Under the Companies and Allied Act (“CAMA”) 2020, private companies in Nigeria may operate with a single shareholder. Section 18(2) of CAMA introduced the concept of single-member private companies, thereby removing the previous requirement that a private company must have at least two shareholders. This reform reflects the legislative intent of promoting ease of doing business in Nigeria by simplifying corporate structures, reducing unnecessary compliance burdens and providing more options for entrepreneurs and investors.
Despite the provision of section 18 (2) CAMA, some companies found that they could not transition to single-shareholder companies as applications for such restructuring were queried by the Corporate Affairs Commission (“CAC”). The position of the CAC was as follows:
- Section 18(2) CAMA does not apply to companies that were incorporated before CAMA 2020 and allowing a pre-CAMA 2020 company to reduce to one shareholder would give the law a retrospective effect, which is not permissible unless expressly provided by the law.
- Section 571(c) of CAMA 2020 provides for the winding up of a company where the number of members falls below two in the case of companies required to have more than one member. The CAC argued that this shows that reducing an existing company’s shareholders below two was not permitted and would trigger winding up of a company.
In 2023, this position was challenged at the Federal High Court in Suit No: FHC/ABJ/CS/665/2023 between Primetech Design and Engineering Nigeria Limited & Julius Berger Nigeria PLC v. Corporate Affairs Commission. The submission of the Applicants was that considering the statutory objective of section 18(2) CAMA, it could not have been the intention of the legislature to create a difference between pre-CAMA 2020 companies and post-CAMA 2020 companies. In their argument, they further stated that restricting the application of Section 18(2) CAMA to post-CAMA 2020 companies will create a biased and unfair application of the law.
The Federal High Court in its judgment rejected the argument of the CAC and stated that Section 18(2) CAMA applies to all private companies in Nigeria including those incorporated under the repealed CAMA 1990 and that any restriction on the application would be discriminatory against companies incorporated before CAMA 2020. The Court also rejected the argument that allowing existing companies to become single shareholder companies would be retrospective and viewed it as applying the current law to the company’s present status and corporate structure.
The CAC was dissatisfied with the judgment of the Federal High Court and appealed to the Court of Appeal. In a unanimous judgment delivered by the Court of Appeal on 10th June 2026, the Court of Appeal affirmed the decision of the Federal High Court that Section 18(2) CAMA applies to all private companies whether incorporated before or after CAMA 2020.
This decision affirms that the single-shareholder regime introduced by CAMA 2020 is applicable to existing companies incorporated before the enactment of CAMA 2020, thereby permitting such companies to restructure and transition into single-shareholder companies.
The commercial implication of the Court of Appeal decision is significant because it provides clarity and flexibility for private companies in Nigeria. The key implications include:
- Investors, founders, and corporate groups can now hold 100% ownership of private companies without the need to retain a nominal second shareholder merely to satisfy the previous statutory requirement. This promotes cleaner corporate structures and aligns ownership with the actual state of affairs.
- The decision confirms that private companies incorporated before CAMA 2020 can reorganise their shareholding structure and transition into single-shareholder companies. This allows businesses that were previously required to maintain at least two shareholders to simplify their ownership structure.
- Pre-CAMA 2020 companies no longer need to maintain artificial shareholding arrangements, nominee shareholders, or unnecessary transfers of shares solely to comply with the former two-member requirement.
- This may reduce corporate governance costs. The decision may make mergers, acquisitions, and group restructuring transactions easier, especially where a parent company or investor wants to acquire all shares in a private company and operate it as a wholly owned subsidiary.
The Court of Appeal’s decision confirms that private companies incorporated before CAMA 2020 can validly restructure into single-shareholder companies. This settles earlier uncertainty arising from CAC’s position and aligns corporate practice with the reform objectives of CAMA 2020.
Commercially, the ruling enhances flexibility in ownership structures, reduces compliance burdens, and supports a more efficient and investor-friendly business environment in Nigeria.
