CAC Annual Returns: Penalties, Costs & How to Avoid Company Strike-Off in Nigeria

Every Nigerian entrepreneur knows this story: You register a company with CAC, maybe open a corporate account, handle a few transactions, then business shifts. Life happens. That company sits there, forgotten.

Three years later, someone mentions your company shows as “inactive” on CAC’s register. Suddenly, panic sets in, and the CAC Annual Returns suffers.

Here’s what most business owners ask next:

• What exactly happens if I never file CAC annual returns?
• Can I just abandon this company and start fresh?

I’ve seen this scenario play out dozens of times. Let me share what actually happens, not the sanitized version from government websites.

A Real Case Study: Why Timing Matters

Last year, a client approached us at Qrafteq Brand Systems. He’d registered his company in 2019, opened a corporate account, then let it go dormant when business slowed down.

Four years later, he landed a government contract opportunity. He submitted his CAC documents for verification.

As a result, the agency immediately flagged his company as non-compliant.

His options were brutal:

1. Pay over ₦120,000 in accumulated penalties to revive the company (and risk losing the contract during the lengthy revival process)
2. Dissolve the company cleanly and register a new one with fresh compliance status

We handled the strike-off and registered a new entity. Though he lost that initial contract due to delays, he secured subsequent deals because his new company had clean records.

The lesson in this scenario is that CAC penalties don’t disappear. They surface at the worst possible moments.

Understanding CAC Annual Returns (It’s Not What You Think)

CAC Annual returns aren’t taxes. They’re compliance filings that tell CAC your company is still operating. Think of it as CAC’s way of keeping their register clean from “ghost companies.”

Current penalties for small companies:

• ₦5,000 late penalty per missed year
• ₦100 daily penalty (though CAC typically applies annual caps rather than endless daily charges)

Sounds manageable initially. Then years pass.

The Math That Hurts: 4-Year Default Example

Company registered in 2020, CAC annual returns ignored until 2024:

• 2021 filing missed → Penalty starts
• 2022 filing missed → Additional penalties
• 2023 filing missed → More penalties
• 2024 filing missed → You’re looking at ₦100,000+ in total penalties

For a company that may never have earned ₦50,000 in profit.

But here’s where it gets complicated: CAC doesn’t always apply this math mechanically. Sometimes they cap penalties. Sometimes they demand full arrears payment. Sometimes they allow waivers for genuinely dormant companies during strike-off applications.

Note: As of 2025, CAC has been reviewing their fee structure, so current penalties may differ from online calculators using older rates.

Read Also: Does the New CAC Fee Increase Affect Business Name and Company Registration in Nigeria?

Real Consequences of Ignoring CAC Annual Returns

Accumulating Penalties: Small company penalties start at ₦5,000 yearly plus daily charges. These stack up fast across multiple years.

Inactive Status: Your company gets flagged as inactive on CAC’s portal. Banks, investors, and government agencies see this immediately during verification checks.

Operational Blockages: Need a tax clearance certificate? Bank facility? Government contract approval? Annual return defaults will derail these processes.

Potential Strike-off: CAC can unilaterally remove your company from their register if they determine it’s no longer operating.

Why “Just Register a New Company” Doesn’t Work

Many entrepreneurs try this shortcut. Abandon the old company, register fresh.

Problems with this approach:

Name Loss: CAC won’t release your old company name for reuse, even for variations.

Reputation Damage: Professional clients and government agencies conducting due diligence will discover your previous non-compliant entity.

Legal Restrictions: Under CAMA 2020, CAC has authority to restrict directors of defaulting companies from registering new entities (enforcement is inconsistent but the legal framework exists).

In short: you don’t disappear from the register by walking away. You just leave a compliance corpse behind you.

The Professional Solution: Voluntary Strike-off

If you’re certain that company won’t be revived, formal dissolution through voluntary strike-off is your cleanest exit.

The Process:

1. Directors/shareholders pass a dissolution resolution
2. File strike-off application through a CAC-accredited agent
3. Clear any outstanding debts (or declare dormant status if applicable)
4. CAC publishes notice in the Federal Gazette for public objections
5. Without objections, CAC removes the company from their register permanently

Typical Costs:

• Application fees: ₦30,000 – ₦50,000
• Professional handling: ₦50,000 – ₦100,000 (varies by complexity)
• Outstanding penalties: Depends on CAC’s current enforcement stance and whether your company was truly dormant

But the tricky part is that CAC’s enforcement mood changes. One quarter they’re lenient with dormant companies, the next they’re strict about arrears payment. This unpredictability makes DIY attempts frustrating and time-consuming.

Read Also: New CAC Fees 2025: Full List of Increased Prices (Effective October 1, 2025)

Which Route Should You Take?

Revive and Pay Up: If your company has value such as established name, banking relationships, existing contracts, or brand recognition.

Strike-off Cleanly: If the company is genuinely dead weight with no future prospects.

Never Just Abandon: Feels easy now, creates problems later when those records surface during important business transactions.

Don’t Let Inactive Companies Block Future Opportunities

Nigerian business environment is challenging enough without compliance ghosts haunting your next big break. Whether you need to revive an old company or bury it legally, handle it properly.

This is exactly what we handle at Qrafteq Brand Systems.

We navigate CAC penalty negotiations, process overdue return filings, and manage strike-off applications without the typical bureaucratic nightmares.

We understand current CAC positions, know which officers are reasonable, and get things resolved efficiently.

Ready to clean up your company records? Contact us and let’s handle this professionally.

Disclaimer: This reflects CAC rules and practices as of early 2025. CAC periodically updates fees and enforcement policies. Always verify current requirements at filing time, or engage professionals to handle compliance matters.