On the 2nd of November 2023, the Corporate Affairs Commission (CAC) issued a circular notifying Companies of the statutory requirement to file annual return every financial year. This circular was prompted by the fact that a lot of legally registered Companies are non-compliant with the statutory requirement to file annual returns, and this has been happening for a while.

According to the circular, the implementation of the notification starts from 1st January 2024, In line with the Companies and Allied Matters Act (CAMA) and the Official Schedule of Fees. The Commission has also stated that Directors and Officers of Struck Off and Wound-Up Companies would be mandated to settle undischarged penalties levied against them.

By virtue of the latest public notice though, CAC has moved implementation from the from 1st January 2024 to the 1st of April 2024, this is because of some discrepancies and glitches that is happening on the Company registration portal. This is probably good news to all Companies as they now have even more time to catch up with payment so that the statutory penalty for non-compliance won’t be invoked against them.

Companies are advised to file up-to-date annual returns before the Implementation timeline of April 1, 2024, to avert penalties.

It is essential to note that every business in Nigeria that is duly registered with the CAC is statutorily required to file annual returns with the Commission after 18 months of incorporation and subsequently yearly, which is in line with Chapter 16 of CAMA 2020. The only exception to this is found in Section 421 (2) of CAMA 2020 which exempts companies with one member from filing annual returns.

Annual Returns filing is very important because:
1. It allows companies to be able to access post-incorporation services from CAC, e.g. Updating names of directors or shareholders, application for share capital increase, removal or addition of partners Etc. CAC will not attend to your request for any of these services if your returns are not filed up till date.
2. It is important to note that major contractual deals in different business sectors also makes this a prerequisite as it shows, longevity, authority and legality of the company or entity proposing for the deal.
3. It notifies the Commission of the company’s continuous survival and operation, which is why companies that are functional are called 'going concern' and it also ensures that the name of the entity is kept on the register the commission maintains, while precluding other companies from copying the name of that company or entity.
4. It helps in showcasing 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.
5. These days, it even helps when you are migrating to other countries as it has now become a prerequisite, it just shows reliability and trust on the part of the company or entity.
6. When you file your annual returns as soon as it becomes due, before it’s late your dashboard will always show “active” on the CAC portal.
7. A company fully compliant with CAC rules can confidently request and obtain services from CAC without any delays.

Implications of Non-Compliance
The penalties for entities that default in annual returns payment, have been entrenched in Section 425 of CAMA 2020. The provision also 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 also 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.

Please note that by virtue of Section 692 of CAMA when a company is delisted for failing to file annual returns there are two options opened to aggrieved party:
1. The aggrieved party may apply to the court for an order to restore the company to the register at any time before the expiration of 10 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.
2. A formal application written in the form of a letter addressed to the CAC’S registrar General appealing and explaining why the annual return was not filed on time. In addition to the written application, all payable dues (total fees for years of unfiled annual returns) and updated company or entity records must be attached and if the application is successful, a relisting certificate will be issued to the company.

Conclusion:
In conclusion, the implications of the Nigerian Corporate Affairs Commission Annual Return Circular extend far beyond a mere regulatory directive. It represents a dynamic intersection of legislative compliance, operational efficiency, and strategic positioning for businesses in Nigeria. The extended deadline to April 1, 2024, offers companies a critical window to align their practices with regulatory norms, mitigating the risks associated with non-compliance.

As the new deadline approaches, companies should see it as an opportunity to not just do what's required but to make their businesses stronger. It's about being a reliable part of the business community in Nigeria. So, as companies work on meeting the rules, they're not just following the law; they're contributing to a trustworthy and successful business environment in the country.