The Companies and Allied Matters Act, 2020 (“CAMA 2020”) has introduced some material changes to the regulation and governance of companies in Nigeria. One of such changes is the inclusion of major asset transactions. CAMA 2020 has established a procedure for companies to approve “major asset transactions.” CAMA 2020 defines a major asset transaction as a transaction or related series of transactions which includes:
- Purchase or other acquisition outside the usual course of the company’s business; and
- Sale or other transfer outside the usual course of the company’s business, of the company’s property or other rights the value of which, on the date of the company’s decision to complete the transaction, is 50% or more of the book value of the company’s assets based on the company’s most recently compiled balance sheet.
A major asset transaction is initiated by the board of directors of a company; the directors will recommend the proposed major asset transaction and submit the same for approval of members of the company at an annual general meeting or extraordinary general meeting as the case maybe. Notice of the transaction, including a summary of the transaction and the recommendation of the board of directors, shall be given to all members entitled to the notice of meeting and to vote. Major asset transactions require a special resolution of the members unless the company’s memorandum of association provides for such approvals to be by an ordinary resolution.
The approval of major assets transactions by private and/or small companies (as defined in CAMA 2020) can be done via circular written resolutions signed by all members.
The provision for the approval of major asset transactions in CAMA 2020 is a positive concept that will further entrench the protection afforded minority shareholders and would boost investor confidence. Its usefulness for single shareholder companies (another innovation of CAMA 2020) is doubtful as this will be another administrative step such companies must take to ensure regulatory compliance in relation to the sale of material assets. In our view, single shareholder companies should have been excluded from these provisions.
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For further information, please contact Companysecretary@aluko-oyebode.com