In August 2023, the Corporate Affairs Commission (CAC) warned that it would delist about 100,000 registered companies from its database in line with Section 692 of the Companies and Allied Matters Act 2020 which empowers it to strike out the names of companies that have laid dormant for at least 10 years and deregister companies that have failed to file their annual returns for a consecutive period of 10 years.
This provision is peculiar since the repealed Act did not provide for the term of years after which this power could be exercised. About one week ago, the CAC made good their promise by delisting these companies—we’re talking of companies registered as early as 1985 i.e. 38 years ago.
There are incorporation responsibilities that can put your business at risk if overlooked. As a business owner, your company’s responsibility does not end at incorporation. Under the CAMA 2020, companies must perform certain obligations even before they can commence business; keeping your company’s statutory books, production of company and official seal, displaying certain items like certificates for companies such as banks, payment of tax, registration with NIPC, SEC and NOTAP as the case may be where a foreigner is involved and rendering returns.
Why does a company need to render annual returns? Annual return is a yearly statement made to the CAC by companies registered with the commission about their composition, activities and financial positions, following the provisions of the CAMA 2020. Simply put, companies in Nigeria are required to render annual returns because it is a legal obligation in the CAMA. Failure to follow the law will result in penalties like the one these companies had to suffer.
So, filing annual returns is like a yearly report that helps companies stay legal, transparent and trustworthy in the eyes of the law and the public. Since these companies failed to abide by this rule, they had to bear the consequence stipulated by law which is to be delisted.
Once your company is struck off the CAC list, you’re automatically prohibited from carrying on business. The only remedy to restore it is to obtain a restoration order from the Federal High Court. This is the provision of Section 692 (3) and (4) of the CAMA 2020.
A safe way to avoid falling into legal eventualities is to enter a legal retainership with a lawyer. In that case, your lawyer can keep your company above water on these issues rather than have you worry about meeting deadlines.
