What the failure to file annual returns could cost your company in Nigeria

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Recently, the Corporate Affairs Commission (CAC) indicated that it had resumed the exercise of striking out dormant companies from its register. About 45,000 companies considered dormant by the Commission stand the risk of being de-registered. Thousands of companies and other forms of corporate bodies get registered at the CAC on a daily basis. In many cases, apart from the incorporation documents, no other information is available regarding registered companies after they have been incorporated. For some companies, operations may not resume immediately after incorporation while in the case of others, operations kick off immediately. Whatever the case, it is important to keep the companies registry updated on the status of the company at all times.

The law requires every company or registered corporate entity to file returns annually in the prescribed form provided not later than 18 months after incorporation. The essence of this exercise is to keep the records of the company up to date and to show that the company is a going concern i.e. not dormant. Changes in the company such as address, share capital, directors etc. within the year in review as well as the financial activities of the company are some of the information captured in the annual returns form. Where the CAC has reasonable cause to believe that a company is not in operation, the law empowers the Commission to strike off the name of such company from the register of companies after following due process of inquiry as to the status of the company. In reality, not every company the Commission considers dormant is actually dormant but the commission relies on one major criterion for this exercise which is the failure to file annual returns.

It is therefore imperative that corporate organisations fulfil their obligations regarding filing of returns with the CAC regularly to avoid being de-listed. As part of efforts to enforce the provisions of the statute, the CAC would usually compel companies who want to undertake any business at the Commission to ensure that their annual returns is up to date before any activity could be permitted on the record of the company. This is a commendable step as companies wishing to obtain certified copies of documents or amend company records would be left with no other option than to comply with the directive and ultimately the statute. The Commission should also make the de-registration exercise more regular in order to foster compliance with the provisions of the statute relating to annual returns. Various means of communication should also be deployed to sensitize the public on the exercise and the importance of keeping their company records up to date.

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6 thoughts on “What the failure to file annual returns could cost your company in Nigeria

  1. The CAC’s announcement that it had resumed the exercise of striking out dormant companies from its register seems to suggest an inconsistency in fulfilling its obligation. The CAC ought to carry out the process in a consistent manner so that corporate organisations recognise that failure to update their records could lead to de-listing within a specified period as a matter of course and not just in a random manner, whenever the CAC decides to act.

    • Thank you for your comment Biobele. That is the current position and I agree with your observation of inconsistency on the part of the regulatory body. A consistent approach would make the enforcement strategy more effective.

    • What can be more fulfilling than to know that this piece has been of benefit. Thank you for your comment Ejoke. It is highly appreciated

  2. Filing annual returns gives the Commission a reason to believe that a company is carrying on business. However, by s. 525(1) CAMA 2004 If the Commission has reasonable cause to believe that a company is not operational, the Commission is empowered to write to the company in that regard. Where the company responds that it is not in operation, the appropriate notification will be given for striking of the name of the company. If the company does not respond within the stipulated period, the appropriate process will be employed to strike off the name of the company from the register of the Commission. Usually, when filing annual returns, a company is required to attach financial document signed by a chartered accountant which reflects the financial position of the company for the period under review. Hope you find this helpful. Thank you

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