Section 394 CAMA 2020

Section 394 Companies and Allied Matters Act is about Qualification of a small company. It is under Chapter 14 (Financial statements, audit and accounting records) of the Act.

(1) A company qualifies as small in relation to its first financialyear if the qualifying conditions are met in that year.

(2) A company qualifies as small in relation to a subsequent financial year if the qualifying conditions—

(a) are met in that year and the preceding financial year ;

(b) are met in that year and the company qualified as small in relation to the preceding financial year ; or

(c) were met in the preceding financial year and the company qualified as small in relation to that year.

(3) The qualifying conditions are met by a company in a year in which itsatisfies the following requirements—

(a) it is a private company ;

(b) its turnover is not more than N120,000,000 or such amount as maybe fixed by the Commission from time to time ;

(c) its net assets value is not more than N60,000,000 or such amount as may be fixed by the Commission from time to time ;

(d) none of its members is an alien ;

(e) none of its members is a government, government corporation or agency or its nominee ; and

(4) For a period that is a company’s financial year but not in fact a year the maximum figures for turnover shall be proportionately adjusted.

(5) The “balance sheet total” means the aggregate of the amounts shown as assets in the company’s balance sheet.

(6) The “number of employees” means the average number of persons employed by the company in that year, determined as follows—

(a) find for each month in the financial year the number of persons employed under contracts of service by the company in that month (whether throughout the month or not),

(b) add together the monthly totals, and

(c) divide by the number of months in the financial year.

(7) This section is subject to section 393.