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AN ACQUISITION
INTO THE POWER OF
CAC TO STIKE
COMPANIES OFF
THE REGISTER OF
COMPANIES
PINHEIRO LP + Follow
Uphold integrity always.
Published Sep 21, 2023

INTRODUCTION

"The Company and Allied Matters Act

regulates the affairs of a registered
company particularly how it should file
its statutory annual returns and how
management and changes should be
carried out and all these must conform
with the provisions of the Act. The Act
made detailed provisions on who does
what and at what time.’[1]

Upon the registration of a company/

business name with the Corporate Affairs
Commission (“the Commission”), there are
certain corresponding mandatory duties
imposed on the registered entity. The
Companies and Allied Matters Act 2020
(“CAMA 2020”) prescribes these duties
which includes filing of Annual Returns.

Be that as it may, the recently published

notice[2] by the Commission has caused
a surge in questions relating to annual
returns and the implication of failure to file
same. The Commission has further to the
publication of the said notice, published a
list[3] of defaulters who run a risk of their
companies being struck off the register of
companies for failing to file their annual
returns.

This article seeks to interrogate the

legality of the action(s) of the Commission
in respect of striking off defaulting
companies off the register of companies
vis a vis the need for their actions to be in
concurrence with public policy/economic
realities.

Keywords: Annual Returns, Corporate

Affairs Commission, Companies and Allied
Matters Act 2020, public policy.

THE STATUTORY DUTY OF A

COMPANY/ REGISTERED BUSINESS
NAME TO FILE ANNUAL RETURNS.

To completely understand the reason for

this imposed duty, it is imperative to
appreciate what annual returns is and the
importance of filing/delivering same to the
Commission.

Annual Returns is a yearly statement that

reflects the activities, composition and the
financial position of a registered
business/company. According to section
418 of CAMA, 2020 the annual returns
shall contain the register of members,
debenture holders, shares and
debentures, indebtedness, past and
present members, directors and secretary.
From the foregoing, it can be implied that
a company that does not file annual
returns for a particular period has not
been carrying out business for that period
of time. Companies that do not file their
annual returns may notice that upon
checking the Commission’s portal, their
company’s status is inactive thereon.
Hence, the purpose of filing annual returns
is to, amongst others:

a) uphold a high level of

transparency;

b) ensure that the Commission is

kept abreast of the activities of all
companies/businesses; and

c) ensure that stakeholders and

potential stakeholders of a
company/business are able to gather
requisite information from an appraisal of
the company’s annual returns. Information
not limited to the said company’s financial
position.

Chapter 16 Part B (Section 417- 425) of

CAMA, 2020 states which companies are
expected to file annual returns, the time
frame they are expected to file or send
same to the Commission and the penalty
for default. Section 417 states that -

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 its year of
incorporation or if it is not required by
section 237 to hold an annual general
meeting.

Section 822(1) and 848 of CAMA 2020,

in addition to the above mandates that any
individual, firm, or corporation carrying on
business under a registered business
name shall no later than the 30th day of
June in each year deliver to the
Commission a return in a prescribed form
showing their particulars. The same (not
earlier than 30th June and not later than
30th December each year) is expected of
incorporated trustees.

It is apparent from the foregoing

provisions read together with sections
237, 421 (2) of CAMA 2020 that no
registered entity is exempted from
delivering its annual return to the
Commission; the only exception being the
year of incorporation or if exempted from
holding annual general meeting or is a
company with only one member.

Consequently, CAMA 2020 in sections

425, 822 (4) and Section 848 (3) goes
on to provide the implication of not filing
annual returns. Section 425 states:

If a company required to comply with

any of the provisions of section 417-
423 fails to do so, the company and
every director or officer in the company
are liable to a penalty as may be
prescribed by the commission.

From the above it is evident that the filing

of annual returns is a statutory
requirement provided for in the Act under
reference.

At this point we shall proceed to compare

the provision and/or the exercise of the
right to strike off the names of companies
in the repealed Companies and Allied
Matters Act, 2004 (“CAMA 2004”),
CAMA 2020, and in the United Kingdom;
the latter being a common law jurisdiction
just like ours.

A COMPARATIVE ANALYSIS OF THE

RIGHT TO STRIKE OFF COMPANIES AS
CONTAINED IN THE COMPANIES AND
ALLIED MATTERS ACT 2004,
COMPANIES AND ALLIED MATTERS
ACT 2020 AND THE UNITED
KINGDOM’S COMPANIES ACT 2006

In Nigeria, prior to the enactment of

CAMA 2020, CAMA 2004 (Sections
370-378) also made provisions for the
filing of annual returns stating when it
should be filed, the effect of failing to file
same, and the penalty where it appears
that a company has not been carrying out
any activity while in default. Section 378
prescribes that where a company does not
comply with the provisions of Sections
370 – 376 every director or officer of
such a company shall be liable to pay a
sum of N1,000 where it is a public
company and N100 where it is a private
company.

On the other hand, Section 425 of CAMA

2020, prescribes that where a company
fails to comply with the provisions of
Sections 417 -423, the officer(s) of such
a company shall be liable to any penalty
as prescribed by the Commission.
Comparing the provisions in the repealed
CAMA 2004 and in the new CAMA 2020, it
appears that the Commission now has
more freedom to prescribe a penalty they
deem fit where a company is in default.

Going further, Section 525 of CAMA

2004 prescribes that where the
Commission has reasonable cause to
believe that the company has not been
carrying on business for a period of time
the Commission may send a letter
inquiring as to whether the company is
carrying on business. Where the said
letter is not responded to within a month,
the Commission may send a registered
letter 14 days after the expiration of one
month referring to the first letter stating
therein that no response has been
received. Upon the expiration of one
month of receipt of the second letter,
where no response is still received from
the company, the Commission may
publish a notice setting out its intention to
strike off the company from the register of
companies.

Comparatively, Section 692 of CAMA

2020 on the other hand provides that
where the Commission has reasonable
cause to believe that a company has not
been complying with the provisions of the
Act for a consecutive period of 10 years or
has not been doing business for a
consecutive period of 10 years, the
Commission may publish a notice of
companies who are at a risk of being
struck off the register of companies.
Applying the literal interpretation, it
appears that Sections 417 – 423 of
CAMA 2020 instructing companies to file
annual returns every year is a mandatory
provision, and so any company that fails to
file its returns (for a consecutive period of
10 years) is automatically at risk of having
its name struck off the register of
companies.

It is apparent that the specific punitive

measures in CAMA 2004 in respect of the
monetary sums to be paid by the officer(s)
of companies and businesses in default of
filing annual returns have been expunged
and left out in CAMA 2020 such that the
Commission is now empowered to
prescribe a penalty that it deems fit
including striking off defaulters from the
register of companies.

In the United Kingdom (“UK”) on the other

hand, the law that governs the
incorporation of companies, businesses
etc, is the Companies Act 2006 3 (“the
CA”) setting out the legal requirements
and procedures for creating, registering
and managing companies. It also covers
various aspects of administration of a
company such as company
formation/incorporation, the different
types of companies, duties of directors,
shareholders rights, corporate
governance, etc. The Companies House is
a body established by the CA presided
over by the Registrar and which like the
Corporate Affairs Commission in Nigeria is
responsible for the registration and
regulation of companies, businesses and
all other entities.

Section 854 of the CA provides that

every company must deliver to the
registrar successive annual returns to be
filed not later than the anniversary of the
company’s incorporation, or the
anniversary of the date the company filed
or delivered its last return. Sections 855
and 856 of the CA further provides the
content of the annual returns, which
includes the register of members,
debenture holders, etc all in no way
dissimilar to Section 418 CAMA, 2020.
On failure to deliver annual returns within
the time stipulated, the CA provides in
Section 858 that same is an offence and
is seen to have been committed by

a. the company

b. every director of the company

c. in the case of a private company

with a secretary or a public company,
every secretary of the company, and

d. every other officer of the

company in default.

Anyone found guilty of an offence under

the above referenced subsection is liable
on summary conviction to a fine. It is
therefore evident that failure to file annul
returns in the UK, is similar to what
obtained in Nigeria pre-CAMA 2020 as
default attracted punitive monetary
punishment for the officers of the
company unlike what obtains in CAMA
2020 which empowers the Commission to
strike companies off the register of
companies.

Section 1000 of the CA in enabling the

Companies House to strike a company off
the register of companies has similar
provisions to that of Section 525 of
CAMA 2004 to the extent that where the
Registrar has reasonable cause to believe
that a company has not been carrying on
business, the Registrar may send to the
company by post a letter inquiring
whether the company is carrying on
business or in operation. If no response is
received within one month of sending the
letter, the Registrar must within 14 days
after the expiration of that month send to
the company by post a registered letter
referring to the first letter, stating therein
that a reply to its letter was not received;
and that if an answer is not received to the
second letter within one month from its
date, a notice will be published in the
Gazette. If it still receives no response
within one month after sending the
second letter, the Registrar may publish in
the Gazette, and send to the company by
post, a notice that at the expiration of
three months the name of the company
will, unless cause is shown to the contrary,
be struck off the register of companies. At
the expiration of the time mentioned in the
notice, the registrar must publish a notice
in the Gazette of the company’s name
having been struck off the register. Just
like in CAMA 2020, a company that has
been struck off the register of companies
can apply to court for an order restoring
its name to the register. However, in the
UK such companies have the opportunity
to apply to the Registrar (administrative
restoration). This is captured in Section
1030 of the CA which states that an
aggrieved company can:

1) Apply to the Registrar for

administrative restoration to the register of
companies by a former director or
member of the company within 6 years
period after the company was struck off
the register of companies

2) Apply to the court for an order to

restore the company within 6 years after
the company was struck off the register of
companies.

Hence, in both the UK and in Nigeria pre-

CAMA 2020, companies in default of filing
annual returns were not simpliciter liable
to be struck off the register of companies
as long as they were going concerns.

THE LEGALITY OF THE NOTICE TO

STRIKE COMPANIES OFF THE
REGISTER OF COMPANIES FOR
FAILURE TO FILE ANNUAL RETURNS
PUBLISHED BY THE CORPORATE
AFFAIRS COMMISSION

The Commission on the 31st day of July

2023, published on its site a notice and a
corresponding list of defaulting companies
at risk of being struck off the register of
companies.5 To examine the legality or
otherwise of this notice and proposed
action, Section 692 (3) of CAMA 2020 is
reproduced below:

“Where the Commission observes or

has reasonable cause to believe that a
company is not carrying on business or
has not been in operation for 10 years
or has not complied with the provisions
of this Act for a consecutive period of
10 years 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 apparent from the above that striking

off a company under this section is
premised on the following:

1. The Commission having

reasonable cause to believe that a
company is not carrying on business.

2. The Commission having

reasonable cause to believe that the
company has not complied with the
provisions of the Act for a consecutive
period of 10 years (one of such being the
provisions/sections mandating the filing of
annual returns).

But like all laws and powers that flow

therefrom, this power is not without
checks and balances in place. Section
692(4), (6) respectively, provides that a
company on such a list under reference,
has 90 days to respond to the
Commission and communicate that it is
carrying on business; and that an
aggrieved company, member or creditor
may at any time before the expiration of 10
years from the publication of the notice,
and the striking the company off the
register of companies can apply to the
Federal High Court for an order restoring
the company to the register of companies.

Thus, a wholesome reading and

juxtaposition of the extant provisions in
CAMA 2020 will lead one to the logical
conclusion that the Commission has acted
within the bounds of its power.

However, in spite of the logical conclusion

in respect of the legality of the notice;
there are lingering questions in the air, to
wit: how does the Commission’s
publication affect the public? Going by the
concept of public policy is this directive by
the Commission beneficial to the society
on the long run?

There are several perspectives one can

adopt in examining the actions of the
Commission in relation to the provisions in
the extant law it has, at this auspicious
time, elected to invoke and these
perspectives no matter how divergent or
similar will inevitably raise several
questions, the most provoking in our
opinion being:

1. Is this an attempt to force the

hands of defaulting companies to file their
annual returns in compliance with the
provisions of the law? Or is this a mere
revenue drive in view of the cost that shall
be incurred by all registered entities in
default?

2. What is the long-term effect on

the economy of the country if these
companies are eventually struck off the
register of companies?

3. What will be the impact on the

already burdened judiciary system when a
large number of companies approach the
Court for an order restoring them to the
register of companies?

4. Why has the Commission not

chosen to invoke a less aggressive
punitive measure than striking companies
off the register of companies for failing to
file annual returns; afterall, failure to file
annual returns when due does not mean
that the company is not a going concern?

CONCLUSION

Regardless of your response(s) to the

above questions, there is no doubt that
the proposed action by the Commission
will have a ripple effect on the economy
and the judiciary as striking a company’s
name off the register of companies is akin
to a dissolution because such companies
shall not have access to the assets or
resources in the name of the Company;
not limited to the company’s bank
accounts, properties etc which shall be
deemed to be vested in the State, as bona
vacantia (latin term meaning “ownerless
goods”), see Section 693 CAMA 2020.

Furthermore, Sections 425 and 692 of

CAMA 2020, read together reveals that
the power to strike off a company is not
one that must be exercised, the word
“may” having been used by the drafters
of the law. The Commission is enabled,
empowered but not mandated to strike
companies off the register of companies
for failing to file annual returns as at when
due.

It is suggested that the Commission

exercises its prerogative to invoke a less
aggressive punitive measure in punishing
companies whose only offence is a failure
to file annual returns. The Commission is
encouraged to balance the need to keep
companies transparent with the need to
ensure that the Commission’s actions,
even if lawful, are not oppressive.

[1] IGHOFOSE v. SIPOL AGRICULTURE

AND FISHING INDUSTRIES LTD & ORS
25 LPELR-46237(CA)
(2017)

[2] https://www.cac.gov.ng/public-
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