HOW THE NEW COMPANIES AND ALLIED MATTERS ACT 2020 AFFECTS REGISTERED ASSOCIATIONS IN NIGERIA

Where a community of persons, bound together by a common objective such as; customs, religion, kinship, sporting, scientific, religion, education, e.t.c unite to form a corporate body so as to promote their objectives such as those mentioned above, they are registered as incorporated trustees with powers to acquire property, sue and be sued. Some of the essential features of organisations registered as incorporated trustees include; registered trustees obtain legal personality and not its members, the name of such organisation must start with the words “Incorporated Trustees of …” and such organisations are not established to do business or distribute profits.

There’s no doubt that organisations qualified to register under the Act as incorporated trustees can operate without registration, however, they cannot take advantages of the numerous benefits that comes with having such organisation registered.

The formation and operations of Incorporated Trustees were governed by the repealed Companies and Allied Matters Act (CAMA), 1990. However, the new Companies and Allied Matters Act 2020, comes with new twists as regards its operations. In this blog, we’ll be considering some of the changes organisations registered under this category should look out for.

A. ONLY TWO OR MORE TRUSTEES CAN APPLY TO THE COMMISSION TO BE REGISTERED AS A CORPORATE BODY.

Under the repealed law, one or more trustees, could apply to be registered as a corporate body, (See Section 590 of CAMA). However, the new Act provides for a minimum of two or more persons instead of one person, (See Section 823 of CAMA).

 

B. USE OF COMMON SEAL IS CURRENTLY OPTIONAL.

In line with the changing times as well as advent of modern technology, better means of verification of corporate documents and transactions have emerged. Most organisations and agencies do not attach much importance to a corporate seal. Therefore, the new Act in recognition of this trend, has made the use of a common seal optional.

By Sections 827 (c) (ii) and 830(1) (b), a company upon incorporation shall have a common seal if the wishes to.

 

C. TWO OR MORE ASSOCIATIONS HAVING THE SAME TRUSTEES MAY BE TREATED AS A SINGLE ASSOCIATION.

To foster ease of administration, the new act vests powers on the Corporate Affairs Commission to direct that any two or more associations having the same trustees, be treated as a single association. See Section 231 (ii) CAMA 2020

 

D. IN THE EVENT OF MISMANAGEMENT, MISCONDUCT OR FRAUD THE COMMISSION MAY APPOINT AN INTERIM MANAGER.

The new Act allows the commission to suspend trustees and appoint an interim manager where there is mismanagement, misconduct or fraud in the administration of the association by trustees, see Section 839(1). This suspension shall be by order of court upon petition by the commission or one fifth of the members of association, see Section 839(2).

 

E. THE COMMISSION MAY DISSOLVE AN ASSOCIATION WHERE ITS BANK ACCOUNT IS DORMANT AND FAILS TO PROVIDE EVIDENCE OF ITS ACTIVITIES.

The address situations where associations are formed and become in operational, the new Act, empowers the commission to dissolve such associations under special circumstances.

By section 842 (1), any bank operating the dormant accounts of the incorporated trustees of an association, has an obligation to notify the Corporate Affairs Commission of the above fact. Upon receipt of such notice, the Commission may request that the said association, provide evidence of its activities. Where the association fails to provide a satisfactory response within 15 (fifteen) days of the said request, or the Commission is unable to locate the association after making reasonable inquiries, the latter has the power to dissolve the said association.

As regards, the money left in the dormant account, the Commission may at its discretion, give a direction to the bank to transfer the said funds to one or more other existing associations. See Sections 842(1), (2) (a) and (b) and (3).

 

F. TWO OR MORE ASSOCIATIONS WITH SIMILAR AIMS AND OBJECTS CAN BE MERGED.

Section 849 gives authority to the Commission to prescribe the merging of two or more associations with similar aims and objects.

 

CONCLUSION

The new Act makes room for the promotion of transparency as well as eases administrative challenges experienced by the Commission in the past decade. No doubt, these innovations has been greeted with mixed reactions as the provisions of the new Act appears to restrict the controlling powers of the Trustees.

However, we are of the opinion that as much as these laws have been created, establishing the needed atmosphere for the implementation of these new laws is where the hard work is. It is hoped that with time, adequate measures would be put in place by the Nigerian government to allay the concerns of stakeholders, taking due considerations to the basic rights of its citizens, especially as it concerns the right to freedom of association.

 

 

 

 

 

 

Cynthia Tishion
Cynthia is a lawyer and currently serves as Head of Corporate / Commercial Services at LEX – PRAXIS. With her passion for business and entrepreneurship, she is actively engaged in creating awareness on the legal aspect of businesses through various platforms such as writing, public speaking engagements.

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