The Federal High Court (FHC) on Tuesday 30th July 2024 held that section 18(2) of the Companies and Allied Matters Act 2020, as amended (CAMA 2020), which allows private companies to have a single shareholder, applies to all private companies, regardless of their incorporation date under the now repealed CAMA 1990.
The judgment was delivered in Suit No: FHC/ABJ/CS/665/2023, filed 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 the change in its shareholding structure following the transfer of shares from the other shareholder to JBN. However, the CAC argued that section 18(2) of CAMA 2020 only applies 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, contended that a purposive construction of sections 18(2), 22(1), 118, 571(c), and 869(1) of CAMA 2020 demonstrates the legislature’s intention for section 18(2) to apply to all private companies, irrespective of their incorporation date or initial shareholding structure.
The FHC agreed with Banwo & Ighodalo’s submissions, stating that limiting the application of section 18(2) to only private companies incorporated after CAMA 2020’s commencement would defeat a literal interpretation of the section and the ease-of-doing-business intentions of the legislature.
Regarding section 571(c) of CAMA 2020, which allows for the winding-up of a company if the number of members falls below two, the court noted that the legislature considered the fact that some companies, such as private companies under section 18(2), are allowed 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 update the company’s corporate records in the Companies Registration Portal (CPR) accordingly.