ANNUAL RETURNS FILING FOR A COMPANY IN NIGERIA – GENERAL OVERVIEW & REQUIREMENTS

Annual returns filing for companies is a mandatory requirement for businesses, companies and corporations carrying on businesses in Nigeria. Apart from being required by law, the annual returns’ filing is crucial in ensuring that registered businesses uphold openness and ethical business practices.

The official records of a business's financial operations and activities for the previous year are called returns, and they are filed with the Corporate Affairs Commission (CAC) in accordance with section 587 of the Companies and Allied Matters Act, 2020, which provides that; any person, company, or corporation operating under a registered business name is required to submit a return to the CAC in the prescribed form by June 30 of each year, with the exception of the year the business is registered. This return must include company's details, and the state of the financial affairs of the company within the preceding period, for many companies, usually between 1st of January to 31st of December.

REQUIREMENTS FOR ANNUAL RETURNS FILING

To file a company’s annual returns, the audited report must be prepared by an auditor for the company. A company currently not working can prepare statement of affairs. The details of the company’s shareholders and directors as contained in the application status which is also referred will also be required. Similarly, the year of filing and the company’s turnover, the name of the officer of the company who authorized the annual returns filing must be submitted to the CAC. The statutory or official fee must also be paid to the CAC. If the annual returns is filed after the lapse of the deadline, a fine will be made in addition to the official fee.

THE IMPORTANCE AND BENEFITS OF ANNUAL RETURN FILINGS

The importance and benefits of annual returns filing are as follows;

1. Prevention of a company name from being struck off the register with fine - The CAC is empowered to strike off the names of business entities, from the register of companies, which have failed to file their annual returns for some years. This means that such a company may no longer operate a registered business entity. If the company is struck off in this manner, the CAC may impose fines and sanctions against the directors or the company.

2. Credibility and transparency - It demonstrates to stakeholders and the public that the company is committed to upholding its corporate credibility, transparency, and accountability.

3. Good Reputation - It helps the company to build a good reputation which could attract foreign investors, partners and customers. It enhances a company’s image and poses it as reliable and responsible.

4. Ability to file post incorporation applications - Failure to file Annual returns makes it impossible to make any post incorporation filings such as alteration of company’s documents which may include change in a company’s registered address, change of director/shareholder, change of object or business of the company and so on.

5. Deactivation - When a company fails to file its annual returns, the company becomes “Inactive” on the CAC’s online public records. This may indicate to the company that the company is not functioning. A company regularly filing annual returns will enjoy or bear “Active” signs on the CAC public records, which indicates the company is functioning.

In conclusion, annual returns filing is an essential obligation for companies in ensuring legal compliance and accountability. Doing so and when due will ensure a smoother compliance process and save the company from having to deal with penalties and other regulatory hitches.

By Corporate & Commercial Law Team at Resolution Law Firm

Email: [email protected]