Why Lawyers Are No Longer Needed In The Formation Of Companies.

Daily Law Tips (Tip 692) by Onyekachi Umah, Esq., LL.M, ACIArb(UK)

 Introduction: 

To have a positive rating on the ease of doing business and to improve its economy, the government of Nigeria has removed certain administrative bottlenecks in the process of formation of business. Business formation in Nigeria, is guided by a federal law (the Companies and Allied Matters Act). Liberating the process of business formation, meant the amendment or repeal (replacement) of an already existing Companies and Allied Matters Act. 

Arguably, on the above assumption and other factors, a new federal law (the Companies and Allied Matters Act, 2020) was made on 7 August 2020, putting to rest the earlier version (the Companies and Allied Matters Act, 1990) and its obsolete procedures. This work will reveal one of the many inventions of the new Companies and Allied Matters Act 2020, this particular invention allows companies and business to be created in Nigeria without the services of legal practitioners, accountants and other professionals. 

Before the New Company Law: 

Prior to 7 August 2020, the Companies and Allied Matters Act compelled all persons seeking to register a company in Nigeria, to engage the services of a lawyer or accountant. In this, a lawyer was expected to make and sign a statement confirming that the persons forming the company have complied with all necessary legal requirements. This led to lawyers being used for the entire processes of formation, management and termination of companies across Nigeria. 

However, this has been argued to be slowing down the pace of business formation in Nigeria and causing too many unnecessary middlemen and high cost. Rightly or wrongly, the above assertion has led to the removal of lawyers, accountants and other professionals from the process of business formation in Nigeria by a new company law, since August 2020. 

 The New Company Law, Lawyers and Other Professionals: 

With the signing into law of the new Companies and Allied Matters Act 2020, by the President of Nigeria, the new company law repealed (replaced) and put to rest the earlier Companies and Allied Matters Act, made since January 2, 1990. 

By the new Companies and Allied Matters Act 2020, any person (including a person forming a company) can make and sign a declaration that all necessary legal requirements of law, have been complied with in the process of forming of a company. This has expressly dispensed and removed the role of lawyers and accountants in making and signing of declarations of compliance. However, where a statement of compliance is signed by a legal practitioner it still acceptable but no longer a mandatory condition. 

The New Company Law and the CAC Lag: 

A federal government agency mandated to regulate and oversee the registration and formation of the business and companies in Nigeria, is the Corporate Affairs Commission (CAC). The CAC is the operator of the Companies and Allied Matters Act (CAMA) with enormous powers and responsibility under the CAMA. 

Companies are formed at and their particulars hosted and housed in the database and offices of the CAC. The CAC has offices across all states in Nigeria and its headquarters is located at Plot 420 Tigris Crescent, Maitama 900271, Abuja, Federal Capital Territory. Its official website is  https://www.cac.gov.ng and its telephone is 0809 552 1924.

Although the new Companies and Allied Matters Act 2020, invented a lot of procedures to aid business formation and management in Nigeria, the CAC seems to be slow in enforcement. For example, the forms and interface of the CAC is reported to be requesting for statement of compliance from lawyers, before new companies are registered, contrary to the provisions of the new company law. Hence, there is a huge gap between the laws in law books and the laws as enforced at the CAC; there is need for catching up. 

Conclusion & Recommendation:

Government has a duty to create a safe and beneficial environment for businesses to be created and groomed in Nigeria. This is a constitutional right of Nigerians and responsibility of government of Nigeria. Unfortunately, it is one of those hopeless socio-economic duties and responsibilities of government that were provided by the constitution of Nigeria but at the same time, the constitution ordinarily prohibits all persons from seeking their enforcement; unless the National Assembly makes a law on them. 

The need for a business-friendly environment has birthed a new company law (the Companies and Allied Matters Act, 2020) and removed the role of legal practitioners in the process of business formation. However, business formation being greatly regulated by law, it is always advisable to engage the services of a legal practitioner. 

While this invention of the CAMA is being celebrated, the regulator and implementer of the CAMA (being CAC), seems to be behind in catching up with the inventions of the new CAMA. It is expected that CAC will update its systems, procedures and forms to align with the new CAMA and avoid denying Nigerians the good fruits of the new CAMA. Until laws are enforced, they are not true tools of social engineering and until awareness are created on laws, laws will lack value and impact. Access my over 40 earlier works on the old and the new CAMA via this link; https://learnnigerianlaws.com/?s=companies+and+allied+matters+  

My authorities, are:

1. Sections 1, 2, 3, 6(6)(c), 16 (2)(d), 17 (3) (c), 318 and 319 of the Constitution of the Federal Republic of Nigeria, 1999.
2. Sections 40, 868 and 870 of the Companies and Allied Matters Act 2020. 
3. The judgment of the Supreme Court of Nigeria (meaning, nature and exceptions to non-justiciability of the fundamental objectives and directive principles of State policy in Chapter 2 of the constitution of Nigeria) in the case of OLAFISOYE v. FRN (2004) LPELR-2553(SC)
4. The judgment of the Supreme Court of Nigeria (nature and exceptions of non-justiciability of fundamental objectives and directive principles of State policy) in the case of AG ONDO STATE v. AG OF FED & ORS (2002) LPELR-623(SC)
5. 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 8 November 2020. 
6. Eric Christiansen, “Adjudicating Non-Justiciable Rights: Socio-Economic Rights And The South African Constitutional Court” [2007] Columbia Human Rights L. Rev. 28 (321) <https://digitalcommons.law.ggu.edu/cgi/viewcontent.cgi?article=1141&context=pubs > accessed 8 November 2020 
7. 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 8 November 2020

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