Does the New Finance Act Exempt Companies from CAC Annual Returns? Daily Law Tips (Tip 758) by Onyekachi Umah, Esq., LL.M, ACIArb(UK)
Introduction:
One of the last federal laws made in December 2020, is the Finance Act. It is was signed by President Buhari on 31 December 2020 but came into force on 1st day of January 2021. The law has made laudable improvements on the Nigerian tax system and ushered in 80 amendments that affected 13 existing federal laws. Popular changes brought in by the new Finance Act includes; the increase of Value Added Tax from 5% to 7.5%, creation of the Unclaimed Funds Trust Fund and the Crisis Intervention Fund of N500 Billion, Exemption of low-income earners (earners of minimum wage or less) from personal income tax, reduction of import duty on Tractors from 35% to 5%, and reduction of import levy on Cars from 30% to 5%. Among the laws affected is the Companies and Allied Matters Act; which is the law that establishes the Corporate Affairs Commission (CAC) and its activities; including, registration of business entities and not-for-profit entities as well as their post registration changes, among other things.
In corporate law practice, my team and I have received severally inquiries from business entities concerning the filling of annual returns to the Corporate Affairs Commission (CAC) and the changes brought by the Finance Act. Many are wondering if the new Finance Act has truly exempted some certain business entities (Business Names and Companies) and Not-For-Profit entities from filing annual returns to the CAC. This work answers the question; “Does the New Finance Act Exempt Companies from CAC Annual Returns?”.
The CAC, Annual Returns and the New Finance Act:
Ordinarily, every entity registered at the CAC must file annual returns to the CAC every year to confirm the existence of the entity and where annual retune is not filed, huge penalties follow; including de-registration of the entity by the CAC. Presently, filling of annual returns entails completion and filing of relevant forms from the CAC, preparation and filing of financial records and the payment of prescribed annual returns fees with penalties (if any) to the CAC.
Following the new Corporate and Allied Matters Act 2020 and the guidelines from the CAC, annual returns for companies limited by guaranty, private companies, Limited Liability Partnerships, Limited Partnerships and Incorporated Trustees (Not-For-Profits) is N5000.00 per year while annual return for business names is N3000.00 and annual return for public companies is N10,000.
The new Finance Act of 2020 amended part of the Corporate and Allied Matters Act 2020. However, the amendment is as to management and payment of unclaimed dividends of shareholders of Public companies quoted on the Nigerian Stock Exchange. Hence there is no amendment of the Finance Act that affects the filling of annual returns to the CAC. There is no exemption of any entity from filling of annual returns by the Finance Act. Even foreign companies that are enjoying an exemption from registering with the CAC, are mandated to file annual returns to the CAC every year.
It is believed that many people mistake annual returns for tax/levies. Annual Return is a yearly notice of existence and state of affairs filed at the CAC by all entities registered with the CAC and foreign companies enjoying exemptions from the CAC. Tax/levies are government prescribed charges created by law and payable to government tax offices/agents, like the Federal Inland Revenue Services and other tax agencies across states in Nigeria.
The only amendment on the Companies and Allied Matters Act (CAMA), by the new Finance Act 2020, is on the issue of “Right of a shareholder to claim for dividend”. The new Finance Act reiterates that unpaid dividends as special debts and allows shareholders to recover their unpaid dividends from companies within 12 years (this is also provided by the CAMA). However, the new Finance Act, went further to create an Unclaimed Funds Trust Fund, mandating publicly quoted companies to transfer their unclaimed dividends to the fund after 6 years. It also allows the Federal Government of Nigeria to have access to such fund as special debts payable to their respective shareholders any time there is a claim for it.
Conclusion:
The new Finance Act made on the last day of 2020, that became effective on the first day of 2021, is commendable. It introduced several themes designed to free up Nigerian economy and support easy of doing business. Although, the federal law created some tax exemptions, it did not waive the duty of entities to file annual returns to the CAC, every year. That duty remains in place as contained in the Companies and Allied Matters Act 2020. Failure to file annual returns fetches monetary penalties and where such failure continues for about 10 years, the CAC can de-register such entity.
My authorities, are:
- Sections 1, 2, 3, 4, 5, 6 and 12 of the Constitution of the Federal Republic of Nigeria, 1999.
- Sections 1, 60, 81 and 81 of the Finance Act, 2020. Click to download a free copy of the Finance Act, 2020 <https://learnnigerianlaws.com/free-copy-of-the-finance-act-2020/>.
- Sections 1, 81, 237, 417, 418, 419, 420, 421, 422, 423, 424, 425, 432 of the Companies and Allied Matters Act, 2020. Click to download a free copy of the Companies and Allied Matters Act, 2020 <https://learnnigerianlaws.com/new-cama-2020-companies-allied-matters-act/>
- Onyekachi Umah, “Why Lawyers Are No Longer Needed In The Formation Of Companies” (LearnNigerianLaws.com, 9 November 2020) <https://learnnigerianlaws.com/why-lawyers-are-no-longer-needed-in-the-formation-of-companies/> accessed 17 March 2021.
- Onyekachi Umah, “CAC Can Now Takeover Churches, Mosques, Associations and NGOs” (LearnNigerianLaws.com, 18 August 2020) <https://learnnigerianlaws.com/takeover-of-not-for-profits-by-cac/> accessed 17 March 2021.
- Onyekachi Umah, “Company Secretaries Are Not Needed In Small Companies” (LearnNigerianLaws.com, 13 August 2020) <https://learnnigerianlaws.com/company-secretaries-are-not-needed-in-small-companies/ > accessed 17 March 2021.
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