One Reason Why your Business name can be removed from the CAC register
*Reviewed 30th August 2021*
The Acting Registrar-General of the Corporate Affairs Commission disclosed that the Commission had delisted 40,000 registered business from its database between October 2017 and October 2019. Simply put, the commission has successfully removed the names of businesses registered. This was carried out to ensure that only the names of active registered businesses remain in the Commission's database.
A couple of months ago an entrepreneur once asked me the need for compliance and penalties for not complying with the provisions of the law.
I started by explaining the various post-incorporation filings expected of businesses upon registration or incorporation in Nigeria. One of such filings is Annual Returns which is applicable to all forms of business registration in Nigeria. Failure to comply imposes a fine tagged as a penalty for late filing.
Since the corporate Affairs unlike the FIRS at the moment do not send demand notices to businesses that are not complying why then should a business be CAC compliant was the next question I was asked.
Compliance with Post incorporation fillings does not only gives the commission a piece of up-to-date information about your business but also a shred of evidence that your business still remains a going concern which the public can transact with without any shadow of doubt should a search be made on your business at the Corporate Affairs Commission.
The commission is empowered by law to strike out/remove the name of dormant companies or business names from its register when it has reasonable cause to believe that such a registered entity is not carrying on business or in operation.
When can the Commission believe your business is dormant.
Note that the Act does not specifically give a list of conditions or incidents for removing a registered name. The word "reasonable cause" was used, what conditions will then be considered as a reasonable cause or when can the commission form an opinion or believe that you're no longer carrying on business activities?
The best way to form an opinion is when the records of the Commission show nill for expected post-incorporation filings especially Annual Returns which is to be filed every year.
A relative example is the provision of the evidence act on presumption of death for a person who is away for at least 7years without being in contact with people who should hear from him or where a partner in a marriage is not out of reach for 7 years, the other partner in law is allowed to file for a divorce as it is presumed that it is either such missing partner is dead or has moved on with his or her life. The Commission, therefore, reserves the right to presume that a business is dormant or has folded up after some. years of its incorporation with zero compliance rate.
One of the incidences of incorporation or business name registration is that once a name is registered by the Commission, there's a restriction on the use of such name by another except with the consent of the registered owner. If the Commission, therefore, believes that a name is dormant, it reserves the right to strike the name off the register, upon which a person can register such name after the expiration of the grace period for relisting an already removed name which I will also discuss in this article.
Procedure for striking out a dormant name
Inquiry by the Commission on the current state of the businesses seeking to be delisted: The Commission may send to the company by post a letter to inquire whether or not the company is carrying on business or in operation.
Further Reminder notice to the business: Upon delivery of the notice above, the Commission after one month and without hearing from the company shall within 14 days send another notice again to the company referring to the first notice stating that no response was made or delivered to the Commission and also further state that If the Commission does not within one month of sending the letter to receive any answer thereto, it shall within 14 days after the expiration of the month send to the company by post a registered letter referring to the first letter, and stating that no answer thereto has been received, and further state that the Commission shall within one month from the delivery of the second notice publish the business name in a gazette with a view of striking of the name off the register if no response is received on the second notice.
Removal of name from the register of business names: If the Commission receives an answer to the effect that the company is not carrying on business or in operation, or does not within one month after sending the second letter to receive any answer, it may publish in the Gazette, and send to the company by post, a third notice stating that at the expiration of three months from the date of that notice the name of the company shall unless cause is shown to the contrary, be struck off the register and the company shall be dissolved.
Note that the notices will be delivered to your address on the CAC records, this is to say that you can only receive this notice if your business is still being carried on in the same address with which the business registration was made. This is another reason the business owners are mandated to notify the Commission of a change in its address. In other words, if your business is still a going concern, the Commission would not be aware of the state of your business if it's been carried on in an address unknown to the Commission.
Can a removed name be relisted?
Anybody aggrieved by the striking off the register of the company may apply to the court at any time before the expiration of 20 years from the publication of the notice of removal, for an order restoring the company to the register and if the court is satisfied that, at the time of the striking off, the company was carrying on business or in operation, or that otherwise, it is just to restore it to the register, the court may order the name of the company to be restored to the record.
The big question is: Is your business still a going concern? Are you CAC compliant? If yes, bravo, if not, you may have to answer the question of whether your business name is still on the CAC register or not. You can approach the Commission or consult a professional for guidance for the next phase. To know the legal obligations of a business organization after it's incorporation, you can read my article on HANDLING POST INCORPORATION MATTERS IN YOUR BUSINESS.