Stress-testing the legal regime for single-member private companies

Abstract

This article stress-tests the legal regime for single-member private companies in Nigeria. The Companies and Allied Matters Act 2020 (CAMA) is the most important reform of Nigerian company and business law in three decades. It introduced, for the first time, a legal regime for single-member private companies (SMPCs). CAMA aims to extend the benefits of formal incorporation to medium, small and micro enterprises with limited incorporation and compliance formalities. However, the stress tests conducted in this article reveal that the legal regime for SMPCs has two design flaws that may compel SMPCs to take on the costs of complying with certain formalities that have no practical legal or economic value for SMPCs. The findings from the stress tests also suggest an inchoate legal transplant, which may be microcosmic of conceptual, transplantation, and drafting problems in the CAMA.