Stress-Testing the Legal Regime for Single-Member Private Companies

The legal framework for single member private companies was one of the major reforms introduced by the Companies and Allied Matters Act 2020 (CAMA). In principle, this corporate structure allows for the formation, management, and operation of a private company, by a single person, with minimal initial and ongoing compliance costs.

Many entrepreneurs and businesses have started adopting this corporate structure on the assumption that its basic principle will hold true under the CAMA and that it would help them avoid the usual (and often, unnecessary) compliance obligations and costs that conventional private companies are subject to.

This article tests that assumption and stress-tests the CAMA’s framework for single-member private companies. The stress tests reveal two critical design flaws in the CAMA’s framework for single-member private companies, which will subject those companies to unnecessary compliance costs and obligations that may result in farcical situations in practice.

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