FILING OF ANNUAL RETURNS WITH THE CORPORATE AFFAIRS COMMISSION: MERITS AND IMPLICATIONS FOR NON-COMPLIANCE.

Every business entity must meet certain criteria to operate legally in Nigeria. Amongst other requirements, the filing of Annual Returns is a basic requirement for every corporate entity, as mandated by sections 417 to 425 of the Companies and Allied Matters Act, 2020 (CAMA).

In the exercise of its statutory duty, the Corporate Affairs Commission (the Commission) had on 24th July 2024 issued a notice informing the general public of its intention to strike off from the Register, names of defunct or dormant companies that have failed to file their Annual Returns for a period of ten (10) years. In addition, a list of the defaulting companies was released to that effect and in line with section 692 of CAMA which granted a period of ninety (90) days from the date of the publication of the notice for the defaulting companies to comply with the directive by filing their Annual Returns.

We will briefly consider what an annual return is, the entities that are required to file it, the implication of non-compliance and the possible recommendations to these entities to help forestall further occurrence.

What is Annual Return?

Annual returns are formal records of a company’s operations and financial activities over the past year. The annual return for a company shall contain, the registered office of the company, the registers of members and debenture holders, shares and debentures, any indebtedness, past and present members, directors, and secretary. It is worth noting that small companies are not mandated to file a financial statement.

The annual returns for a business name shall contain the particulars of the individual, firm or corporation and the nature of the business and it shall be accompanied by a signed financial statement.  

The annual returns for an association shall show the name of the association, the names, addresses, and occupations of the trustees, and members of the council or governing body, particulars of any land held by the corporate body, and any change in the constitution of the association during the preceding year.

The filing of annual returns therefore entails the process of a business entity furnishing the Commission with a detailed report of the operations and financial activities within the financial year.

Who files and When?

By section 417 of CAMA, companies are obligated to make and deliver to the Commission an annual return in a required form once at least every year. Furthermore, companies are required to file annual returns within 42 days after the annual general meeting of such a Company.

Section 822 mandates every individual, firm, or corporation carrying on business under a registered business name, the obligation to file annual returns not later than the 30th of June each year, except the calendar year in which the business name is registered. Section 848 goes further to mandate the trustees of an association the obligation to file annual returns not earlier than 30th June or later than the 31st of December each year other than the year in which it is incorporated.  Flowing from the referenced sections, it is clear that all forms of companies, firms, organizations, and associations are required to file annual returns with the Commission.

Why File?

The importance of filing annual returns cannot be overemphasized. We will briefly highlight a few of them.

Implication of Non-Compliance.

By virtue of section 425 of CAMA where a company fails to file its annual returns, such a company, every director or officer of the company is liable to a penalty as prescribed by the Commission. This provision also applies to individuals, firms, or corporations carrying on business under a business name as well as associations.

Section 692 of CAMA provides (3) instances where a company’s name may be struck off the register of companies. They are;

Process of Striking Off

In the occurrence of any of the above highlighted instances, the Commission is obligated to publish in at least (3) national newspapers, a notice of its intention to strike off the name of such erring company from the register of companies.

Upon publication of the notice, a defaulting company is required to within (90) days respond to the Commission’s notice giving reasons why it should not be struck off the register. Such reason may be that during the queried period, the company is still operating, or carries on business or it has complied with the provisions of the Act.

Should the Commission receive no response within the (90) day grace period, the Commission shall go ahead to strike off the name of such a company and publish the name and date of the striking off in at least (3) national daily newspapers. It is worth noting that the liabilities of the directors, managing officers, and members of the company shall continue in force regardless during this process.

Any Remedy?

Notwithstanding the above, the CAMA provides that a company whose name has been struck off the register can be restored only by an order of the Court once it is satisfied that at the time of the striking off, the company was carrying on business or in operation, or that it is just to restore it to the register.

Conclusion

The above provisions of the CAMA have made it copiously clear that filing of annual returns is a form of corporate governance requiring regulatory compliance and failure to do so shall result in legal repercussions, including but not limited to delisting of the company on the Register of companies. The need for Companies to file annual returns cannot be overemphasized as it is important to file annual returns on or before the due time.

Recommendation

It is advisable that every Company should engage corporate lawyers as company secretaries who will assist in checking the activities of the company to always meet all statutory compliance.