Filing Of Annual Returns In Nigeria: The Effect Of Compliance And Non-compliance With CAMA, 2020 -By Oyetola Muyiwa Atoyebi & Chikezie Iwu

INTRODUCTION

In July 2023, the Corporate Affairs Commission (CAC) issued a stern warning through the Registrar General of the Commission, on the default of companies in filing their statutory annual returns[1] as enshrined in the Sec 417 of the CAMA 2020 and the intent of the Commission to send notices of striking off to the defunct companies before embarking on the action as enshrined in section 692 of the CAMA, 2020[2]. However, the affected companies are entitled to be relisted upon payment of their outstanding debts and an order of a court, as provided by the law[3].

According to the Companies and Allied Matters Act 2020 (“CAMA”), every registered business name, private or public company (limited by shares or guarantee or unlimited), incorporated trustees, or partnership is required to file annual returns with the Corporate Affairs Commission (“CAC”) within the time prescribed by the Act.

The prompt filing of an annual return in full is an important way to notify the CAC that a business is a going concern meaning it is actively operating and failure to file an annual return may result in penal sanctions against the directors or principal officers of the company and the company itself. It can further lead to the removal of the company’s name from the Register of Companies under the CAC, making the name of the defunct company appear “inactive” on the CAC online portal.[4]

This research explains the meaning of annual returns, the time stipulated for their filing, the required forms needed for filing, and lastly the benefits of compliance and drawbacks of non-compliance with the CAMA 2020.

ANNUAL RETURNS

The annual return is the income generated on an investment during a year as a percentage of the capital invested and is calculated by way of the geometric average. This return provides details about the compounded return earned yearly and is used to compare the returns provided by various investments like stocks, bonds, derivatives, mutual funds, etc.[5]

An annual return is a mandatory requirement every enterprise, private limited company, or incorporated trustees in Nigeria must fulfill at least once every year by making and delivering to the Corporate Affairs Commission (CAC) a return in the prescribed form. This return should contain the specified matters relating to the organization in accordance to the provisions of the Companies and Allied Matters Act (CAMA).[6]

An annual return is not the declaration of the profit the company made in a year, it is not a financial document, but rather a yearly statement by an active registered business name or company which is meant to keep CAC updated about the company’s activities, composition, and its financial position.[7]

TIME FOR FILING ANNUAL RETURNS WITH CAC

Pursuant to 822(1) of CAMA 2020 every individual, firm, or corporation carrying on business under a registered business name shall, not later than the 30^th day of June in each year, except the calendar year in which the business name is registered, deliver to the Commission a return in a prescribed form showing the particulars of the individual, firm or corporation and the nature of the business carried on.

1. COMPANIES:

By provision of Section 421 (1) of CAMA 2020, the annual return of a company (limited by shares or guarantee or unlimited) shall be completed, signed, and delivered to the Corporate Affairs Commission not later than 42 days after the annual general meeting for the year, whether or not that meeting is the first or only general meeting of the company in that year. Every company (except a small company or a company with a single shareholder) shall hold, in each year, a general meeting as its annual general meeting not later than 18 months after incorporation and thereafter not later than 15 months after its last annual general meeting. Please note that late filing may be allowed by the Corporate Affairs Commission subject to a penalty for late filing.

2. INCORPORATED TRUSTEES:

Non-governmental organizations, clubs, and not-for-profit institutions which are registered as Incorporated Trustees are required to file annual returns not earlier than 30th June or later than 31st December each year except in the year in which it is incorporated. The return should show the name of the association, the names, addresses, and occupations of the trustees, and members of the council or governing body, particulars of any land held by the incorporated trustee during the year, and of any change which has taken place in the constitution of the association during the preceding year.

3. LIMITED LIABILITY PARTNERSHIP (LLP) AND LIMITED PARTNERSHIP (LP):

A limited liability partnership shall file its annual returns with the CAC within 60 days of the closure of its financial year. The financial year is determined by the partners in the partnership agreement, usually from January 1st to December 31st each year[8].

CAC DOCUMENTS AND FORMS REQUIRED FOR FILING ANNUAL RETURN

In the process of filing an annual return to the CAC, by virtue of Section 422(1) (a)(b), 422(2) 422(3) CAMA2020, generally, certain documents are to be annexed to the annual return filing in respect of companies including,  a Certified True Copy (CTC) of every balance sheet (Statement of Financial Position) and profit and loss account (Statement of Profit or Loss) laid before the company in general meeting, a CTC of the report of the Auditors on, and of the report of the directors accompanying each balance sheet.

Furthermore, pursuant to the Companies and Allied Matters Act, 2020, a private company is required to include along with the annual return required by sections 418, 419, or 420 of the Act, a certificate signed both by a director and the secretary of the company. This certificate confirms that the company has not submitted the Return;

• since the date of the last return, or,
• in the case of a first return(first-time submission), since the date of incorporation of the company, or
• when it issued any invitation to the public to subscribe for shares or debentures of the company and
• where the annual returns disclose the fact that the number of the company exceeds 50.

Also, a certificate so signed that the excess consists wholly of persons who under Section 22 (3) of the Act are not included in the calculation of the number of 50.

It is also worth noting that a small company is exempted from the above requirements but is required by Section 423(2) of CAMA 2020 to send with the annual return a certificate signed by a director and the Secretary stating that:

1. The company is a private company limited by shares;

• The amount of its turn-over for that year is not more than N120,000 or such amount as may be fixed by the CAC;

1. The company’s net assets value is not more than N60,000,000 or such amount as may be fixed by the CAC;
2. None of its members is an alien;
3. None of its members is a government, government agent, or nominee; and
4. The directors among them hold at least 51% of the equity share capital of the company[9].

The following are the prescribed forms under the CAMA 2020 for the filing of annual returns to CAC

1. Form CAC 10: Annual Return for a small company.
2. FORM CAC 10 A: Annual Return for a company having shares other than a small company.
3. FORM CAC 10B: Annual Return for a company limited by guarantee.
4. FORM CAC 10C: Annual Return of exempted foreign companies.
5. FORM CAC/IT 4: Annual Return for Incorporated Trustee.
6. FORM CAC/BN/7: Annual Return for Business Name.[10]

BENEFITS OF FILING ANNUAL RETURNS

1. Regular filling of annual returns makes your business, company, or incorporated trustee status active on the CAC portal. You can visit https://search.cac.gov.ng/listto check your company status[11].
2. It enables companies to process and access post-incorporation services from the CAC, such as;requesting Certified True Copies (CTC) of Incorporation documents, carrying out increases in share capital, changes to business objects or registered addresses, and changes to directors, partners, or trustees. Failure to file annual returns on time and any applicable penalties not paid in full will hinder CAC from providing any post-incorporation services to any registered entity.
3. It is interesting to note that the majority of contract bids in the public or private sectors typically include the submission of an up-to-date annual report as a crucial requirement.For an entity to comply with this obligation it must make sure its records are updated as and when required.
4. It assists the company or entity in informing the Commission of its ongoing existence, which is why companies that are functional are called ‘a going concern’ and it also ensures that the name of the entity is kept on the register the Commission maintains.
5. Assists in presenting your company as a trustworthy corporation during due diligence checks. Due diligence investigations with the CAC are typically conducted by investors to learn more about the state of a company and If the CAC is unable to provide meaningful information or a positive response to inquiries, it is due to a lack of knowledge of the company’s present situation.
6. A company fully compliant and up to date with filing of Annual Returns can confidently obtain services from CAC within the shortest possible time without any delays[12].

EFFECT OF FAILURE TO FILE ANNUAL RETURNS[13]

The penalties for entities that fall under the category, or are required to file annual returns by the law but fail to do so, have been prescribed in Section 425 of CAMA 2020. The provision states the following:

1. The company and every director or officer are liable to a penalty that is at the discretion of the Commission.
2. A company’s name may be struck off the Register for failing to file yearly returns for a period of ten (10) years in a row. The law gives the Commission the power to remove a company’s name from the Register of Companies when there are good grounds to think that the firm is not operating, after following the due process of investigating the status of the company.

What is more, is that before the Commission will strike out names of companies from its registrar for failure to file annual returns, the company must either bedormantor in non-compliance with the statutory provisions of the Companies and Allied Matters Act (CAMA) 2020 and when a company is delisted for failing to file annual returns, there are two options open to an aggrieved party;

1. May apply to the court for an order restoring the company to the register at any time before the expiration of 20 years from the publication of the notice of removal, if the court is satisfied that, at the time of the striking off, the company was carrying on business or in operation, or that otherwise, it is just to restore the company to the register.

2. A formal application written in the form of a letter addressed to the CAC’s Registrar General (RG), appealing and explaining why the annual return was not filed on time.In addition to the written application, all payable dues (total fees for years of unfilled annual returns) and updated company or entity records must be attached and if the application is successful, a relisting certificate will be issued to the company.

CONCLUSION

The Corporate Affairs Commission requires that for every business, private limited company, and trustee organization in Nigeria to remain a going concern, it is required to file annual returns on a yearly basis, and to do so, they must complete the prescribed form by including the specified information about their organization as required by the relevant provisions of the Companies and Allied Matters Act (CAMA), submit it to the Corporate Affairs Commission (CAC), to avoid being listed as a defunct company liable to be struck out from the register of the Commission for non-compliance.

SNIPPET

An annual return is not the declaration of the profit your company made in a year, it is not a financial document, but rather a yearly statement by an active registered business name or company which is meant to keep CAC updated about the company’s activities, composition, and its financial position.

KEYWORD

annual returns under cama 2020, what is annual return date in Nigeria, is annual return mandatory, annual returns CACNigeria.

AUTHOR: Oyetola Muyiwa Atoyebi, SAN FCIArb. (U.K)

Mr. Oyetola Muyiwa Atoyebi, SAN is the Managing Partner of O. M. Atoyebi, S.A.N & Partners (OMAPLEX Law Firm).

Mr. Atoyebi has expertise in and vast knowledge of Corporate Lawand Practice and this has seen him advise and represent his vast clientele in a myriad of high-level transactions.  He holds the honour of being the youngest lawyer in Nigeria’s history to be conferred with the rank of Senior Advocate of Nigeria.

He can be reached at atoyebi@omaplex.com.ng

CONTRIBUTOR: Chikezie Iwu

Chikezieis a member of the Dispute Resolution Team at OMAPLEX Law Firm. He also holds commendable legal expertise in Corporate Law.

He can be reached at chikezie.iwu@omaplex.com.ng

[1]Sec 417 of the CAMA 2020

[2]Dailytrust:CAC To Delist 100,000 Companies Over Failure To File Annual ReturnsCAC to delist 100,000              companies over failure to file annual returns – Daily Trust accessed on 15^th August, 2023.

[3] Ibid

[4] Koriat& Co: Why Every Company Must File Annual Returns In Nigeria

[5] Niti Gupta: Annual Return

[6]Resolution Law Firm : GUIDELINES FOR FILING ANNUAL RETURNS IN NIGERIA

[7] Omolayo Olorunsola: WHAT YOU NEED TO KNOW ABOUT FILING ANNUAL RETURNS

[8] Koriat & Co : Why Every Company Must File Annual Returns In Nigeria

[9]Section 423(2) CAMA 2020

[10] CAC Forms : https://www.cac.gov.ng/forms/ Accessed on 15^th August, 2023

[11]Brandview: The key Benefit of filing annual returns for your business, company or incorporated trustee under the corporate affairs Commission

[12]Ebunoluwa Bayode-Ojo: Filing annual returns in Nigeria: Implication of non-compliance

[13] Section 425 CAMA 2020