Capital market operators and other stakeholders have picked holes with some sections of the new Companies and Allied Matter Act (“CAMA 2020” or “the Act”), stressing that the Nigerian capital market can only be revived if the offending sections are immediately amended.
President Muhammadu Buhari had on August 7, 2020, signed the act after it was passed by the National Assembly, into law. The CAMA 2020, which repeals the CAMA 1990, introduces new provisions to reflect modern commercial realities as well as reduce compliance costs and regulatory hurdles for businesses in Nigeria.
But the new CAMA has been under attacks by different stakeholders over some of its sections that are anti-investment, particularly the excessive regulatory provisions. This is aside from the criticisms that have dogged the act from religious circles.
The loopholes and limitations of the new CAMA were laid bare yesterday during the first hybrid 2020 conference of the Chartered Institute of Stockbrokers, CIS, in Lagos with the theme: “Navigating through the Storms-Reenergizing the Economy through the Capital Market.”
A key speaker at the event, Mr. Asue Ighodalo, co-founder of Banwo and Ighodalo, who made a critique of the new CAMA in his presentation on “Rebirth of CAMA: Implications for the Capital Market Ecosystem”, explained that much as it contains many sections that would enhance the growth and development of the capital market, there was a need to review some new sections that could inhibit growth.
According to him: “Whilst CAMA 2020 amends and addresses a number of the loopholes and problem areas in the repealed Act, and also tried to revise our companies’ statute to bring same in tune with the 21st century, it would appear that the introduction of some oversight provisions and concepts suggest overregulation of companies and company practices. Some of these excessive regulatory provisions actually impede transactions in the market.
“Section 142 of the Act provides that a company shall not, in any event, allot newly issued shares unless they are offered in the first instance to all existing shareholders of the class being issued in proportion as nearly as may be to their existing holdings. The applicability of this provision does not distinguish between private and public companies.
“The implementation of this provision will pose significant problems for public companies seeking to raise capital by the issuance of new shares. In undertaking such capital raising transactions, public companies would not be able to make public offers or undertake private placements without first making an offer to all their shareholders.
“This amendment has raised concern amongst operators, corporates, and investors, and is a significant deviation from the provision of the repealed Act which only specified pre-emptive rights for private companies.”
In his presentation, the Chairman, House Committee on Capital Market, Babangida Ibrahim explained that the Conference would add value to the search for a fruitful and rewarding economic template that would bring about sustainable growth and development of Nigeria.
Earlier, in an address of welcome, the CIS President, Mr. Olatunde Amolegbe pointed out that finding solutions to Nigeria’s economic problems was at the heart of this year’s conference objective and that Nigerian stockbrokers have skills and competencies which can help the government in providing solutions to funding infrastructure deficit.
“I should at this juncture inform the general public that the scope of stockbroking or the skill content of Chartered stockbrokers goes far beyond the traditional and popular securities trading activity typically associated with them. Stockbrokers are all-round investment experts,” Amolegbe said.