The statement of issued share capital and share allotment is a critical area of company registration that even CAC-accredited agents, who are practising lawyers, often struggle to get right. In this guide, I will walk you through the best format to split and allot company shares on CAC online according to CAMA 2020.
Just a few weeks ago, a colleague of mine who is into CAC registration reached out to me to help him explain how he will allocate shares by 30% each to 3 shareholders.
In the process of our discussion, I discovered he has been dividing and assigning the shares to shareholders wrongly for a couple of years he has been doing company registration.
This raised my intention to drop an article like this because I understand a lot of agents and even lawyers might be making the same mistake he is making.
Before we go deeply into how to split and allot company shares On CAC online the right way, let’s understand what share capital means.
What is Company Issued Share Capital?
Every company is supposed to have several shares. The statement of issued share capital is the total number of shares a company has issued to its shareholders.
Private Companies Limited by shares are expected to have a Minimum share capital of N100,000 (One hundred thousand), while Public companies are expected to have a minimum share capital of N2,000,000.
In Nigeria, the most common share capital used by private companies is N1,000,000 (One million shares); however, for some companies, due to the nature of their activities, CAC mandates them to use a higher share capital.
E.g. Private Security company is supposed to have a minimum share capital of 10 million, while companies with foreign participation are to have 100 million shares, e.t.c
Download the full CAC Operations Checklist here
Understanding Share Split and Allotment in Nigeria
Every agent carrying out a company registration is expected to fill out a compulsory statement of issued share capital on the 6th page of the company registration form online.
The company registration online form has the following pages in total
- Page 1: Entity details
- Page 2: Objects of Memorandum
- Page 3: Articles of Association
- Page: 4 Directors
- Page: 5 Secretary (Optional for small companies)
- Page: 6 Statement of Issued Share Capital
- Page: 7 Person With Significant Control
- Page: 8 Statement of Compliance
- Page: 9 Document Upload
- Page: 10 Preview and payment
Shares represent the unit of ownership in a company. The number of shares a person or corporate body owns in a company determines how much power and controls he has in the company.
This makes page 6: Statement of issued Share Capital of a company very vital, and it is important to understand what you are doing. Any wrong input or error on the page can lead to serious consequences. You might even face litigation as an agent.
Share Split is a process of dividing shares into the right amounts of units in order to distribute them evenly to the shareholders.
Think of having ₦1,000,000 (1 million) oranges to apportion (share) to 1 million people.
How are you going to share it?
Each person takes 1 orange right so that nobody takes more than 1. In this way, you are dividing the shares and sharing them equitably. Nobody gets more than 1, and everybody goes home happy.
Share allotment, therefore, is the process of apportioning or distributing shares evenly and equitably. This is done in the right proportion, so that all the total issued shares in the company are used up.
What CAMA 2020 Says About Share Split And Allotment
Before now, companies could split shares, apportion some of them and still retain part of their shares unallotted.
In December 2022, the Companies and Allied Matters Act (2020) mandated that all companies allot their unissued shares.
Any share capital remaining unissued after this date is not considered part of a company’s share capital until it is fully issued or reduced.
Companies with unissued shares were forced to allot the shares or face losing out on the shares in the company.
Reasons to Split or Allot Shares in a Nigerian Company
Below are key reasons companies split and allot company shares on CAC in Nigeria
- To comply with CAMA 2020 requirements
- To distribute shares to shareholders
- Attract New Investors
- To increase liquidity
Guide to Split and Allot Company Shares On CAC Online
Follow this step to split and allot company shares to shareholders the right way
- Under the statement of issued share capital, select the type of company you are registering. You must ensure the company does not fall under companies that CAMA 2020 mandates to have a specific (higher) share capital.
For the sake of this tutorial, we are going with 1 million shares. So you will select the first option, ” Entities with shares below five million”
- Under total issued share capital, Input ₦1,000,000 (1 million)
- Under breakdown of issued share capital, Input N1,000,000 to divide the shares by ₦1,000,000 and achieve ₦1 per unit of share.
- If you do everything correctly you should, it will look like the screenshot below
- Issued share capital ₦1,000,000
- Issued Share capital in words ₦1,000,000
- Divided by 1,000,000 number of Units
- Nominal value of ₦1 or unit of shares
Now that we have successfully structured the company’s share capital and divided it equally to get the right number of units to be shared, the next step is to allot the shares to shareholders.
Guide to Allot Company Shares On CAC Online
If you are to allot all shares to one shareholder, then all the shares will be allotted to the lone shareholder.
For the sake of this tutorial, we are going to allot 5 million total issued shares by 50/50 each to 2 shareholders.
This means each shareholder will receive ₦2,500,000 each (Two Million, Five Hundred Thousand)
- Go to the shareholder’s form
- Edit shareholder (Ensure to correct the date of birth)
- Select Equity shares
- Allot shares to the shareholder and save
The above picture shows that we are allocating ₦2,500,000 (50%) to the first shareholder. This is exactly how you are going to allot to the second shareholder to completely use up the ₦5,000,000.
Assuming our Total Share Capital was ₦1,000,000, then we will be allotting 50% which is ₦500,000, to the shareholder. The same process applies
Now you can see we have allotted ₦2,500,000 to the second shareholder, therefore exhausting the total shares.
This is exactly how you are going to do it if you are dividing and allotting ₦1,000,000 shares
Summary
If you are to allot ₦1,000,000 shares to 5 people, each of them will take ₦100,000
If you are to allot ₦1,000,000 to 3 people by 50/20/30 percentage, the 50% shareholder will take ₦500,000, the 30% shareholder will take ₦300,000, and the 20% shareholder will take ₦200,000.
Always ensure to divide the issued share capital with the same share value to have a nominal value of ₦1 for each unit of share
Common Mistakes to Avoid When Splitting or Allotting Shares
Below are some share split errors and allotment mistakes that a lot of consultants make while carrying out company registration
- Using restricted words in a Name that demand a higher share capital
- Not checking the designated share capital for the activity the company is into
- Dividing shares wrongly e.g Dividing ₦1,000,000 by 2 or 3 instead of ₦1,000,000 to have a nominal value of ₦1, per unit of share
- Miscalculating CAC and stamp duty fees for higher share capital (The higher the share capital, the higher the cost of registration)
- Not allotting shares properly and in the right percentage as requested by the client
FAQs on Splitting and Allotment of Shares CAC
Below are some Frequently asked questions on CAC share structure and allotment
What does it mean to split shares on CAC?
To split shares on the CAC portal means to divide the issued share capital by the same amount to have a nominal unit value of
What is the process of allotment of shares?
After dividing the shares to have a nominal value of ₦1, allot the shares in the percentages as instructed by the client
Can A business name split and allot shares?
No. Business Names do not have share capital structures
Do I need an authorized agent for my company registration?
Yes. You need the services of a trusted CAC authorized agent like Legacy Benjamin Consult to help navigate the complexities of your CAC registration and other corporate services. Send us a DM 08066108299
Can I leave part of my shares unissued?
No. CAC, in its implementation of CAMA 2020, mandates companies to allot all their shares except for public companies
Conclusion:
In conclusion, share capital structure, division and allotment are not really hard as most consultants struggle with it.
I hope this guide has walked you through and given you the practical steps to divide and allot shares the right way
