The Corporate Affairs Commission (CAC) has issued a 90-day ultimatum to over 91,000 dormant companies, demanding that they file their outstanding annual returns or face the ultimate penalty: being struck off the register.
This mandate, anchored in Section 692 (3) (4) of the Companies and Allied Matters Act No. 3 of 2020 (CAMA), aims to cleanse the corporate register of inactive entities that have not complied with statutory filing requirements for the past decade.
The announcement, made through a notice titled “NOTICE OF INTENTION TO STRIKE OFF COMPANIES FROM THE REGISTER” on the CAC’s official website, has sent ripples through the business community. According to the CAC, these companies have failed to file their annual returns for ten years, making them eligible for delisting under the law.
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The Commission’s directive calls for these companies to submit all overdue returns within 90 days to avoid being struck off.
Annual returns are crucial documents that every registered company, including Non-Governmental Organizations (NGOs), must submit to the CAC annually. These returns are required regardless of whether the company has been actively trading.
The CAC has published a comprehensive list of defaulting companies on its website, providing a transparent mechanism for affected companies to verify their status. Companies that have complied with the filing requirements but still appear on the list are advised to email [email protected] with proof of compliance to ensure their names are not wrongly struck off.
“Companies who filed complete annual returns in response to the earlier publication are advised to confirm removal from the list of Companies to be struck off. The updated list for publication is available on the Commission’s website,” the agency said.
Why Some Companies Default
While the CAC’s move is legally justified, it has sparked concerns among various stakeholders. Many argue that the decision does not fully consider the broader economic context that may have contributed to the inactivity of many of these companies. Over the past decade, Nigeria has faced significant economic challenges, including a recession and the impacts of the COVID-19 pandemic. These factors have led to a harsh business environment, forcing many companies into dormancy or closure.
For some businesses, the inability to file annual returns may not be a matter of negligence but rather a reflection of financial hardship. Many believe the cost of compliance, coupled with dwindling revenues, may have made it difficult for some companies to meet their obligations.
This situation has led to a growing discourse on whether the CAC should take a more nuanced approach, perhaps offering amnesty or more flexible terms for companies that can demonstrate genuine hardship.
Implications for the Business Environment
The CAC’s ultimatum has broader implications for Nigeria’s business environment. On one hand, cleaning up the corporate registry is a positive step towards improving corporate governance and transparency. It ensures that the registry reflects only active and compliant companies, which is crucial for accurate data collection, policy formulation, and investor confidence.
On the other hand, the potential delisting of over 91,000 companies could have unintended negative consequences. Analysts believe that it may signal to potential investors that the Nigerian business environment is unstable or unfriendly to businesses. They noted that for companies that are genuinely struggling but still hope to revive their operations, being struck off could close the door on potential recovery efforts.
The CAC’s decision comes at a time when the Nigerian government is striving to improve the ease of doing business and attract foreign investment. The World Bank’s Ease of Doing Business index has shown some improvement for Nigeria, but challenges remain.
Against this backdrop, economists said regulatory predictability and support for struggling businesses are critical components of a healthy business ecosystem. As such, the current scenario calls for a balance between enforcing compliance and providing support to businesses navigating tough economic conditions.