The Reasons for Non-Registeration of a Company by the Corporate Affairs Commission

The Reasons for Non-Registeration of a Company by the Corporate Affairs Commission.

By Ater Solomon Vendaga

The Companies and Allied Matters Act (CAMA) 2020 in Nigeria introduced significant changes to the process of registering a company, one of which is allowing a single person to form a company, commonly referred to as a “single-member company”. This is specifically provided for in section 18(2) of the Act. However, there are circumstances in which the Corporate Affairs Commission (CAC) may refuse to register a company, even if an individual has taken all the necessary incorporation steps. These circumstances typically revolve around the legal and regulatory requirements that govern company formation in Nigeria.

Accordingly, section 41(1) of the Companies and Allied Matters Act (CAMA) 2020 outlines the circumstances under which the Corporate Affairs Commission (CAC) may refuse to register the memorandum and articles of a company. These circumstances are as follows:

(a) Non-compliance with CAMA: If the memorandum and articles of the company do not comply with the provisions of CAMA, the CAC may refuse registration. This means that the company’s governing documents must adhere to the legal requirements and standards set out in CAMA.

(b) Illegal Business or Objects: If the business that the company intends to carry on, or the objects for which it is formed, or any of them, are deemed illegal, the CAC can reject the registration. This is to prevent the formation of companies engaged in unlawful activities. For example, any business involved in illegal activities, like drug trafficking or fraudulent schemes, will not be registered.

(c) Incompetent or Disqualified Subscribers: If any of the subscribers to the memorandum is found to be incompetent or disqualified according to the provisions of section 20 of CAMA, the CAC may refuse registration. Section 20 provides for who a disqualified subscriber is. It states that an individual shall not join in the formation of a company under CAMA if they meet any of the following conditions:

1. Where the individual is less than 18 years of age. In other words, individuals who are under the age of 18 are not legally allowed to participate in the formation of a company. This is in line with the general legal principle that minors do not have the legal capacity to enter into contracts or engage in certain legal transactions.

2. Where the individual is of unsound mind and has been so found by a court in Nigeria or elsewhere. In cases where a court has determined that an individual lacks the mental capacity to make sound and legally binding decisions, that person is disqualified from participating in the formation of a company. This ensures that individuals who are not mentally capable do not engage in complex business activities.

3. Where the individual is an undischarged bankrupt. An undischarged bankrupt is a person who has declared bankruptcy and has not been legally released from their debts or obligations as per the bankruptcy proceedings. Such individuals are disqualified from participating in company formation.

4. Where the individual is disqualified under sections 281 and 283 of CAMA from being a director of a company. This refers to individuals who have been legally barred from holding directorial positions in companies due to various legal reasons, such as prior misconduct or violations of the law.

However, Subsection (2) of s. 20 provides an exception to the age requirement mentioned in subsection 20(1)(a). It states that a person shall not be disqualified under subsection 20(1)(a) if two other persons who are not disqualified under that subsection have subscribed to the memorandum. In other words, if at least two other eligible individuals (who are 18 years of age or older) participate in the formation of the company by subscribing to the memorandum, then an individual who is younger than 18 can also participate in the formation without being disqualified based on their age.

(d) Non-compliance with Other Laws: If there is non-compliance with any other law relating to the registration and incorporation of a company apart from CAMA, the CAC has the authority to refuse registration. This ensures that the company adheres to all relevant laws and regulations.

(e) Conflicting Name: If the proposed name of the company conflicts with or is likely to conflict with an existing company, trade mark, or business name registered in Nigeria, the CAC can refuse registration. This is to prevent confusion and conflicts with existing entities.

It should be noted that under Subsection (2) of s. 41 there is provision for recourse available to a person who is aggrieved by the CAC’s decision to refuse registration. It states that: Any person aggrieved by the decision of the Commission under subsection (1) may give notice to the Commission, requiring it to apply to the Court for directions. The Commission shall, within 21 days of receiving such notice, apply to the court for directions. This means that if an applicant believes that the CAC has wrongly refused to register their company based on any of the reasons mentioned in subsection (1), they have the right to challenge the decision by notifying the CAC. The CAC is then obligated to seek directions from the court within 21 days to resolve the matter. This provision ensures a mechanism for applicants to appeal and seek legal remedies if they believe their registration was wrongly denied by the CAC.

ABOUT THE AUTHOR

ATER, Solomon Vendaga is a Final Year Law Undergraduate at the University of Abuja, Nigeria who has keen interest in Taxation Law, IP Law, Tech Law, and Public Policy. He is the Program Associate at Sabilaw Foundation, National Vice President of Association of Nigerian Taxation Students-ANTAS and the President of the Tax Club at the University of Abuja Nigeria. He can be reached via; +234(0)08025263078, soloater12@gmail.com