Nigeria: Issuance Of All Share Capital Of Companies And The Ultimatum Of The Corporate Affairs Commission

INTRODUCTION

By virtue of Regulation 13 of the Companies Regulations 2021 ("the Regulation"), all existing companies whose issued capital are less than the minimum issued share capital are required to issue all their unissued shares on or before 31^st June 2021 .

However, vide a publication dated 16^th April, 2021, the Ministry of Industry, Trade and Investment approved the amendment to Regulation 13 of the Companies Regulations, 2021 extending the ultimatum for existing Companies to comply with requirements of issued share capital under Section 124 of the Companies and Allied Matters Act 2020 (CAMA) to 31^st December 2022.

Hence, this article provides an overview on the CAC publication dated 16^th April 2021 and the importance of complying with same.

ISSUANCE OF ALL SHARE CAPITAL OF COMPANIES BY 31^ST DECEMBER 2022

A Share Capital is the amount of money invested in a Company by its members in exchange for ownership of shares. Section 868 of the Companies and Allied Matters Act, 2020 ("the CAMA") defined Share Capital as the issued share capital of a company at any given time.

Before the enactment of the CAMA 2020, Section 99 of the CAMA 1990 required every company to have a prescribed authorised share capital out of which 25% must be issued to shareholders. The enactment of the CAMA 2020 abolished the "authorised share capital" rule and replaced with the "issued share capital" rule. Thus, no company shall have a share capital which is less than its minimum issued share capital; every company with unissued shares, must not later than six (6) months from the commencement of CAMA 2020 issue all its shares (Section 124 of CAMA 2020). Also, Regulation 13 of the Companies Regulations 2020 clarified Section 124 of CAMA, 2020, and expressly stipulated that the period for compliance of companies was 30^th June 2021.

In a bid to ensure total compliance by Companies, the Corporate Affairs Commission by a publication dated 16^th April, 2021, extended the ultimatum for existing Companies to comply with requirements of issued share capital under CAMA 2020. As an incentive, Regulation 13(2) exempts all notices of issue delivered to the Commission for registration from payment of filing fees. This means that the Commission will recognise the fees that had been previously paid by the companies on unissued shares.

It is pertinent to note that any share capital of a Company that remain unissued after 31st December 2022 shall not be recognised as forming part of the share capital of the Company until the share capital of the Company is fully issued or reduced accordingly.

Also, any application filed for the issuance of the unissued share capital after the deadline will attract a daily default penalty by the company and every of its officer. The Regulations state the following daily penalties payable by companies; N1,000, N500 and N250 for Public, Private and Small Companies respectively – Regulation 13(3) of the Companies Regulation, 2021.

CONCLUSION

It is therefore advisable that every company issue all their unissued shares on or before 31^st December 2022. Failure of which will expose the Company to far-reaching consequences such as the payment of default fees, and forfeiture of unissued shares among others.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.