Every business, private limited company, and trustee organisation in Nigeria is required to file annual returns on a yearly basis. To do so, they must complete the prescribed form, submit it to the Corporate Affairs Commission (CAC), and include the specified information about their organization as required by the Companies and Allied Matters Act (CAMA). Chapter 16 of the CAMA (2020) makes it a statutory prerequisite for every company in Nigeria to file annual returns every year. The only exemption is found in the provisions of Section 421 (2) of CAMA 2020 which exempts companies with one member from filing annual returns.
Each calendar year, returns must be filed (i.e. annually). On the other hand, newly incorporated companies need not file returns for the first 18 months post-incorporation, whereas older companies must submit their annual returns no later than 42 days following their annual general meetings.
Significance of filing Annual returns.
- It enables companies to process and access post-incorporation services from the CAC, e.g request Certified True Copies (CTC) of Incorporation documents, carry out increases in share capital, changes to business objects or registered addresses, and changes to directors, partners, or trustees. If annual returns are not filed on time and any applicable penalties have not been paid in full, CAC will not provide any post-incorporation services to any registered entity.
- It is noteworthy that the majority of contractual bids in public or private sectors typically require the filing of an up-to-date yearly report as a major pre-requisite. for an entity to comply with this obligation it must make sure its records are updated as and when required.
- It assists the company or entity in informing the Commission of its ongoing existence, which is why companies that are functional are called ‘a going concern’ and it also ensures that the name of the entity is kept on the register the commission maintains.
- Aids in presenting your business as a trustworthy corporation during due diligence checks. In order to learn more about the state of a company, investors typically carry out due diligence investigations with the CAC. If the CAC is unable to provide meaningful information or a positive response to inquiries because it lacks knowledge of the company’s present situation.
- A company fully compliant and up to date with filing of Annual Returns can confidently obtain services from CAC within the shortest possible time without any delays.
Also read: A Review of the Impact of the Business Facilitation Act 2023 on CAMA 2020: Furthering the Ease of Doing Business in Nigeria
Implications of non-compliance
The penalties for entities which fall under the category, or are required to file annual returns by the law but fail to do so, have been prescribed in Section 425 of CAMA 2020. The provision states that the company and every director or officer are liable to a penalty that is at the discretion of the Commission.
A company’s name may be struck off the Register for failing to file yearly returns for a period of ten years in a row. The law gives the Commission the power to remove a company’s name from the Register of Companies when there are good grounds to think that the firm is not operating, after following the due process of investigating the status of the company.
The commission often bases its decisions on one main criterion, according to which a corporation is dormant if it fails to file yearly returns.
When a company is delisted for failing to file annual returns, anyone who is displeased with the removal of the company’s name from the register may apply to the court for an order restoring the company to the register at any time before the expiration of 20 years from the publication of the notice of removal, if the court is satisfied that, at the time of the striking off, the company was carrying on business or in operation, or that otherwise, it is just to restore the company to the register.
A formal application can also be written in the form of a letter addressed to the CAC’s Registrar General (RG), appealing and explaining why the annual return was not filed on time.
In addition to the written application, all payable dues (total fees of years of unfiled annual returns) and updated company or entity records must be attached.
If the application is successful, a relisting certificate will be issued to the company.