CAC Threatens to Sanction Companies With Unissued Shares

By Modupe Gbadeyanka

Companies operating in Nigeria, which failed to cancel or issue all their unissued shares to their shareholders before the deadline of December 31, 2022, would be sanctioned alongside their directors.

Business Post reports that the Companies and Allied Matters Act (CAMA) 2020 replaced the authorised share capital in CAMA 1990 with minimum issued share capital.

In the abolished law, organisations were required to issue at least 25 per cent of their authorised share capital, but under the new law, the entire share capital must be fully issued at all times, cancelling the ability of companies to retain unissued shares for future allotments.

This was captured in Section 124 of the law, which said “no company shall have a share capital which is less than its minimum issued share capital and that every company with unissued shares, must not later than six (6) months from the commencement of CAMA 2020, issue shares up to an amount, not below its minimum issued share capital.”

The Corporate and Affairs Commission (CAC), which regulates the registration and running of registered organisations in Nigeria, extended the deadline for the cancellation of all unissued shares of firms to December 31, 2022.

Most companies on the Nigerian Exchange (NGX) Limited held their extraordinary general meetings (EGMs) last year to comply with this new law, but a few did not.

According to a circular issued by the CAC, such erring organisations would be severely sanctioned.

“Further to the notice of the commission dated April 16, 2021, on the extension of the period for existing companies to comply with the requirements of issued share capital under the Companies and Allied Matters Act 2020 and the Companies Regulations 2021 to December 31, 2022, and in line with the last paragraph of the notice, customers and general public are hereby reminded that any application filed in compliance with the requirements after the extended date (being December 31, 2022) shall attract daily default penalty against the company and each officer of the company for every day during which the shares remained unissued after the extended date and in accordance with Regulations 13(2) of the CR,” the notice emphasised.

Recall that in 2021, President Muhammadu Buhari signed the CAMA into law. Many stakeholders applauded the new law because of the innovative changes it brought into play, including making it possible for an individual to establish a company as a sole director.