A Critical Appraisal of the Judicial Perspective on Single Shareholding in Nigeria

Contributor: Cyril Samuel Dandison

1. Introduction

The recognition of single-shareholder companies, also known as Single-Member Companies (SMCS), marks a significant evolution in Nigerian corporate law. It reflects a legislative shift towards greater business flexibility and limited liability for sole proprietors, aligning with global corporate practices that facilitate ease of doing business.^[1] The Companies and Allied Matters Act (CAMA) 2020 introduced statutory provisions enabling the incorporation and operation of single-shareholder companies, effectively eliminating the two-member requirement previously mandated under CAMA 1990. However, despite this statutory innovation, the judicial interpretation and application of single-shareholding remain inconsistent, with courts yet to fully address the complexities surrounding shareholder rights, corporate governance obligations, and the legal status of personal representatives in succession matters.

A fundamental issue within the legal framework of SMCs is the interchangeable use of the terms ‘shareholder’ and ‘member’ in statutory provisions and judicial decisions. While a shareholder is a person who holds an interest in a company by virtue of share ownership^[2], a member is an individual whose name is entered into the register of members.^[3] This distinction is of particular significance because a company may have multiple shareholders but still qualify as a single-member company if only one person is formally recognized as a member. The lack of precision in CAMA 2020 has led to ambiguities in the interpretation of statutory provisions, making it difficult to ascertain the exact rights, obligations, and compliance requirements applicable to SMCs. Judicial decisions have further compounded this issue by failing to clearly distinguish between legal and beneficial ownership of shares.^[4]

In Tika Tore Press Ltd v. Abina & Ors^[5], for example, the Supreme Court held that while a personal representative of a deceased shareholder may have legal ownership of shares, such ownership does not automatically confer membership rights unless the representative’s name is entered into the register of members. This legal distinction is crucial in determining voting rights, corporate decision-making authority, and the extent to which personal representatives can exercise shareholder privileges.

The Supreme Court, in Savannah Bank v. Ajilo^[6], has previously acknowledged the challenges created by legislative imprecision, emphasizing that statutory ambiguities can lead to conflicting judicial interpretations. This issue is particularly evident in the regulatory treatment of SMCs, where inconsistencies in statutory terminology have led to uncertainty regarding compliance obligations. For instance, while CAMA 2020^[7] exempts single-member companies from holding annual general meetings under provisions referring to ‘single shareholder companies,’ a separate provision addressing the filing of annual returns uses the term ‘single-member companies.’ These inconsistencies pose practical difficulties for the courts and the Corporate Affairs Commission (CAC) in determining the regulatory requirements applicable to SMCs.

Further complicating the legal landscape is the initial position taken by the CAC, which refused to extend the single-shareholder provision to companies incorporated before the enactment of CAMA 2020. The CAC argued that the single-member framework applied exclusively to companies formed after 2020, thereby excluding pre-existing companies from restructuring their shareholding to a sole-member structure. This interpretation was challenged in Primetech Design & Engineering Nigeria Limited & Julius Berger Nigeria Plc v. Corporate Affairs Commission^[8], culminating in a landmark ruling by the Federal High Court in Abuja. The Court decisively held that Section 18(2) of CAMA 2020 applies to all private companies, regardless of their incorporation date, effectively rejecting the CAC’s restrictive approach. The judgment reaffirmed the principle that once a statute repeals an earlier law, the repealed provisions cease to have legal force, and all companies, whether incorporated under CAMA 1990 or CAMA 2020, must be governed by the new legal framework.

This article critically examines the judicial perspective on single-shareholding in Nigeria through the lens of the Federal High Court’s decision in Primetech v. CAC.^[9] It evaluates the court’s reasoning in affirming that the single-shareholder provision under Section 18(2) of CAMA 2020 applies to all private companies, irrespective of their incorporation date. The article further explores the implications of this ruling for corporate governance, regulatory compliance, and business structuring in Nigeria. By analyzing the legal arguments presented, the statutory ambiguities within CAMA 2020, and the broader regulatory concerns, this discourse provides a structured critique of the evolving jurisprudence on single-shareholding. Ultimately, it highlights the significance of the Primetech decision in shaping corporate law, offering insights into potential judicial and legislative reforms needed to ensure clarity and consistency in the application of Nigeria’s corporate framework.

The Attitude of the Judiciary in Primetech Design & Engineering Nigeria Limited & Julius Berger Nigeria Plc v. Corporate Affairs Commission.

The decision of the Federal High Court in Primetech Design & Engineering Nigeria Limited & Julius Berger Nigeria Plc v. Corporate Affairs Commission^[10] represents a judicial reaffirmation of statutory interpretation principles in corporate law, particularly concerning the legal effect of repealed legislation. The Court adopted a purposive approach, rejecting the rigid and restrictive interpretation advanced by the Corporate Affairs Commission (CAC) and affirming that Section 18(2) of the Companies and Allied Matters Act (CAMA) 2020 applies to all private companies, regardless of when they were incorporated. This ruling effectively eliminates the artificial dichotomy between companies incorporated under CAMA 1990 and those registered post-2020, ensuring that the legislative intent of corporate flexibility is fully realized.

The Court’s reasoning was anchored on the fundamental principle that when a statute is repealed, it ceases to have legal effect unless there are express saving provisions preserving its application in specific circumstances.^[11] Section 869(1) of CAMA 2020 repealed CAMA 1990 in its entirety, making the former the prevailing law governing corporate structures in Nigeria. The Court rightly emphasized that allowing CAC’s restrictive stance would amount to perpetuating the mandatory two-member requirement under a repealed law, which is legally untenable. The judgment, therefore, reinforces the doctrine that statutory provisions should not be interpreted in isolation but rather within the broader context of legislative intent and economic realities.

A key aspect of the judicial approach in Primetech v. CAC was its rejection of CAC’s reliance on Section 571(c) of CAMA 2020 as a basis for refusing the transition of pre-2020 companies to a single-shareholder structure. The Court clarified that Section 571(c) of CAMA 2020 applies only to companies that were originally established with multiple members and subsequently fell below the required threshold due to unforeseen circumstances. Since CAMA 2020 expressly allows private companies to have a single shareholder, there is no logical basis for preventing companies incorporated under the repealed CAMA 1990 from restructuring their ownership in line with the new law. This ruling sets an important precedent by preventing regulatory agencies from imposing unwarranted restrictions that undermine legislative reforms aimed at enhancing the ease of doing business in Nigeria.

Beyond its statutory interpretation, the judgment in Primetech v. CAC is a reflection of the judiciary’s role in ensuring that corporate regulations align with economic realities and business efficiency. By upholding the right of companies incorporated before 2020 to transition to a single-shareholder structure, the Court facilitated a more flexible and dynamic corporate framework, particularly for small and medium enterprises (SMEs) seeking to streamline operations. This decision also reduces compliance burdens, as single-member private companies are exempt from certain regulatory obligations, such as holding annual general meetings.^[12] However, while the ruling enhances corporate flexibility, it also raises potential concerns regarding governance, transparency, and minority shareholder rights in cases where nominee arrangements or indirect interests are involved.

The Primetech ruling serves as a judicial response to legislative ambiguities within CAMA 2020, particularly the interchangeable use of the terms “shareholder” and “member”. While the decision clarifies the applicability of the single-shareholder provision, future judicial pronouncements may be necessary to resolve lingering uncertainties regarding the rights and obligations of sole shareholders, particularly in cases of succession, share transfers, and corporate liabilities. Given that regulatory agencies may continue to interpret statutory provisions restrictively, Nigerian courts will play a critical role in shaping the evolving jurisprudence of single-shareholding, ensuring that the objectives of corporate law reform are not frustrated by unnecessary bureaucratic constraints.

Conclusion

In conclusion, the Federal High Court’s judgment in Primetech v. CAC reinforces the principle that regulatory interpretations must align with legislative intent and prevailing statutory provisions. By affirming the right of all private companies, irrespective of their incorporation date, to operate as single-shareholder entities, the decision strengthens corporate law reforms aimed at fostering business efficiency and economic growth in Nigeria. However, as single-member companies become more prevalent, there is a need for further judicial and legislative clarifications to ensure that corporate governance standards are maintained while allowing businesses to enjoy the full benefits of corporate flexibility.

Reference

1. Udo Udoma & Bello-Osagie, “20 Innovations in the Companies and Allied Matters Act 2020” Available@ https://www.mondaq.com/nigeria/shareholders/1031968/20-innovations-in-the-companies-and-allied-matters-act-2020 accessed 21st March, 2025 ↑
2. K.O.D Okwor, & M. Adebayo, “Stress-Testing the Legal Regime for Single-Member Private Companies” (Templars; 2022) Available @ https://www.templars-law.com/app/uploads/2022/08/Stress-Testing-the-Legal-Regime-for-Single-Member-Private-Companies.pdf accessed 21st March, 2025 ↑
3. ↑
4. Ibid ↑
5. [1973] 4 SC 63 ↑
6. [1989] 1 NWLR (Pt. 97) 305. ↑
7. Section 264 (5) CAMA 2020 ↑
8. Suit No: FHC/ABJ/CS/665/2023 ↑
9. Ibid ↑
10. Ibid ↑
11. AELEX “A Review of The Federal High Court’s Decision On The Issue Of Single Shareholding Based On The Interpretation And Applicability Of Section 18(2) Of CAMA 2020 “ Available @ https://www.mondaq.com/nigeria/shareholders/1513134/a-review-of-the-federal-high-courts-decision-on-the-issue-of-single-shareholding-based-on-the-interpretation-and-applicability-of-section-182-of-cama-2020 accessed 21st March 2025. ↑
12. Section 264 (5) CAMA 2020 ↑