A Comprehensive Guide to Articles of Association under CAMA 2020
The Company and Allied Matters Act (CAMA) 2020, governed by the Corporate Affairs Commission (CAC) in Nigeria, provides a detailed framework for the formation and operation of companies.
A key element in this framework is the Articles of Association. This blog post delves into the specifics of the Articles of Association, their form and content, and their significance in the Nigerian corporate landscape.
What are Articles of Association?
The Articles of Association (often referred to simply as "Articles") are one of the two primary constitutional documents of a company, the other being the Memorandum of Association. The Articles serve as a rulebook for the internal management of a company, regulating the relationship between the company and its members and how the company is run.
They cover a wide range of issues including the powers and duties of directors, the conduct of board and shareholder meetings, the issue and transfer of shares, and the declaration of dividends.
Importance of the Articles of Association
The Articles of Association are crucial for several reasons:
- Internal Regulation: They establish the rules for the internal management of the company.
- Statutory Contract: They form a statutory contract between the company and its members, and among the members themselves.
- Flexibility: Companies have considerable freedom to draft their Articles to suit their specific needs, subject to compliance with relevant laws.
- Transparency: They provide a clear and accessible document that outlines the company’s management structure and governance policies.
Articles for Regulating Companies under CAMA 2020
CAMA 2020 mandates that every company must have Articles of Association that are registered along with the Memorandum of Association. These Articles must be signed by the subscribers to the Memorandum and outline the regulations for the company.
1. Form and Content of Articles
The form and content of the Articles of Association vary depending on the type of company:
- Public Company with Share Capital: As specified in Part I of Table A in the First Schedule to CAMA 2020.
- Private Company with Share Capital: As specified in Part II of Table A.
- Company Limited by Guarantee: As specified in Part III of Table A.
- Unlimited Company: As specified in Part IV of Table A.
Companies may modify these standard forms to suit their specific requirements.
2. Special Provisions for Companies Limited by Guarantee
For companies limited by guarantee, the Articles must state the number of members with which the company proposes to be registered. This is necessary for the CAC to determine the registration fees.
3. Structural Requirements
The Articles of Association must:
- Be printed.
- Be divided into consecutively numbered paragraphs.
- Be signed by each subscriber of the Memorandum of Association in the presence of at least one witness who attests the signature.
- Bear the same stamp duty as if they were contained in a deed.
Key Features and Benefits of Updating Articles under CAMA 2020
Updating and maintaining effective Articles of Association is vital for the smooth operation and legal compliance of a company. Here are some key features and benefits:
Objects and Share Capital
- Objects: Under CAMA 2020, the objects of a company are generally unrestricted unless specifically limited in the Articles. This allows for greater flexibility in business operations.
- Share Capital: The Articles must address the company’s share capital structure, including provisions for the issue, transfer, and redemption of shares. This ensures clarity and control over the company’s equity.
Director Responsibilities and Meetings
- Directors’ Duties: The Articles can specify the duties and powers of directors, including conflict of interest provisions and indemnities. This helps in defining the governance framework.
- Meetings: Modernizing meeting procedures, such as allowing electronic communications and shorter notice periods, can enhance operational efficiency.
Member Rights and Proxies
- Member Rights: The Articles should clearly outline the rights of members, including voting rights and rights to dividends. This ensures transparency and fairness.
- Proxies: Provision for the appointment of proxies and their rights under the new Act can be detailed to protect member interests.
The Articles of Association are a fundamental component of a company’s legal structure, providing a clear framework for internal governance and operations. Ensuring that your company’s Articles are up-to-date and compliant with CAMA 2020 is crucial for legal compliance and operational efficiency.
