You Can Now Register Your Company and be the Only Shareholder and Director

Under the Companies and Allied Matters Act 1990(“CAMA”) which is the old law regulating the registration, management and control of companies, business names and incorporated trustees in Nigeria, an individual could not singlehandedly register a limited liability company because the law required a minimum of two shareholders and two directors. As a result, many sole proprietors and startups who wanted to incorporate limited liability companies could not do so unless they had at least one additional person, whether an employee, friend, spouse or a child or other family members as an additional shareholder and director holding at least one share in their company. Those who did not find this option palatable, had to make do with registering their businesses as a business name rather than as an incorporated company, thereby losing out on all the benefits of an incorporated company. Some of these benefits are discussed below.

The good news is that the new CAMA 2020 has introduced a one-member company. By the provision of section 18(2) of this new CAMA, a single person can now register and own a private limited liability company and be the sole shareholder and director.

BENEFITS OF INCORPORATING A PRIVATE LIMITEDLIABILITY COMPANY

1. Perpetual succession: a company once incorporated enjoys perpetual succession until it is being wound up. The death, insanity, or insolvency of the shareholder does not affect the company’s existence because a company is a separate legal entity;
2. Limited liability: the liabilities of the company’s members (in this case, the single shareholder), is limited to the value of the shares it holds in the company. On the other hand, as a sole proprietor, the owner of the business has unlimited liability;
3. Investors invest in a company more than in a sole proprietorship and partnership;
4. Availability of funds: it is oftentimes easier for a company to approach a bank for a loan in than it is for an individual business woman or man;
5. The requirements for registering a business name and a one-member limited liability company are similar.
6. Easy Formation: The process for forming a one member limited liability company provided by the Act is well structured and detailed and as such it is easy to form;