to establish a private company with only one (1) member or shareholder.”

“Exemption from appointing Auditors – Small companies or any company having a single shareholder are no longer mandated to appoint auditors at the annual general meeting to audit the financial records of the company. S.402 of the new CAMA provides for the exemption in relation to the audit of accounts in respect of a financial year.”

“Exemption from the appointment of company secretary – The appointment of a Company Secretary is now optional for private companies. According to S. 330 (1) of the new CAMA, the appointment of a company secretary is only mandatory for public companies.”

“Creation of Limited Liability Partnerships (LLPs) and Limited Partnerships (LPs) – The new CAMA introduces the concept of Limited Liability Partnerships (LLPs) and Limited Partnerships (LPs). This combines the organisational flexibility and tax status of a partnership with the limited liability of members of a company.”

“Reduction of Filing Fees for Registration of Charges – Under S. 223 (12) of the new Act, the total fees payable to the CAC for filing has been reduced to 0.35% of the value of the charge. This is expected to lead to up to 65% reduction in the associated cost payable under the regime.”

CAMA 2020 mostly manifests the objective of the Nigerian government to simplify business operations and ensure overall progression in the Nigerian business environment. The friendly provisions towards small businesses will encourage more commercial activities which will attract potential investors and develop the economy. It is expected that the new Act will usher in a new business regime for overall economic development in line with international best practices.


1.2 Statement of the Problem

The uneasy regulations, costs of setting up and management of SMEs in the country affects the proper running of businesses in Nigeria. These government regulations tailored by CAC hampers on the production and growth of SMEs in the country.

Following concerns on the CAMA 1990 becoming outdated, Buhari in November 2019, wrote to the Senate seeking an amendment for the Act to be repealed or re-enacted. The amendments were aimed at encouraging investments that will allow small businesses and startups thrive, lower costs and ease regulatory burdens. It also provides significant benefits to companies by reducing red tape and making it easier to comply with regulatory obligations. It is based on this premise that this study seeks to examine economic impacts and prospects of the CAMA Law 2020 on Small and Medium Scale Enterprises in Nigeria.


1.3 Objective of the Study

The primary objective of this study is to examine the economic impact and prospects of the CAMA Law 2020 on SMEs in Nigeria.

Other objectives of this study include:

  1. Assessing how the performance of SMEs is impacted upon by the CAMA Law 2020.
  2. Assessing the benefit of the CAMA Law 2020 on the economy of Nigeria.
  3. Identifying the future prospects of the CAMA Law 2020 on the economic growth of Nigeria.

1.4 Research Questions

The following research questions guides the study:

  1. How has CAMA Law 2020 impacted the performance of SMEs?
  2. What are the benefits of the CAMA Law 2020 on the economy of Nigeria?
  3. What are the possible prospects of the CAMA Law 2020 on the economy of Nigeria?

1.5 Research hypothesis

The study developed for testing the following null hypothesis:

  • H01: There is no significant positive relationship between CAMA Law 2020 and the performance of SMEs in Nigeria.
  • H02: There is no significant positive relationship between the CAMA Law 2020 and the economic growth of Nigeria

1.6 Significance of the study

An understanding of the role SMEs place in the economic growth of any country, and the essence of the CAMA Law 2020 enabling an environment where they thrive well would be of great relevance to government policymakers, students, researchers, students’ affairs practitioners and all the various bodies that comes to play when talking of CAMA Law 2020 and SMEs in the country. The outcome of the study will help business owners and companies as well government to strategize and reconstruct their policies in a way to attain the CAMA Law 2020 effectively. It will also push people further to identify the exciting opportunities the CAMA Law 2020 will bring into the business environment.


1.7 Scope of the study

The study is focused on assessing the economic impacts and prospects of the CAMA Law 2020 on SMEs in Nigeria. The various ways the signed CAMA Law 2020 will enhance the performance of SMEs will be examined in this study.


1.8 Definition of terms

CAMA 2020:

In this study, this term refers to Company and Allied Matters Act 2020

SMEs:

Small and medium-sized enterprises (SMEs)

Impact:

To have an immediate and strong effect on something or somebody.

Prospects:

This refers to something that is expected or certain to happen in the future.


The Economic Impacts And Prospects Of Cama Law 2020 On Small And Medium Scale Enterprises In Nigeria


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The Economic Impacts And Prospects Of Cama Law 2020 On Small And Medium Scale Enterprises In Nigeria


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Frequently Asked Questions


What does Cama 2020 mean for business in Nigeria?

The new Companies Allied Matters Act (CAMA) 2020 is expected to enhance the ease of doing business in Nigeria. The new document has repealed and replaced the extant CAMA 1990 with key amendments that would remove some bottlenecks from the old act.

Will CAC’s Cama help ease the strain of doing business in Nigeria?

It is hoped that the practical administration of the CAMA, 2020 by the CAC will help ease the strain of doing business in Nigeria and further improve Nigeria’s position in the global index.

What are the innovations and reforms under Cama 2020?

Notable innovations and reforms under the new CAMA 2020 include the following: 1. Section 18 (2) – Recognition of single member/shareholder for the incorporation of a private company under. That provision changes the former requirement for at least two persons for the incorporation of a company in Nigeria.

What is the purpose of the 2020 Cacam Act?

CAMA 2020 provides a robust framework for reforming identified onerous legal, regulatory and administrative bottlenecks which, for three decades, have made doing business in Nigeria substantially difficult (particularly for Micro, Small and Medium Enterprises (MSMEs)), and impeded investments into Nigeria.

What is Cama 2020 (‘Cama’)?

The repeal and re-enactment of the Companies and Allied Matters Act, 1990 (CAP C20, LFN 2004) (‘CAMA’) as CAMA 2020 (“the Act”) is a major game changer in the corporate regulatory landscape.

What is the new company law in Nigeria 2020?

On 7 August 2020, the President of Nigeria signed into law, a new company legislation ( the Companies and Allied Matters Act 2020 ). The new company law in Nigeria has ushered in some changes, designed to improve the ease of doing business in Nigeria among other things.

What are pre-emptive rights under Cama 2020?

CAMA 2020 has introduced pre-emptive rights in favour existing shareholders of a private company where a shareholder intends to transfer its shares to a third party. The shares are required to be first offered to the existing shareholders.

What is the Cama and why is it important?

The overhaul of the CAMA, which is the foundational legal basis for corporate vehicle regulation, is long overdue as this is its first comprehensive update in 30 years.

What does the new Cama mean for businesses in Nigeria?

The new CAMA, now seen as Nigeria’s most significant business legislation in three decades, introduces new provisions that promote the ease of doing business whilst reducing regulatory hurdles and also bringing the provisions in tangent with the technological realities of the 21st century.

What is Cama 2020 and how does it affect companies?

SIGNIFICANT CONTROL AND SUBSTANTIAL INTEREST: To further ensure transparency in company administration, the CAMA 2020 has extend the obligation to disclose significant control or divestment of shares by way of writing to the company. Prior to now, this obligation only applied to public companies.

What are the benefits of Cama?

The new CAMA also provides for remote or virtual general meetings, provided that such meetings are conducted in accordance with the Articles of Association of the company. This will facilitate participation at such meetings from any location within and outside the shores of the country, at minimal costs.

What changes have been made to the Cama Act?

Notable changes as contained in the Act include the following: ORGANISATIONS REGULATED BY CAC: Hitherto, all companies registered under CAMA and with the CAC must either be a private company or a public company. The recent amendment has now introduced Limited liability partnerships and Limited Partnerships.

What are the new provisions of the Cama 2020?

By the provisions of the CAMA 2020, netting agreement can now be concluded and enforced against an insolvent party, guarantor or any person providing security. COMMON SEAL: The use of common seal has now been made optional by the CAMA 2020.

Are limited partnerships regulated by Cama 2020?

Although Limited Partnerships is regulated by the Partnership Act of 1890, the provisions of the Partnership Act shall apply subject to the provisions of CAMA 2020. Limited Liability Partnership is also to be regulated by the CAC. In addition to this, CAMA 2020 also introduced what may be known as one person company (OPC).

Is common seal still used in Cama 2020?

COMMON SEAL: The use of common seal has now been made optional by the CAMA 2020. Thus, an authorized signature of a company is now sufficient execution of any contract undertaken by a company.

Can a private company director allot shares under Cama 2020?

CAMA 2020 now makes room for directors in private companies to allot shares. This power is however, limited to any restriction in the Articles of Association of the company and the company in general meeting delegating such powers to the directors.

What is visualcad / Cam 2020?

VisualCAD/CAM 2020 CAM software comes in 5 different configurations to suit the varied machining needs of our customers. This is a general purpose program tailored for hobbyists, makers and students. Ideal for getting started with CAM programming. Includes 2 & 3 axis machining methods.

What is the Anti-Money Laundering Act of 2020?

The Anti-Money Laundering Act of 2020 1 AML/CFT Priorities (AML Act Section 6101) 2 Arts and Antiquities (AML Act Section 6110) 3 Financial Crimes Tech Symposium (AML Act Section 6211) 4 Assessment of No-Action Letters (AML Act Section 6305)

What is the American innovation and Manufacturing Act of 2020?

On December 27, 2020, the American Innovation and Manufacturing (AIM) Act of 2020 was enacted as section 103 in Division S, Innovation for the Environment, of the Consolidated Appropriations Act, 2021 ( H.R. 133 (116 th ): Consolidated Appropriations Act, 2021 [Including Coronavirus Stimulus & Relief] ).

What is the purpose of the Act?

The ACT is an entrance exam used by most colleges and universities to make admissions decisions. It is a multiple-choice, pencil-and-paper test administered by ACT, Inc. The purpose of the ACT test is to measure a high school student’s readiness for college, and provide colleges with one common data point that can be used to compare all applicants. 

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