In this interview with THE COMMERCE AFRICA Magazine, the Registrar-General of the Corporate Affairs Commission, Mr Garba Abubakar spoke on the reforms being implemented at the Commission and steps being taken to position the CAC into a world class company registry. EXCERPTS…
What is your vision for the CAC?
The vision is to have a Commission and a Registry that is world class that delivers services using the best electronic system to the satisfaction of our customers with highly motivated workforce. As an individual, what I did was to key in to the vision. The vision has always been there since the last 50 years. We have modified it in line with current realities. We are on course to realizing this vision. And from the various reforms initiatives, we are on the right track.
Now that the CAC establishment Act has finally been amended, how fulfilled are you in the discharge of your mandate?
The new law is an improvement over what we had. It took thirty years to have a new law. But, you know, everything human can never be perfect. But certainly, it is an improvement. We have a new law in line with current realities and global standards on company regulation and administration and the law has come with new legal entities types, new legal provisions dealing with matters that are of global concerns such as beneficial ownership disclosures, company voluntary arrangements which is a new insolvency framework that encourages the survival of companies as opposed to the old practice where receivership and liquidation always ends in liquidation.
So, these are new initiatives that have been provided in the new law that support businesses, their survival and growth.
Can you give an update on the implementation of the amended Companies and Allied Matters Act (CAMA), particularly considering the uproar it generated when it was newly passed?
The uproar related to just an aspect of the law dealing with regulation of not-for-profit organizations, particularly on corporate entities. But generally, the implementation is going on smoothly. I can say that virtually all aspects of the law are being implemented now. What we did was to improve on our technological solutions. We had to deploy a new company registration portal to support the implementation of the new law.
Without a robust electronic system, it would not have been possible because the law has come with a lot of initiatives. For the first time, it has recognized electronic signatures and electronic filling. As at today, all your dealings with the Commission as an applicant that wants to register its own entity or that wants to make post -incorporation changes on its entity , they are done electronically and the results we send to you are also sent electronically.
The old system where customers had to queue to collect certificates or submit documents have been removed So, that tells you that the implementation is going on smoothly and to support the implementation we had to come up with regulations.
The first one we had was the company regulation 2020 that provides for the disclosure requirements, various forms that the commission is supposed to use, that the customers are supposed to use, the fees for various charges, the requirements for accessing these services. That was the first to be done. Subsequently, this year, we came up with the insolvency regulations that provide an elaborate framework on insolvency proceedings either be it receivership , be it managership ,be it voluntary arrangement or administration.
So all these things have been provided in the insolvency regulations. We will soon roll out another regulation on beneficial management disclosure. All these are initiatives that provide very clear guidelines, clear directions on how to deal with the Commission, on how to carry out certain transactions in relation to these companies. The new legal entity types we have since started the registration of limited partnerships and limited liability partnerships. These are new legal entity types that were introduced by the new law. Hitherto, we didn’t have such legal entities in our law.
We have to look at what obtains globally because, businessmen need options. Since last year, August, 2021, the technological solutions to support the registration of these entities was built and deployed and customers have been taking advantage of that. All these things go to show that we are on course because the law is dynamic and is not supposed to be implemented from day one to two, it is an ongoing thing and we expect companies to imbibe these provisions because they are the greatest beneficiaries of this law.
They are supposed to apply the law in the administration of their company, in their governance structures. We have elaborate articles of association in the act. So, a company has the options unlike before where the articles provided were not elaborate , were very scanty. What we have now are very elaborate to assist companies in their governance framework. So a company has the option either to adopt what is in the schedule to the Act or they can submit a completely new article or modify.
These are some of the things that are in place and I can assure you that we are seeing greater level of compliance by these entities. The technological solutions have also provided ease to these companies in their dealings with us. It has reduced cost because you no longer need to come to CAC . Infact, you don’t need to go through any professional. We have introduced what we called Company Electronic Account. Any company on its can apply to have that account. Once you have this account, in their dealings with CAC all their post incorporation fillings can be done directly. We are at the verge of introducing electronic system for submission of financial statement in extensive reporting language. The system has been built with support from European Union citizens for change initiative and it has been tested we are integrating into our main application .So, at the point of submitting financial statement, companies have the option to either submit in pdf or in extensive reporting language. The advantage of using extensive reporting language is that it can be analyzed , it will be in analytical manner and anybody interested can download this information for research purposes and Government can even use it for planning.
So, if you want to know how many companies are in a particular sector , what is their aggregate turnover, net asset, you can download the support from the system and analyze it .So this is how far we have gone. As I said, our vision is to have a world class registry. What we have now is comparable to many of the best registries in the world. We are continuously improving. Technology is dynamic. The world is not static. We try to anticipate what is coming in future and adopt .
What are the challenges limiting your operations so far?
Cost of operation is one major challenge. Cost diesel has gone up, cost of electricity too has gone up. We spend a lot of money on these. To address some of these challenges, we decided to provide tools to our staff that enable them to work outside the office hours. They have data provided by the Commission and laptops to work with. We have offices round the states. With the online system, anybody can work from anywhere. Even on public holidays and Christmas, the staff are busy and they deliver results.
Another challenge has to do with finance. Over the years, government requested us to reduce our fees and that has adversely affected us. There are expectations from government especially the issue of Ease of doing Business. So, we have to balance the interests. Government as part of the initiatives to support Ease Of doing business slashed the fees by 50%
in 2015. That has continued to affect us.
Again, under the Company and Allied matters Act 2020, the fees for registration of charges was also reduced by 65% for private companies and 135% for public Companies. Registration of charges used to account for 40% of our revenue . You can imagine the effect of that on us. What we try to do is to balance this loss through enforcement, getting companies to file their returns, to update their status. When they make changes, we make sure they file the changes because we are the only registry in Nigeria. Some of the measures we took are helping matters because hitherto, at a glance, you won’t know the status of any company in Nigeria. We had a public search window that allows you to see the name, the number and date of registration and address. We have extended it further now to provide for the status. So, any company that has not updated in the filling of its returns with us, its status will remain inactive. And that is helping to enforce the requirements of filling of annual returns. A lot of Embassies and other Government organizations have access to this data base and its also available publicly. Most embassies are reluctant to issue visas to anybody whose status is inactive and this the right thing to do . Because, globally, why would you deal with an inactive company. A company is in good standing if it is up to date in its regulatory filling. The registry is the only place where you can get reliable information on these entities. The information is publicly available. Any member of the public from anywhere in the world can access this information. So, if as a company you want to deal with the world, why should they rely on the information you give to them, why are you not filling, why are you not updating your information with the Registry if you are transparent? So, because of that, a lot of companies are filling their returns. These are part of the measures to enforce compliance not just to augment the shortfall in revenue but also to ensure that companies are transparent, and are disclosing what they are expected to disclose. So, people dealing with companies will have reasonable certainty about the genuineness of the information, about the authenticity of the information and the integrity of the information.
In the past, some companies used to have multiple accounts depending on who they are submitting to. To the tax authorities, they will submit the one with lower turnover, and when they are doing Procurement they will submit the one with higher turnover to increase their chances. So, all these things now, we are having greater synergy with bodies like the Federal Inland Revenue Service (FIRS), Bureau for Public Procurement. We exchange information such that whatever you submit to CAC, you can be sure that this information will be available to these other agencies and they can easily verify.
As you migrate your registry online, what arrangements have you put in place to limit incessant downtime or breakdown in infrastructure which had elicited protests from clients in the recent past?
Incidentally, the challenge we had before, was with our former hosting facility. Their equipment had reached the end of life and they didn’t upgrade. So, we had downtime severally. But, the good thing is, since the deployment of this new application, on 3rd January, 2021, we have not recorded any downtime from our hosting facility.
We have disaster recovery arrangement. We have two other sites apart from the primary site. So, if there is any issue, we can easily switch over. We have adequate safeguards on that. The customers can attest to that. If you see any challenge, sometimes it is from the customers end. If your internet is not strong, you may not know immediately. You may be thinking CAC system is down. Have you heard of any protest lately? The only one we had was when we introduced a new system and customers didn’t want to adjust but wanted to still be coming to CAC.But they are happy now with the new system.
This is because, anywhere in the world, you can take instructions from clients and you can register companies without coming to the Commission and you can send results to customers electronically. There are people that are attending Post-Graduate in programs in UK and other countries and still providing legal services without being here physically. This is because you pay fees electronically and submit results in the same way. We don’t even require original signatures. You upload your signatures. So, everything has been simplified.
Recently, there were plans to write-off the indebtedness of registered entities which had not filed returns for a number of years to enable them start on a clean slate. Where are we on that now?
I am not aware of that; we are not contemplating any such thing. Why didn’t they file? Our own is not taxation. We need this information. If your company is registered, say in the last ten years and your status is showing inactive, for us to revert it to active, you must file in all your outstanding returns. This is public information. What explanation are you going to give to people that are willing to deal with you for the ten years of inactivity if we say we are waving? The payment is just incidental. What we are interested in is the information.
You can imagine a company that is a going concern and has actively been in business in the last 10 years and has not been filling its returns. That company needs to account and submit its financial statements for all those years so that we store it in the data base. Anybody interested, if you want to do a research and wants to deal with the company, he may want to know the trajectory in the growth of that entity. He cannot rely on what you give to him because that may be doctored. But for them to submit anything to the registry, they are confirming that what they are submitting is authentic. If it turns out that what they are submitting is incorrect, they will be liable on conviction to two years imprisonment for submitting any statement that is wrong. Our own is not tax. So, we cannot waive and the law does not contemplate waiver. Every company has to update its information.
The amended CAC Act gives you far-reaching leverage to generate more revenue for government, could you share with us your revenue performance for last year as well as projections for 2022?
I don’t know what you mean by far-reaching leverage. I have told you the reduction in our fees .In fact, in the new act, we have tried to remove certain things which we consider to be further savings to the customers. Hitherto, when you register newly, you have to pay for certified copies of the documents that will be given to you to enable you open a bank account and all. We now issue the certified copies at no cost. In some cases, for the CTC, you pay close to N7,000 to N10,000. Multiply that by the number of companies that register. The law has given us enough room to generate enough to cover our cost. Incidentally, we have been lucky. Even before the new law came into play, due to prudent management and our efforts to block all the leakages with electronic system, it is difficult for anybody to do transactions outside the system.
The challenges we had before was that when customers were coming in to do their transactions, they pay on Remita, print the receipt and submit to us. We had instances when some of these receipts were cloned leading to loss of revenue. You now transact on Remita, end to end through the Portal. The Portal will not render services to you until that payment is verified. So, we have succeeded in blocking most of these leakages.
My first year in office,we recorded an increase in revenue by about N7bn from the previous year partly because some of these leakages were reduced.
Secondly, we had a lot of transactions on charges. Despite the lockdown arising from Covid, the revenue recorded was unprecedented in the history of the Commission. We recorded about N20bn. That was the first time the Commission made that kind of money.
But as I have said, in 2021, because the fee on registration of charges was actually reduced by 65% for private companies and 135% for public companies, we had some reduction in the revenue. But, still, what we recorded was even higher than what we had before 2020. We had about N16bn. So, we are seeing an improvement. Hitherto, up till 2020, we were carrying outstanding liabilities to the tune of N67bn from previous years. We are able to clear most of these liabilities. We have been paying operating surplus to government as at when due. So, that tells you that there is greater efficiency in the management of funds, greater prudence and we are cutting wastes. A lot of the initiatives are helping to block these leakages.
The SMEs is the engine of economic development, are there incentives being given by the CAC to enable them formalize their businesses?
There is no better incentive than giving them access to register directly. The major component of the cost for registration is the professional fee that you have to pay, either to a lawyer or chartered Secretary. Whereas, you can register a business with just N10,000:00. If it is a company with N1m share capital, you spend less than N20,000; CAC registration and Stamp duty combined. If you are going through a professional, the cost of professional service is sometimes 5-10times higher than the actual fees.
So, the new law has actually made it optional. The requirement to even do a statutory declaration of compliance that was in the former law has been removed. So, as the owner of the business or a director of any entity, what you do is a statement of compliance which is not even under oath. And you can even present your application directly. All you need to do is to create an account on the Company’s registration portal as a public user. The system is easy. You type out your updates, you can adopt modern article if you are registering a limited liability company, if it is a business name, you just fill out your details. You pay the fee online after creating the account, fill out the forms, you submit and you get your result- your certificate. You can print it! That is the greatest incentive that can be given to anybody. Because, how much is N10,000:00? And some of these initiatives of allowing them to do it themselves are informed by the fact that a lot of them don’t even have the capital to start the business. Some have to borrow the money to pay the registration fees.
So, why do we need to create additional burdens on them to pay professionals? There are those that have the resources to hire professionals . We are not driving people from earning a living. But that will be for those that can afford the services of professionals.
Secondly, the electronic system enables people to view anything now electronically. You don’t need to come to CAC .So, if you want certified extract, if you want to view information, you just pay N1000:00. And it is instant. Once you pay, it gives you information about the entity.
These are some of the incentives that we have put in place that have made life very easy for everybody.
Before now, there were certain things that were very difficult to process. Now, for example, unlike before,if you want to search for name availability, you get the result same day or within one hour of submission. I believe a lot of lawyers, fresh from law school now will not even know about what used to obtain. Life has been made quite easy for anybody to transact with CAC.People couldn’t believe this is the same CAC of 4-5 years ago!
How are you handling companies that refuse to file their returns?
I have said it. The law has made the process of striking off more cumbersome. Unlike before where anytime we have reasonable cause to believe a company is not carrying out operations we could just initiate the process of striking it off, the law has now set a time limit of dormancy period of 10years. But now, if your return is outstanding, after 18months, your status will become inactive. Let’s see who will deal with you with inactive status. Your clients will not agree with you. So, this is the game changer. We are enforcing that strictly. For us to change the inactive status to active, then you must have updated your returns. Everything about your returns.
What should Nigerians be expecting from CAC going forward
This is the only company registry in Nigeria and business registration is still a matter within the Exclusive legislative list. Unless things change, CAC will continue to have its role and the good thing is that this is one of the most improved public organizations in Nigeria. From 2004 when we started electronic registration system in Nigeria, we have been improving, never static. CAC is the only Agency that has a full-fledged Service Portal. You don’t need anybody’s intervention to deal with us. You don’t need a staff to assist you do anything. You can start and finish your registration. Once your requirements are okay, you don’t need anyone’s assistance. So that tells you that we have a clear vision on the way to go. We compare with our peers in other countries. We look at what other countries have done and have made perfect, we imbibe and improve on them.
The world is a global village. We have a Forum Of Company Registries . We meet every year, either electronically or physically. We exchange ideas and that has been a good platform and avenue for us to learn from the best. What we have done is comparable to other registries anywhere. I can assure you that CAC will continue to grow from strength to strength with continued support of our parent Ministry (Federal Ministry Of Industry Trade and Investment) through the two Honorable Ministers.