Good evening everyone. Am Barr. Amaka Obizolu, the principal partner of Amaka Obizolu & Co. Am pleased to be in your midst today to talk to us on Nigerian Business Law and Tax System.
I want to assure you all that at the end of this lecture, everyone should be able to understand some aspects of business law in Nigeria, appreciate that the law recognizes the freedom of individuals to enter into contractual and commercial transactions, understand the role of law of contract as the basis or foundation of business transactions in Nigeria.
Business laws are implemented to provide all organizations in the market place with fair conditions to succeed. The actions of businesses, their owners and their employees are regulated by laws meant to protect businesses from other entities that want to cheat them. It is salient to know that all businesses must be created to exist under the laws of the place where they reside.
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Because business law is vast and complex, a business needs to have a lawyer to interpret and advise proper action to ensure compliance. In order to aid businesses and their legal staff, agencies such as CAC, NSE, SON, NAFDAC, SEC, FCCP etc. were created to protect investors and consumers by holding businesses accountable for any dangerous and fraudulent practices, hence the need for business registrations.
Business law also is meant to provide guidelines by which businesses are able to avoid litigation, therefore it’s beneficial to seek the counsel of lawyers who specialize in business law before a business forms, because these lawyers are acquainted with the pitfalls the new business seeks to avoid. A good lawyer is able to structure contracts and exchanges such that the business remains compliant with law to minimize liabilities while remaining as profitable as possible.
Don’t forget that Nigeria was a colony of Britain up to the first day of October 1960 when Nigeria became an independent country; as such, Business in Nigeria necessarily starts with company law of Nigeria Ordinance of 1912, thereafter to 1922-1968-1990 till date now known as Companies and Allied matters Act 1990 Cap C20 LFN 2004. This law regulates the different ways in which business owners can register and carry out their businesses as either;
Part A Companies
Part B Business names
Part C Incorporated Trustees.
Bearing in mind that CAC (Corporate Affairs Commission) is the body in charge of registration of businesses under the Act, most persons who are interested in doing Business in Nigeria or in doing business with Nigeria would want to operate as or in companies and so will be concerned with Part A only with good reasons. The most important thing for the non-Nigerian to take into account is that our law requires foreigners intending to carry on business in Nigeria to be incorporated locally.
Note: An enforceable system of business laws provides for more efficient transaction. Example a supplier who sells goods on credit can be confident that the buyer will be held to the agreed payment terms, as long as the agreement is drafted and executed by a lawyer.
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If you operate an existing business or plan to launch a new one, I will advise that your success may depend on obtaining the right legal advise in order to structure contracts and exchanges such that the business remains compliant with law to minimize liabilities while remaining as profitable as possible.
For the purpose of this lecture, I am going to narrow down the areas of business law as it applies to Nigerian and non Nigerians. Under the Act, we have legally recognised business as follows:
- Public or private companies limited by shares.
- Pubic or private Unlimited companies.
- Public or private companies limited by guarantee.
- Other business association includes
Incorporated Trustee (which is not a business Organization)
Note: On major difference between the public and private companies, A public company is the proper business structure if shares are to be offered to the public for subscription while a private company cannot, while membership of a private company has Max of 50, there is no limit for public company.
Note: That in sole proprietorship (business names) liability is incurred personally and subject to taxation in a personal capacity while in limited companies their liability is limited to it’s members to any share unpaid respectively held by them.
In partnership, business is carried on by 2 or more persons with maximum of 20 partners unless it is a partnership of a professional body.
Partnerships are also suitable for small businesses and are jointly and severally liable unless it is a limited partnership.
Pls note that in choosing your company names, some names are prohibited when it is identical with another company in existence or that closely resembles to deceive EXCEPT the old company consents or is being or wound up, which is why it is beneficial to seek the counsel of lawyers in this field for a proper guide.
Note also, that upon the registration of your company, A certificate of incorporation to be issued is a “prima facie” evidence that all conditions precedents and incidentals to the registration of a company has been fulfilled, and as such, to the effect of the incorporation of a company as stated in Section 37 CAMA, the company becomes a body corporate, known by the name in Memo and Articles of Association, has legal personality, can sue and be sued in it’s own name, has perpetual succession and a common seal.
It is also advisable as soon as the certificate of incorporation is issued, to display its name plate/sign board, print letter head with d Company’s name, registration number, address, names and nationality of director as this will help to reduce fraudulent practices.
It is pertinent to know, for investors who seek to have total control of the company to take Majority shares, attach special rights to their shares, provide for power to appoint and dismiss directors, should be a life director, should have custody of the company seal, should be a signatory to all company documents and to provide for pre-emptive right i.e. right of first refusal.
Stay with us tomorrow, 7am GMT, for a publication of part 2, where Barr. Amaka discusses Foreign Participation in Businesses in Nigeria and how the law defines company Shares.
Amaka C. Obizolu Mrs. (LL.B, BL)
+234 803 5404 780