Tag: msmes

The Companies and Allied Matters Act 2020 (CAMA 2020) and the Tax Reform Acts 2025 (collectively referred to as “the Reformed Acts”), which take effect from 1 January 2026, represent a landmark shift in Nigeria’s regulatory framework for businesses—especially Micro, Small, and Medium Enterprises (MSMEs), classified in law as “small companies.” These laws combined aim to streamline corporate governance, modernise tax administration, and provide targeted incentives that foster growth and formal participation in the economy. This article traces how small companies can align with these compliance requirements to improve operational efficiency, and unlock long-term benefits.

Defining Small Companies under the Reformed Acts

CAMA 2020 introduces a clear classification system for private companies, with “small companies” defined by specific financial and ownership criteria. A business qualifies as small if its annual turnover does not exceed ₦120 million, its net assets are below ₦60 million, it has no foreign or governmental shareholders, and, where applicable, the directors between themselves hold at least 51% of its equity share capital¹. This classification confers a range of corporate governance reliefs, such as exemption from appointing a company secretary or formally holding annual general meetings.

Complementing this, the Nigeria Tax Act 2025 offers a fiscal definition for small companies: those with annual turnover below ₦100 million are exempt from key taxes, including Companies Income Tax (CIT), Capital Gains Tax (CGT), and the development levy. This threshold—an increase from the ₦25 million turnover cap under the Finance Act 2023—broadens access to tax relief and encourages smaller businesses to formalise their operations.

While the corporate and tax classifications differ, they serve complementary purposes. CAMA governs internal governance and legal status, while the Finance Act 2023 and Reformed Acts define fiscal obligations. For MSMEs to maximise regulatory benefits, a comprehensive understanding of both is essential.

Easing Governance through CAMA 2020

One of the most impactful features of CAMA 2020 is the governance flexibility it affords small companies. It permits incorporation with a single director, effectively bridging the benefits of sole proprietorship with the protection of a separate legal entity². The appointment of a company secretary is optional³, and small companies are exempt from formally holding annual general meetings, provided decisions are properly recorded in written resolutions⁴ or conducted virtually⁴^B.

To fully utilise these flexibilities, small companies should align their Articles of Association with the updated provisions. This allows founders to concentrate on core business activities while remaining compliant with statutory governance obligations.

Corporate Administration and Digital Filings

CAMA 2020 also modernises corporate administration by mandating timely filings with the Corporate Affairs Commission (CAC). Resolutions related to any change in corporate information such as directorship, shareholding, or share capital must be filed within 14 days⁵. The Act affirms the legal validity of electronic documents⁶, allowing businesses to handle compliance via the CAC’s online portal (www.icrp.cac.gov.ng).

Failure to meet filing deadlines may result in daily penalties and could impair a company’s legal standing during the period of non-compliance⁷. Small businesses lacking internal capacity may find value in engaging professional services to ensure timely and accurate filings, thereby preserving transparency and enforceability of contracts.

Financial Record-Keeping: Bridging Compliance and Strategy

Although small companies are not required to file audited financial statements⁸, they must maintain accurate and up-to-date accounting records under Section 374(3)(a)(b) CAMA 2020. These records—which should include income, expenditure, assets, and liabilities—are essential for preparing annual returns and meeting tax obligations such as applying for tax clearance under the current Finance Act 2023 and the upcoming Nigerian Tax Act 2025.

Under current law, the Finance Act 2023 exempts companies with turnover below ₦25 million from several taxes⁹. From 1 January 2026, the Tax Reform Acts 2025 will extend these exemptions and introduce a unified tax regime, including exemption from remitting 4% development levy on assessable profits (replacing multiple fragmented levies) and deployment of digital tools for regulatory compliance and monitoring¹⁰.

Businesses should adopt digital bookkeeping tools such as QuickBooks or Zoho Books to track financial performance. Records must be retained for a minimum of six years¹¹, and periodic turnover assessments are necessary to confirm continued eligibility for small company benefits¹². Where needed, professional accountants can assist in aligning internal practices with evolving regulations¹³.

Strategic Gains from the Tax Reform Acts 2025

The Tax Reform Acts 2025—comprising the Nigeria Tax Act, Nigeria Tax Administration Act, Nigeria Revenue Service Act, and Joint Revenue Board Establishment Act—introduce a simplified, tech-driven tax regime tailored to the needs of small companies. These reforms officially define a small company as one with annual turnover not exceeding ₦100 million and fixed assets below ₦250 million¹⁴.

While businesses with turnover under ₦25 million continue to enjoy full tax exemptions, others falling within the revised ₦100 million threshold also benefit from reduced liabilities and streamlined compliance procedures. The Nigeria Revenue Service Act facilitates a fully digital tax administration system, promoting e-filing, real-time reporting, and reduced bureaucracy¹⁵.

Furthermore, the Nigeria Tax Act 2025 exempts exports—whether in goods, services, or intellectual property—from VAT, bolstering the competitiveness of Nigerian small companies in regional and global markets¹⁶. Additional incentives are directed at priority sectors such as agriculture, manufacturing, and technology¹⁷.

To ensure fairness and resolve disputes efficiently, the Joint Revenue Board Establishment Act introduces mechanisms like a Tax Ombudsman and Tax Appeal Tribunal. These bodies provide accessible channels for addressing taxpayer grievances and investigating misconduct, thereby promoting accountability and taxpayer confidence¹⁸.

Transforming Compliance into Strategic Value

Regulatory compliance, when approached strategically, can yield competitive advantages. Accurate financial records allow small businesses to identify cost efficiencies, assess profitability, and make informed decisions. Transparent governance and proper filings enhance credibility with investors, lenders, and partners¹⁹.

Moreover, correct application of tax exemptions and incentives directly translates to lower operating costs and higher reinvestment capacity in innovation and growth. Export-focused businesses, in particular, stand to benefit from VAT exemptions and improved digital tax systems that support cross-border trade and scalability.

To realise these benefits, small companies should routinely evaluate their compliance status, analyse financial data for insights, and stay informed about legal updates via official portals or professional advisors. These actions ensure readiness to adapt as the regulatory landscape evolves.

Conclusion

The combined framework of CAMA 2020 and the Tax Reform Acts 2025 offers Nigerian MSMEs an unprecedented opportunity to simplify governance, minimise tax liabilities, and optimise operations. With these reforms taking effect from 1 January 2026, small companies are well positioned to benefit from reduced administrative burdens and improved access to capital, markets, and incentives.

By adopting digital tools, aligning governance structures with the law, and seeking expert guidance where necessary, small businesses will not only remain compliant but also scale effectively in emerging markets—particularly under initiatives like the African Continental Free Trade Area (AfCFTA). The key to unlocking these benefits lies in proactive engagement with the reforms and a commitment to transparent, data-driven business management.

Endnotes.

1. CAMA 2020, s 394(3)
2. CAMA 2020, ss 271(1), 18 respectively.
3. Ibid, s 330(1).
4. Ibid, s 238, 4b. Ibid, s 240.
5. Ibid, ss 295, 336.
6. Ibid, s 860.
7. Ibid, ss 245(6),862.
8. Ibid, s 402(1)(b).
9. Finance Act 2023, s5. Section 5 of the Finance Act 2023 affirms the definition of small company in Section 105 Company Income Tax Act which states that, a small company is one that has a gross turnover of N25,000,000 or less in a year of assessment. Under Section 23(1)(o) of the CITA, the profits of a small company, as defined in Section 105, are exempt from companies income tax if the gross turnover does not exceed N25 million in a year of assessment. Also, see NTA 2025 s 56(2).
10. NTA 2025, s 158(2): Nigeria Tax Administration Act 2025, cls 7–9, 23
11. CAMA 2020, s377
12. Ibid, s 394
13. NTA 2025 (n10)
14. Ibid, s 56
15. Nigeria Revenue Service Act 2025, s 3.
16. NTA, s186
17. NTA, s 166, Tenth Schedule.
18. Joint Revenue Board Establishment Act 2025, s 41
19. CAMA 2020, s425

Written by Adeola Osifeko LLB,BL,LLM,ACIS,ABR Principal Partner at AEO Law Practice.