On 30 July 2024, the Federal High Court in Abuja ruled that section 18(2) of CAMA 2020 lets every private company have a single shareholder. That includes companies incorporated under the repealed CAMA 1990. The suit was Primetech Design and Engineering Nigeria Limited & Julius Berger Nigeria Plc v Corporate Affairs Commission (FHC/ABJ/CS/665/2023).
This notable decision appears to settle the dispute between the Corporate Affairs Commission (CAC) and pre-CAMA 2020 entities that wanted to move to a single shareholder. It also ensures uniformity and fairness across all private companies.
Background to the single shareholder dispute
A shareholder of Primetech transferred all his shares to Julius Berger Nigeria Plc (JBN), which made JBN the sole shareholder. Primetech’s board approved the transfer, and the company asked the CAC to update its Company Registration Portal. The CAC objected, relying on sections 18(1), 18(2) and 571(c) of CAMA 2020.
The arguments
- Primetech: a literal reading of section 18(2) would cause ambiguity, absurdity or injustice. CAMA 2020 lets one person form a private company, unlike CAMA 1990’s two-shareholder minimum. Public companies and companies limited by guarantee still need at least two members. Primetech argued that the Legislature could not have meant to limit single-shareholder status to newer companies.
- CAC: section 18(2) applies only to companies incorporated after CAMA 2020 began, and it is not retrospective. It also argued that cutting an existing company to one shareholder would be grounds for winding up under section 571(c).
The Court’s decision on single shareholder companies
The Court held that section 18(2) applies to all private companies, whatever their incorporation date. It said the CAC’s reading would be discriminatory and inconsistent with the CAMA 2020 reforms. In the Court’s view, the Legislature intended single-member private companies to exist irrespective of formation date.
The Court also rejected the CAC’s reliance on section 571(c). That section applies only to companies that section 118 requires to have at least two members, namely public companies and companies limited by guarantee. As a result, section 571(c) cannot restrict private companies, and they may operate with just one shareholder.
Finally, the Court ordered the CAC to approve and accept the share transfer instruments that made JBN the sole shareholder of Primetech. It found the CAC’s refusal unlawful.
What the ruling means for private companies
This decision marks a significant development in Nigeria’s corporate law. Every private company, regardless of when it was incorporated, can now benefit from sole shareholding under CAMA 2020. To read the full newsletter, use the download button below.
