Q & A: Understanding Share Certificates Under CAMA in Nigeria: Insights from the 2020 Amendments

Question: When I give friends or investors shares in my business, what other documents should I provide as evidence?

Answer: When bringing in new investors, it’s important to notify the Corporate Affairs Commission (CAC). This requires completing necessary filings and making critical amendments to your company’s internal records. These records are the strongest evidence of a person’s shareholding, and failure to comply will result in penalties. It’s essential to handle these filings accurately and within the timeframes prescribed by law.

In addition, a share certificate is typically issued to serve as evidence of ownership. Under Section 171(1) of the Companies and Allied Matters Act (CAMA) 2020 (similar to Section 146 of the old CAMA), companies are required to complete and have ready for delivery, share certificates within a limited time period unless the terms of the share issue specify otherwise.

Section 148(1) of CAMA 2020 also addresses situations where the issuance of shares may be invalid due to inconsistencies with legal provisions, a company’s articles of association, or the terms of issue. In such cases, the issuance can be validated through a special resolution by the company.

An important update to note is the dematerialisation of share certificates under Section 7 of the Business Facilitation (Miscellaneous Provisions) Act, 2023. This amendment to Section 171 of CAMA 2020 allows share certificates to be issued in both physical and electronic forms. This innovation eliminates the risk of losing physical certificates and supports paperless transactions in line with modern business practices.

Additionally, with the common seal now optional, share certificates can either be issued under the company’s seal or signed as a deed by the company, both of which are valid.

In summary: While share certificates are still in use, the requisite CAC filings and internal records are more important, and the certificates can now be issued electronically. This development enhances security, reduces risks associated with physical certificates, and aligns with the realities of conducting business in today’s technology-driven world.