7 Things Ignoring Your CAC Annual Returns Could Cost Your Business

The filing of Annual Returns with the Corporate Affairs Commission (CAC) is a mandatory statutory obligation for every registered company in Nigeria, governed primarily by the Companies and Allied Matters Act (CAMA) 2020. This process, required annually after the company’s initial 18-month or business name’s 12month’s grace period, serves as a mechanism for the government to maintain an up-to-date public register of active entities. Ignoring this routine compliance requirement is often viewed merely as incurring late filing fees, but in reality, it sets off a cascade of severe legal, financial, and operational penalties that can compromise the very existence and viability of a business. The true cost extends far beyond a simple fine; it impacts governance, reputation, and opportunity.

1. Inactive Status

Failure to file annual returns promptly leads the CAC to classify a company as “Inactive” on its public search database. This status is highly visible to the general public, including potential clients, partners, and competitors. An Inactive status immediately raises doubts about the company’s operational continuity and legal standing.

Imagine a company, “Delta Engineering Ltd.,” is bidding for a major government construction contract. The due diligence team checks the CAC public search portal and finds the company status listed as “Inactive” due to three years of non-filing. Despite having the best technical proposal, the company is automatically disqualified because the Inactive status suggests instability or a dormant legal existence, which is a major red flag for high-value contracts.

2. Risk of Deregistration (Company Strike-Off)

The most severe consequence of persistent non-compliance is the risk of the CAC invoking its power under Section 692 of CAMA 2020 to initiate a compulsory strike-off process. If a company fails to file returns for an extended period, the CAC assumes the entity is no longer operating and gives notice of its intent to remove the company’s name from the register.

“Zenith Trading Co.” has been dormant for several years and its directors ignored all CAC reminders. After ten consecutive years of non-filing, the CAC publishes a notice in the Gazette and formally strikes the company off. The directors discover they can no longer access the company’s residual bank accounts or legally dispose of its remaining property, as the entity no longer possesses a legal personality, requiring an expensive and complex court order for restoration.

3. Loss of Contracts

In today’s regulatory environment, both government agencies and major private corporations strictly enforce Know Your Customer (KYC) and due diligence standards. Proof of compliance, typically a CAC Status Report showing up-to-date returns, is mandatory for qualification.

“Apex Consulting” is poised to secure a lucrative retainer contract with an International Oil Company (IOC). The IOC’s procurement team insists on seeing the company’s CAC profile as part of their onboarding procedure. When they find that Apex has a two-year backlog of annual returns, they deem the firm non-compliant with corporate governance standards and award the contract to the next compliant bidder, citing “failure to meet statutory regulatory standards.”

4. Bank Account Restrictions

Financial institutions are integral gatekeepers of regulatory compliance. Banks routinely conduct compliance checks on corporate accounts and require evidence of current CAC registration status, especially when performing upgrades, applying for loans, or during annual reviews.

A medium-sized logistics firm attempts to increase its operational account limit to accommodate a new line of credit. The bank’s internal compliance department requests the latest CAC Annual Returns acknowledgement. Upon seeing the firm has not filed for four years, the bank not only denies the credit application but also places a “Post-No-Debit” (PND) restriction on the company’s existing account pending rectification of its compliance issues, effectively halting all financial transactions.

5. Denied Access to CAC Services

A company with outstanding Annual Returns is immediately locked out from accessing crucial CAC services on the online portal. These services include essential statutory changes necessary for corporate management and growth, recovering of CAC certificates and documents, letter of good standing, change of director/trustee, etc.

A technology startup receives a crucial capital injection and needs to immediately increase its authorised share capital and appoint a new foreign director as stipulated in the investment agreement. When the Company Secretary tries to upload the relevant resolutions and forms on the CAC portal, the system blocks the transaction, demanding all outstanding annual returns and associated penalties be settled first. The delay could potentially jeopardise the investment deal.

6. Penalties to Directors and Officers

CAMA 2020 has significantly increased the penalties for non-compliance and, critically, holds the company’s directors and officers personally liable for these defaults. The penalties are accrued daily for every year the return remains outstanding, escalating the financial burden.

The directors of a failed manufacturing company, “Globe Products Plc,” believe they can simply ignore the company’s dissolution. However, the CAC issues a personal demand for the accumulated annual return penalties and default fees accrued over ten years. Because the company is illiquid, the directors find themselves personally liable for the steep statutory fines, impacting their individual credit ratings and financial standing.

7. Loss of Business and Funding Opportunities

Investors, especially venture capitalists and sophisticated angel investors, conduct rigorous due diligence that involves forensic checks on a company’s legal health. Non-compliance with mandatory filings like Annual Returns is universally seen as a major corporate governance failure and a sign of poor management discipline.

A highly promising FinTech startup, “SwiftPay,” is in the final stages of closing a $1 million seed round. The Venture Capital (VC) firm’s legal team flags that SwiftPay has missed its last two Annual Returns and has not perfected its allotment of shares. The VC withdraws the offer, stating that non-compliance demonstrates a critical lack of operational and regulatory rigor, making the investment too risky. The company loses the funding and the momentum needed for scaling.

Finally, the annual filing of returns is not a mere bureaucratic formality but a foundational pillar of corporate governance in Nigeria. The costs of ignoring this obligation—from being marked as inactive and losing lucrative contracts to facing account restrictions, systemic lockout from CAC services, personal liability for directors, and the ultimate threat of deregistration—are exponentially greater than the minimal effort and expense required for timely compliance. Maintaining an active and compliant legal status is therefore an imperative business strategy, not just a legal requirement, ensuring the continuous, unhindered operation and growth of the enterprise.

Ochidoz Ltd can handle  your business name, company and NGO annual return filing professionally. Click here to send us a WhatsApp chat or give us a call at +2349061182744