The Darkside Of Unissued Share Capital And The CAC Deadline: The Implications Every Company Needs To Know On Missing The Deadline.
The recently introduced CAMA 2020 transformed the course of corporate practice in Nigeria, by bringing about notable changes. One of which, includes the necessity for companies to issue the unissued share capital in the company, in accordance with Section 124 of the Companies and Allied Matters Act 2020, which is enforced by the Corporate Affairs Commission.
Failure on the part of any company to fully issue their shares within the stipulated period would subject the company to penalty and not filing the allotment will result in all the unissued shares being disregarded from the company’s share capital until such shares are issued or formerly reduced.
The implications of not meeting the deadline of 31st December 2022 by which the allotment of all unissued shares are to be filed for free is that either such unissued shares are forfeited or the company and the directors of the company will be expected to pay the penalty which is calculated on daily basis by the Corporate Affairs Commission.
How would the fine be calculated?
The number of default days, that is, the number of days after the deadline, multiplied by the number of directors in the company and the company itself (as the company is a separate legal entity, completely separate from the directors), then multiplied by the fine. The Company, as well as the directors (for a small company), are expected to pay a sum of 250 Naira each for each default day.
For example, a small company with 10 directors that has unissued shares beyond the deadline (31st December 2022), would be mandated to pay 250 Naira by each including the company, for each day of the default; that is 11x250x number of default days. If the company defaults for 30 days, it would then be, 30 days x 11 (10 directors plus company) x 250 Naira fine.
30x11x250 = N82,500
In conclusion, if you have unissued shares say as of 14th February 2023, you have defaulted for 45 days and the default fee will be multiplied by 45. It is worthy of note that the longer you wait; the more default days you incur. Companies are hereby urged to issue their unallotted shares as soon as possible to cut the accruing cost.
Do you have unissued shares in your company share capital? Help is here for you. Ensure that you engage our experts to advise on the best approach or steps to take to be on the right side of the law with minimal resources. Contact us for more information.