Recently, during a training on ‘Use of the beneficial ownership register’, in Lagos, the Registrar-General and Chief Executive Officer, CAC, Alhaji Garba Abubakar, disclosed the commission’s intention to delete 100,000 registered companies from its database. This post seeks to educate business owners about annual returns by answering the following questions;
- What is annual return?
- When should a business owner file an annual return?
- Why do you need to file an annual return as a business owner?
- Is there any implication for not filing an annual return?
- How to file an annual return?
- Who Should pay annual return?
- What to do if you failed to file annual returns?
WHAT IS AN ANNUAL RETURN?
In simple term, an annual return is the statement of profit or loss over a one-year period of a company doing business. Section 417 of the Companies and Allied Matters Act (CAMA) provides that “Every company shall, at least once every year, make and deliver to the commission an annual return in the form and containing the matters specified…” However a company is exempted from filing annual return in the year of its incorporation and in a year such company is not stated to hold its annual general meeting.
WHEN SHOULD A BUSINESS OWNER FILE AN ANNUAL RETURN?
Section 421 of CAMA provides that a company is expected to file its annual return not later than 42 days after the company’s Annual General meeting. However where there is a need for such a company can write to the Corporate Affairs Commission (CAC).
WHY DO YOU NEED TO FILE AN ANNUAL RETURN AS A BUSINESS OWNER?
The following are some of the reasons while businesses should file their annual return;
- It updates the company’s record with CAC.
- It reinforces the credibility and compliance of a company to investors.
- It prevents the company from a penalty liability to CAC.
- A Company that complies with filing it annual return has a higher chance of being able to obtain loans from financial institutions would be deemed compliant during a due diligence search.
THE IMPLICATION OF NOT FILING AN ANNUAL RETURN
Section 425 of CAMA provides that if a company required to file its annual return fails to do so, the company and every director or officer of the company are liable to a penalty as may be prescribed by CAC. Where a company fails to file its annual return for a consecutive period of 10years, such company’s name stands at risk of being struck out of the companies’ register.
HOW TO FILE AN ANNUAL RETURN
The annual return of a company is to be filed with CAC and it is to be accompanied by the following document (s) as provided in Section 422 of CAMA;
- A written copy, certified both by a Director and secretary of the company to be the true copy, of every balance sheet and profit and loss account laid before the company in general meeting held in the year to which the return relates.
- An annexed document to the balance sheet where there has been any correction made to the balance sheet
WHO SHOULD PAY ANNUAL RETURN?
Every registered entity should always file its annual returns yearly.
WHAT HAPPENS IF YOU HAVE NOT PAYED ANNUAL RETURNS?
If you have not paid your annual returns in the past year or more, you can pay a penalty at the CAC for the years in which you failed to pay.
In conclusion, a company must always file its annual return with CAC in order to ensure that it does not stand at risk of being delisted by the commission.
Contact us via info@aocsolicitors.com.ng for more information and services of filing your company’s annual return.