Filing annual returns is a crucial obligation for companies operating in Nigeria. It is a statutory requirement that is expected to be met by every registered business entity in the country. Failure to comply with this requirement can lead to severe penalties, legal actions, and even the de-registration of the company.
In this piece, we shall attempt to tell you what you need to know about filing annual returns in Nigeria, including why you should file annual returns, procedures, deadlines, and penalties for failure to file returns.
What are annual returns?
Annual returns are documents that companies are required to file with the government or regulatory authorities on a yearly basis. These returns provide a snapshot of a company’s financial and legal status, including information about its ownership structure, shareholders, directors, financial performance, and other important information.
Annual returns are an important regulatory requirement that help ensure transparency and accountability in corporate governance. They provide stakeholders, including investors, shareholders, and regulatory authorities, with important information about a company’s financial and legal status, which can help them make informed decisions about their engagement with the company. Additionally, annual returns provide a record of a company’s history, which can be used for legal and financial purposes in the future.
Why is it important to file annual returns?
Some of the reasons why it is important to file annual returns are examined below:
- Legal compliance: The primary reason why it is important to file annual returns is that it is a legally prescribed requirement. The legal requirement for filing annual returns in Nigeria is enshrined in the Companies and Allied Matters Act (CAMA) 2020. According to CAMA 2020, every registered company in Nigeria is expected to file its annual returns with the Corporate Affairs Commission (CAC) within 42 days after its Annual General Meeting (AGM).
- Transparency and accountability: Annual returns provide important information about a company’s financial and legal status, including details about its shareholding structure, directorship, and financial performance. This information helps to promote transparency and accountability in corporate governance, which can help build trust and confidence by employees, regulators and other stakeholders.
- Access to finance: Many lenders, investors, and other stakeholders require companies to file annual returns before they can provide financing or investment. This is because annual returns provide important information about a company’s financial health and legal compliance, which helps stakeholders assess the company’s risk profile and make informed decisions about their engagement with the company.
- Business planning and decision-making: Annual returns provide a record of a company’s financial and legal history, which can be used for business planning and decision-making. By analyzing past annual returns, companies can identify trends, strengths, and weaknesses, which can help them make more informed decisions about their future plans and strategies.
Filing annual returns is important because it helps companies demonstrate their commitment to legal compliance and good corporate governance.
Procedures for filing annual returns
The process for filing annual returns in Nigeria involves several steps. These include the preparation of the annual return, payment of the prescribed fee, and submission of the document to the CAC.
1. Preparation of the annual return
The first step in filing annual returns is the preparation of the document. This involves gathering all the necessary information and documents required by the CAC, you can read more about them here. The annual return form is also available on the CAC website, and it must be completed and signed by the company’s directors or authorised officers.
The company’s financial statements, including balance sheet and profit and loss statement which form part of the annual return are attached to the form for submission to the CAC.
2. Payment of the prescribed fee
After preparing the annual return, the next step is to pay the prescribed fee. The CAC has a schedule of fees for various services, including the filing of annual returns. The fee for filing annual returns is determined by the authorized share capital of the company.
3. Submission of the annual return
The final step is the submission of the annual return to the CAC. This can be done by submitting the document via the CAC portal. The CAC will then review the document to ensure that all the required information and documents have been provided. If everything is in order, the CAC will issue an acknowledgment of compliance, which confirms that the company has met its statutory obligation to file annual returns for the year in question.
Deadline and penalties
The deadline for filing annual returns in Nigeria is 42 days after the company’s AGM. This means that if a company holds its AGM on the 1st of January, it must file its annual returns with the CAC on or before the 12th of February of the same year.
Failure to file annual returns in Nigeria attracts severe penalties, which can include the following:
- A fine prescribed by the CAC.
- The company may be struck off the register of companies if it fails to file its annual returns for ten consecutive years.
- The directors and officers of the company may be liable to such penalties as may be prescribed by the CAC.
Filing annual returns is a crucial obligation that every registered company in Nigeria must fulfil and ensure to fulfil with accuracy. At Norebase, we are happy to assist companies with the filing of their annual returns. We have also built a software Autocomply that keep you informed on all you legal compliance to avoid missing deadlines, Join the waitlist here .
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