HOW TO AVOID CORPORATE AFFAIRS COMMISSION (CAC) QUERY ON FILED APPLICATIONS
Applications filed in Corporate Affairs Commission (CAC) may well be for change in Directorship, transfer of shares (allotment of shares is no longer satisfactory), change of registered address, appointment of secretary, change of Company’s name etc.
Once these applications are filed for verification at CAC as a fresh application, the internal management procedure of the commission entails that the application is assigned to a staff known as a verification officer. A verification officer is an experienced staff of the Commission who is not below the rank of a manager
These are the steps every verification officer will take to ensure that all information submitted by an applicant in the course of completing his or her resolution, CAC forms, resignation letters, transfer instruments etc, are accurate so as to guarantee an approval.
STEP 1: COMPANY REGISTRATION INFORMATION CONTAINED ON THE LETTERHEADED PAPER
Section 548 of CAMA provides that the name of a company and registration number must be stated in legible characters in all business letters, bill of exchange, promissory notes, endorsements, cheques etc.
In Consideration of the above legal prerequisite, section 35(2) (b) of CAMA also provides that every company must have a registered office, the notice of which must have been delivered to the commission prior to the incorporation of the company.
Based on the foregoing statutory provisions, it will be mandatory for companies designing its letter headed paper to include all these information. Failure to include the name of the company, registration number and registered address of the company on the letterhead paper will attract a query on such application, thereby leading to the disapproval of the application. Mind you, even if all the above stated information is contained on the letterhead paper and it is different from what is on the commission’s record, the verification officer will not approve such application.
It is advisable for applicants to conduct a manual search on the company’s file at the commission prior to completion of relevant forms and resolutions.
STEP 2. RESOLUTION APPROVED BY MEMBERS AND THE BOARD
A corporate legal entity such as a limited liability company communicates its intents through resolutions, and a resolution can either be Ordinary, Special or a Board resolution.
Ordinary and special resolutions are made by members of the company in a General meeting, while Board resolutions are made by the Directors appointed by members.
The verification officer will take a look at the resolution adopted by the applicant and in most situations, unless CAMA or the articles expressly requires a special resolution, an ordinary resolution will suffice.
The following are some of the situations where a special resolution is required under CAMA.
- To alter the object clause of a memorandum – (s. 46(1).
- To change the name of a Company (s. 31 (3)
- To alter any provision in the memorandum – (s. 44(5)
- To reduce capital on the authorization of the article and with the consent of the court – (s. 106(1)
- To make the liability of the directors unlimited on the authorization of the articles – (s. 289).
- To effect winding up by the Court (s. 408(a).
- To wind up voluntarily (s. 457(b)
- To re-register a private company to public company (s. 50(1)(a)
- To re-register an unlimited company as a private company limited by shares (s. 52(1)
10. To re-register a public company as a private company (s. 53.(1)(a).
11. To create reserve capital – (s.99).
12. To alter the articles of association of a Company (s. 48(1)
STEP 3. HOW WELL THE RESOLUTIONS, FORMS & ACCOMPANYING LETTERS ARE COMPLETED.
At this point, the verification officer will be looking out for the proficiency of the legal consultant saddled with the responsibility of completing the various accompanying documents to the CAC Post Incorporation Forms.
Let’s take for instance, from CAC 7A which is used for filing notice of change in Directorship.
SECTION B is a column that contains the name, residential address and date of appointment of a newly appointed Director, while SECTION D is a column that accommodates all directors of the company from the date of the application as contained in the resolution.
If the legal advisor fails to capture the name and residential address of the newly appointed directors in section D, such application will be queried and denied. On the other hand, if a lawyer subcontracts such application to any other lawyer or corporate consultant and its seen that an approval is given even with a detective and erroneously completed form and resolution, then the authenticity of such application must be investigated by conducting a search on the Company’s file on record to ascertain the status quo .
The same level of diligence is required while completing a Form CAC 2A (Post incorporation Form for share transfer). A member of a company who desires to transfer his or her shares to another shareholder or a potential shareholder must execute a share transfer instrument which transfers his or her interest and responsibilities to the Purchaser. The next step the Directors will take after registering the Transfer instrument is to notify the company secretary to take necessary steps to file the transfer instrument with the corporate affairs commission. In completing the complementary Form CAC 2A, it’s mandatory that the Secretary avoid Completing SECTION A AND B (which is only essential for allotment of unalloted shares or increase in share capital). Only SECTION C will be completed in this instance.
Another important factor that any verification officer will pay attention to is to ensure that the resolution and other accompanying documents is properly dated. For instance, the date on the Letter of consent to act as a Director must tally with the date on Section B Form CAC 7A
STEP 4. UP DATED ANNUAL RETURN
Any company registered with CAC is required to file an Annual return with the commission after 18 months of its incorporation. An annual return is said to have been filed when a duly completed Form CAC 10 or 10A (used for a big company) and the statement of affairs or audited account of the company is submitted to the commission and an Acknowledgement letter issued as a prima facie evidence of filing. The reason why annual return is filed is to ascertain whether the company is still a going concern
So therefore, any company that files any post-incorporation application to the Commission must ensure that its Annual return filing is up to date so as to avoid a query and subsequent disapproval of the application.
In conclusion, It has been said that Diligence is the mother of good luck and Industry need not wish, it therefore beacons on any corporate consultant to ensure that all information contained in any application filed at the Commission is accurate and precise.