On Tuesday, July 30, 2024, the Federal High Court (FHC) ruled that section 18(2) of the Companies and Allied Matters Act 2020 (CAMA 2020), as amended, which permits private companies to have a single shareholder, applies to all private companies, irrespective of their incorporation date under the now-repealed CAMA 1990.
The judgment was delivered in Suit No: FHC/ABJ/CS/665/2023, brought by Primetech Design and Engineering Nigeria Limited (Primetech) and Julius Berger Nigeria Plc (JBN) against the Corporate Affairs Commission (CAC). The case arose from the CAC’s refusal to register and record changes in Primetech’s shareholding structure after JBN became its sole shareholder.
Primetech, incorporated in 2011 as a private company with two shareholders, notified the CAC of a change in its shareholding structure following the transfer of shares from the other shareholder to JBN. However, the CAC contended that section 18(2) of CAMA 2020 applies only to private companies registered after the enactment of CAMA 2020, and that reducing the shareholding to one shareholder would be grounds for winding-up under section 571(c) of CAMA 2020.
Banwo & Ighodalo, representing Primetech and JBN, argued that a purposive interpretation of sections 18(2), 22(1), 118, 571(c), and 869(1) of CAMA 2020 indicates the legislature’s intent for section 18(2) to apply to all private companies, regardless of their incorporation date or initial shareholding structure.
The FHC concurred with Banwo & Ighodalo’s arguments, stating that restricting the application of section 18(2) to private companies incorporated after the enactment of CAMA 2020 would undermine a literal interpretation of the section and the legislature’s ease-of-doing-business objectives.
Regarding section 571(c) of CAMA 2020, which permits the winding-up of a company if the number of members falls below two, the court noted that the legislature acknowledged that certain companies, such as private companies under section 18(2), are permitted to have only one shareholder.
The court ruled that the CAC was wrong to rely on section 571(c) as the basis for its refusal to register and record the change in Primetech’s shareholding structure. It ordered the CAC to immediately accept the share transfer instrument making JBN the sole shareholder of Primetech and to update the company’s corporate records in the Companies Registration Portal (CRP) accordingly.
