On Wednesday, the 24th day of July, 2024, the Corporate Affairs Commission (CAC) pursuant to its powers under section 692(3) (4) of the Companies and Allied Matters Act, 2020 (CAMA), issued a public notice of its intention to strike off from the Register, names of defunct or dormant companies that are in default of filing of their annual returns for a period of 10 (Ten) years.
By the said notice, defaulting companies have a 90-day timeline from July 24, 2024, to file all their outstanding annual returns with the commission. A defaulting company who proceeds to file outstanding annual returns may then proceed to send an email to: [email protected] in order to have its name removed from the list.
The list of defaulting companies can be assessed on www.cac.gov.ng [i]
WHAT IS THE EFFECT OF STRIKING OFF ON AFFECTED COMPANIES?
The process of striking off is a means of ending a company’s activities in Nigeria. It removes the company from the register of companies, allowing it to cease operations. Under the Companies and Allied Matters Act (CAMA), the Corporate Affairs Commission (CAC) can strike a company’s name off the official register of companies, which is a process that involves removing the name of the company’s name from the register.
When this happens, the company’s legal existence is effectively dissolved. It means the business has dissolved from the view of the law and is no longer regarded as a legal entity. Organizations have the option to voluntarily seek to strike off, or the CAC may start the process if an organization fails to comply with legal obligations, including not filing yearly returns (as is the rationale behind CAC’s notice of July 24, 2024.
Usually, where a company intends to formally dissolve especially where it has no assets or liabilities, and is no longer in business, it may seek to be struck off the register. The CAC has the authority to remove a company’s name if it is determined that it does not meet the requirements of the CAMA, such as not filing annual returns within the allotted time, not keeping up a registered office, not adhering to other legal obligations, or simply being inactive or not engaging in any substantial business activity.
The effect of striking off the list has the following effects on a company:
A). Loss of legal status: A company loses its status as a legal entity when its name is removed from the CAC registry. This implies that it is unable to transact business, sign contracts, file or defend legal actions under its own name. That is to say, the company is no longer able to possess assets, sign contracts, or carry out commercial operations. It cannot file or receive a lawsuit in its own name.
Effectively, the company’s legal identity is terminated, together with its name, registration number, and any rights pertaining to its status as a corporate entity. The business must also stop doing any business at all. It is unable to carry on with its business, trade, or service offerings. Closing all operational facilities and managing assets in compliance with legal requirements are the next steps. It is no longer possible for directors and officers to act on behalf of the business. Nonetheless, if the directors are liable for unlawful or dishonest acts, they can still be held personally liable for their prior actions.
B). Asset disposal: The CAC or another regulatory authority might need to be involved in managing or overseeing the disposal of assets if a company is struck off involuntarily.
Disposal of assets after a company’s name has been struck off the register involves managing assets that were left behind post-dissolution. Before a company is struck off, it should settle its liabilities and distribute its assets. After striking off, the company no longer exists to handle assets, so the management of these assets falls to regulatory authorities or involves legal processes for potential restoration or liquidation.
C) Directors and officers of a struck-off company may still be held accountable for actions taken before the company was struck off. They might face legal consequences or penalties if the striking-off was due to non-compliance or misconduct on their part.
CONCLUSION
Striking off a company under CAMA in Nigeria signifies the end of its legal existence. It involves removing the company from the official register, thereby ceasing its operations and legal capabilities. This action has various implications for the company’s directors, creditors, employees, and other stakeholders. If the company whose name was struck off believes it to be unfair, it can apply to be restored to the register. A struck-off company can be restored to the register if it can demonstrate that the striking-off was erroneous or that there are valid reasons for its reinstatement. This usually involves applying to the CAC and providing evidence supporting the need for restoration. It should however be noted that a struck-off company ceases to be a legal entity.
[i] See the Commission’s website to access the list via: https://www.cac.gov.ng/wp-content/uploads/2024/07/AR-DEFAULT-JUL-16-2024-1.csv
Written by Grace Eniyandunmo for The Trusted Advisors
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