PRINCIPAL LAWS ON CORPORATE LAW PRACTICE IN NIGERIA

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The principal laws are: the Companies and Allied Matters Act, 2004; The Nigerian Investment Promotion Commission Decree, 1995; Industrial Inspectorate Act; The Nigerian Enterprises Promotion (Issue of Non-voting Equity Shares) Act 1987; Investment and Securities Decree; The Immigration Act 1963; The Industrial Development (Income Tax) Relief Act; and Foreign Exchange (Monitoring and Miscellaneous Provisions) Decree.

REGULATORY BODIES ON CORPORATE LAW PRACTICE

There are 3 principal institutions or bodies which are statutorily vested with regulatory, supervisory and controlling authority over companies and their activities in Nigeria. These are the Corporate Affairs Commission (CAC), Securities and Exchange Commission (SEC), and Nigerian Investment Promotion Commission (NIPC).

FEATURES AND FUNCTIONS OF THE REGULATORY BODIES AND THEIR RELEVANCE ON CORPORATE LAW PRACTICE

Corporate Affairs Commission

This is the apex of the regulatory bodies for companies in Nigeria, which was established under section 1 of the CAMA as a body with full legal capacity like incorporated companies. Thus, it has perpetual succession and a common seal, capable of suing and being sued in its corporate name, of acquiring, holding or disposing of any property, movable or immovable, for the purpose of carrying out its functions.(click on any of the pictures on the right hand side or left for more insight).

The establishment of the Corporate Affairs Commission as an autonomous body was as a result of the perceived inefficiency and ineffectiveness of the erstwhile Company Registry, a department within the Federal Ministry of Commerce and Tourism which was then responsible for the registration and administration of the repealed Companies Act of 1968.

Features of CAC

The features are that the commission has a membership of 15 persons representing a wide variety of interests – the business community, labour, the legal profession, accountancy profession, Manufacturer’s Association of Nigeria, association of Small Scale Industries, the Institute of Chartered Secretaries and Administrators, the Securities and Exchange Commission and the Ministries of Trade and Tourism, Finance and Economic Development, Justice, Industry, and Internal Affairs. The chairman who is appointed by the president must be a person who is experienced in or has acquired specialized knowledge of corporate, industrial, commercial, financial or economic affairs and is thus able to make outstanding contributions to the work of the constitution – section 2 of the commission.

There is a provision for a Registrar-General of the commission who must be a person who has qualified to practice law in Nigeria for not less than 10 years and he must have had experience in company law practice or administration for not less than eight years. He is entitled to represent the Commission in legal proceedings in court – section 10

Members of the commission other than ex-officio members hold office for 5 years and are eligible for re-appointment for another 5 years. With the exception of the Registrar, generally, they are all part-time members – section 3 of the commission.

A member of the commission ceases to hold office, if he becomes of unsound mind or is incapable of carrying out his duties, if he becomes bankrupt or has made arrangement with his creditors, if he is convinced of felony or any offence involving dishonesty.

Members, other than the representatives of the Ministries, the Securities and Exchange Commission, the Institute of Chartered Securities and Administrators and the Registrar-General are entitled to such remuneration and allowances as the president may direct – section 4.

The quorum for meetings of the Commission is five excluding the representatives of the Institute of Chartered Secretaries and Administrators, the Securities and Exchange Commission and the Ministries – section 5(3).

Functions of CAC

The functions of the Commission as set out in section 7 of the Companies and Allied Matters Act, includes the following:

• To administer the Act, including the regulation and supervision of the formation, incorporation, management and winding up of companies;
• To establish and maintain companies registry and offices in all the states of the Federation suitably and adequately equipped to discharge its functions under the Act or any law in respect of which it is charged with responsibility;
• Arrange and conduct an investigation into the affairs of any company where the interests of the shareholders and the public so demand;
• To undertake such other activities as are necessary or expedient for giving full effect to the provisions of the Act.

The relevance to corporate law is that the Commission also registers Business Names, and Incorporated Trustees as well as provides a wide range of ancillary services.

Securities Exchange Commission

The Securities and Exchange Commission (SEC) is the apex regulatory body for Nigeria's capital market. It however, operates under the supervision of the Federal Ministry of Finance. The Securities and Exchange Commission, Nigeria, like other exchange commissions elsewhere, regulates the operation of capital market transactions, ensuring that the relevant rules are complied with

The business of capital formation and mobilisation is at the root of economic development, which is why every economy wants to develop its capital market. Capital markets drive capital mobilisation and allocation to businesses, in the push for economic growth. Through the capital market, companies and governments mobilise capital for investment, while offering opportunity to investors to seek profitable outlets for their funds. Because complex financial processes are often involved, and large numbers of investors participate, the need for guarding the mechanism for those transactions becomes apparent. Investors need to be protected, just as the process needs to be kept viable.

The Securities and Exchange Commission as it is today, is the outcome of the Investments and Securities Act (ISA) No 45 of 1999. However, its seed was actually sown in 1962, when the Capital Issues Committee, an arm of the Central Bank of Nigeria, was set up to evaluate applications from companies wanting to raise capital from the market and recommend for approvals. That committee transmuted to the Capital Market Commission in 1973 and the Securities and Exchange Commission in 1978, by virtue of Decree No. 7 of 1979. The Investment and Securities Act No. 45 of 1999 finally sought to broaden the operation of the Commission and refocus it for more impact on economic growth.

Features of SEC

The featuresof the Commission are that it consists of a chairman appointed by the president and ten other persons including two full-time Commissioners who must be persons with ability, experience and specialized knowledge in capital market matters – section 2 of the Commission. There is a Director-General for the Commission. He is appointed by the President and he is the Chief Executive of the Commission.

Functionsof SEC

The Securities and Exchange Commission, Nigeria, broadly has a responsibility to regulate the capital market and ensure that investors are protected. That means ensuring that processes increasingly get transparent and that transaction rules are complied with.

§  It scrutinises parties that apply to operate in the capital market as market operators and licenses those considered suitable. Such operators include: issuing houses, securities dealers/stockbrokers, sub-brokers, registrars, trustees, capital market consultants, reporting accountants, solicitors and investment advisers etc.

§  Securities for issue to the investing public are also scrutinized and registered by the Securities and Exchange Commission. A party intending an issue must apply to SEC for approval. These include: Equities/shares, debentures/industrial loans, government bonds and collective investment schemes.

§  It is the Security and Exchange Commission's responsibility to license transaction floors and exchanges, including: Securities Exchanges (like stock exchanges), Commodities Exchanges and Capital Trade Points, Futures, Options and Derivatives Exchanges as well as Depository, Clearing and Settlement agencies like the CSCS.

§  Major financial transactions like mergers, acquisitions, takeovers and other forms of business combinations must also have the blessing of the Securities and Exchange Commission.

§  SEC has a monitoring role over the capital market. That role is to ensure fair practices that will advance the market and attract more investment inflow. It extends to ensuring good corporate governance for the quoted companies which, among other things, have a responsibility to deliver timely and reliable reporting to the investing public.

§  As investors, it's good to know, too, that the Commission adjudicates on transaction disputes, in addition to receiving and treating investor/operator complaints. Parties that are aggrieved over market transactions and fail to get a fair treatment elsewhere can take their case to SEC. Often, defaulting parties receive the big stick.

The relevance to corporate law is that The Securities and Exchange Commission is consequently there to see to the orderly and rapid development of the capital market. Its basic role is to ensure transparent conduct, such that parties that take decisions, especially on investments, do it on the strength of good information and sound processes. By that, it is to attract more funds into the market and also attract more viable companies that could expand their operations by tapping funds from the capital market.

Nigerian Investment Promotion Commission

This was established in 1995 as a body corporate with perpetual succession under the NIPC Decree, 1995.The commission shall encourage, promote and coordinate investment in the Nigerian economy.

Functions of NIPC

·         To be the agency of the Federal Government to coordinate and monitor all investment promotion activities to which this Decree applies;

·         Initiate and support measures which shall enhance the investment climate in Nigeria for both Nigerian and non-Nigerian investors;

·         Promote investments in and outside Nigeria through effective promotional means;

·         Provide and disseminate up-to-date information on incentives available to investors;

·         Assist incoming and existing investors by providing support services;

·         Evaluate the impact of the Commission in investments in Nigeria and recommend appropriate recommendations; and

·         Maintain liason between investors and ministries, government departments and agencies, institutional lenders and other authorities concerned with investments.

One Stop Investment Commission

In its continuous effort to encourage Foreign Direct Investment (FDI) in Nigeria, the Federal Government established the One Stop Investment Centre (OSIC) otherwise known as One Stop Shop (OSS) on 21^st March 2006.

Nigeria like most African nations has set up statutory bodies to regulate foreign investment in the country. Therefore foreigners interested in carrying on business in the country are required to obtain investment approvals after incorporating their companies. The practice has been that company incorporation and foreign investment approvals are processed in different authorized government agencies. This process was characterized by delays usually caused by government bureaucracy which also stifled the smooth start up of foreign businesses in Nigeria.

In a bid to ensure the timely incorporation of companies and grant of investment approvals, the government had in the early 1990’s set up the Industrial Development Commission Committee (IDDC) to serve as a one stop agency for all pre-investment approvals. The IDDC had the statutory responsibility to grant Business Permits, Approved Status-in-Principle, Expatriate Quota, approvals on fiscal concessions, vet licensing and transfer agreements and generally advise the Federal Government on policy matters designed to promote the industralisation of the country.

Although the law establishing the IDDC provided that every valid application received would be processed within two months, this expectation was rarely ever met in practice. The IDDC Act was subsequently repealed by the Nigerian Investment Promotion Commission (NIPC) Act 1995 which established the NIPC to encourage and promote investment in Nigeria. Companies with foreign participation are required to apply to NIPC for registration and the statute provides that within 14 days from the receipt of completed registration forms, NIPC shall register such companies or otherwise advice the applicant accordingly.

Functions of OSIC

This includes simplifying and curtailing the procedures and guidelines for issuing business approvals, permits and authorizations by eliminating bottlenecks faced by investors in establishing and running businesses in Nigeria.

In addition, OSIC is expected to achieve the following functions:

·         Reduce the high cost of doing business

·         Eliminate dealing with multiple agencies

·         Eradicate the use of discretion and lack of transparency in granting approvals, licenses, permits

·         Eliminate over bureaucratization in procedures and processes

·         Eradicate poor service delivery

·         Ensure Foreign Direct Investment and investor tracking

Features of OSIC

·         The participating agencies will maintain their existing mandates and responsibilities within the structure of OSIC

·         Only statutory provisions will be administered at OSIC and not special applications

·         Agencies will establish their presence at OSIC in phases

·         Approval time for business entry approvals is 24 hours

·         OSIC covers investments into all sectors of the economy

·         It is mandatory for all foreign investors to register with OSIC to facilitate foreign direct investment tracking/investor tracking as provided in the NIPC Act.