The Corporate Affairs Commission (CAC) is Nigeria’s regulatory body responsible for the incorporation, regulation, and dissolution of companies. A critical aspect of this regulatory function is the annual filing of returns by registered companies. This statutory obligation, often overlooked, carries profound legal implications that can significantly impact a company’s existence and operations.
Chapter 16 (Section 417) of the Companies and Allied Matters Act (CAMA) 2020 imposes a mandatory duty on every company registered under the Act to file annual returns with the CAC. These returns must be filed within eighteen months of the end of each financial year. The information required in the annual return is extensive and includes particulars about the company’s directors, shareholders, registered office, and financial position. While the CAMA 2020 mandates annual return filings for most companies, there are exceptions provided in Section 412(2) CAMA 2020. Sole-member companies are exempt from this requirement.
However, for companies obligated to file, non-compliance carries significant consequences. Section 425 of CAMA 2020 provides the Penalty for non-compliance with the filing of annual returns. The most drastic consequence is the company being struck off the CAC register. The CAC has the authority to remove a company from the register if it believes the company is dormant. Typically, a company’s inactivity is inferred from its failure to file annual returns. This essentially means the company ceases to exist as a legal entity. The implications of this are far-reaching. Contracts, property ownership, and legal proceedings can be adversely affected. Non-compliance also attracts financial penalties. It is unlawful for any Company whose name has been struck off the Register of Companies to carry on business.
Under Section 425 of CAMA 2020, the CAC is empowered to impose administrative fines on defaulting companies and officers of the company such as the directors. A daily default penalty fee of up to N 1000 (One thousand Naira) is to be paid by the defaulting company and its directors or officers. Directors of companies that fail to file annual returns may also face personal liability. This can include disqualification from acting as a director and potential legal actions.
Finally, a company’s reputation can be severely damaged by failure to comply with statutory obligations. This can impact business relationships, investor confidence, and overall market standing.
The widespread disregard for the annual return filing requirement has significant implications for the Nigerian corporate landscape. It creates a distorted picture of the business environment, as the register may not accurately reflect the number of active companies. Moreover, it hinders effective regulatory oversight and enforcement. Companies must treat this obligation with the seriousness it deserves.