There is a recent move by the Corporate Affairs Commission (“CAC” or “Commission”) to strike off over one hundred thousand (100,000) companies from its register. This is borne out of the publication by the Commission stating that the Commission is moving to strike off thousands of companies that failed to file annual returns. As expected, company owners, shareholders, directors and other stakeholders were propelled to ask questions regarding the issue. Some of the issues relating to the move by the will be addressed in this article.
The provisions of the Company and Allied Matter Act, 2020 (“CAMA”) make it a mandatory obligation for different companies to file their annual returns. This is more as the purpose of filing annual return with the Commission is to update the Commission of the activity of the company and to keep the status of the company active. With specific reference to the provisions of sections 417 of CAMA, any company limited by shares or guarantee is mandated to file annual returns. The section provides: “Every company shall, once at least in every year, make and deliver to the Commission an annual return in the form, and containing the matters specified in sections 418, 419 or 420 as may be applicable: Provided that a company need not make a return under this section either in the year of its incorporation or, if it is not required by section 237 to hold an annual general meeting during the following year, in that year.”
From the foregoing, it is crystal clear that it is a legal requirement for a company limited by shares or guarantee to file its annual returns except the said company is exempted from filing as provided by law. This is in consideration of the use of the word shall by the Act. The ordinary meaning of the word as defined by Longman Dictionary to mean“…used to emphasize that something will definitely happen, or that you are determined that something should happen”. The two instances when a company is exempted as provided by the aforesaid section are highlighted. First, a newly registered company is exempted from filing its annual return for the year of incorporation. Second, where exempted under section 237 of CAMA.
It is pertinent to state further that the ground that necessitates the move by CAC is embedded in section 425 of the CAMA. It provides to the effect that where a company fails to comply with the provisions of sections 417, the failing company and every director or officer of the company are liable to a penalty as may be prescribed by the Commission. Section 425(3) specifically provides that “failure to file annual returns for a consecutive period of 10 years is a ground for striking the name of a company off the companies’ register.” Furthermore, section 692(3) of the Companies and Allied Matters Act, 2020 provides to the effect that the CAC may strike off a company from the register where the Commission has reasonable ground or grounds to believe that a company is no longer carrying on business, or such company has not been in operation for a period of ten (10) years, or has not complied with any provision of the ACT.
In the light of the foregoing, it is apt to say that the move by the CAC is in accordance with the Companies and Allied Matters Act, 2020. This is more so as the companies that the CAC has stated would be affected are companies that have not filed their annual returns for a period of ten (10) years. Furthermore, the penalty that the CAC noted would be striking off of these erring companies from the companies registered. It is hereby opined that in view of the fact that filing of annual return with the Commission is means of updating the Commission of the activities of the company, the commission can aptly conclude that a company is no longer carrying on business and/or has not been in operation for a period of ten (10) years. Section 692(4) further authorizises the Commission to strike off the name of any company so published where the Commission does not receive any response from the company within 90 days of the publication by the Commission of its intention to strike off the name of the company.
A further consideration of the provision of section 692(3) would reveal that the Act provides certain conditions to be observed by CAC. It provides that the Commission may cause to be published, in at least three national daily newspapers, a notice of its intention to strike off the company from the register. It is arguable that with the use of “may” the condition of publishing the intention of striking off is subject to the discretion of the Commission.
From the totality, while it can be said that the Commission is empowered to strike off a company’s name from the company register, it is pertinent on the part of the Commission to strictly do so in accordance with the provision of the law in its entirety. The foregoing, it predicated on the fact that aggrieved parties may resort to court to seek one remedy or the other against the Commission. It is only when the actions of the Commission are in consonance with the law that it would get judicial backing.
