Doing Business in Nigeria: Business Organisation and Regulations 1. You should read the first part of this article for full information on the business organisation and regulations in Nigeria.
2.6 Shareholders’ Meetings
The first annual general meeting of a company must be held within 18 months of incorporation. Subsequent annual general meetings must be held each calendar year, provided that not more than 15 months shall elapse between one annual general meeting and another. Twenty-one days’ written notice to all shareholders is required for an annual general meeting, although this requirement may be waived by agreement of all the shareholders. A copy of the audited financial statements, the directors’ report and the auditor’s report must be sent to every shareholder at least 21 days before the annual general meeting.
At the request of shareholders holding at least 10% of a company’s paid-up share capital, the directors must convene a general meeting known as an extraordinary general meeting. Twenty-one days’ written notice of every extraordinary general meeting is required unless shareholders holding not less than 95% of the issued share capital waive this requirement.
2.7 Annual Returns
Every company must file its annual returns with the CAC within 42 days of its annual general meeting. The annual return is made by completing and filing Form CAC 10 at the CAC. Documents to be attached to the annual returns form include a copy of the balance sheet and profit and loss accounts presented to the annual general meeting, together with a copy each of the auditor’s report and directors’ report.
2.8 Directors and Officers
Every company must have a minimum of two directors. A company must also have a secretary. Unless required by the articles of association, a director need not own any shares. There is no restriction on the nationality of directors of Nigerian companies under CAMA. Although corporations are prohibited from acting as directors, a corporation may nominate a person as a director to represent its interest on the board. The appointment of directors is governed by the provisions of the articles of association of a company.
Generally, the articles provide for the appointment of the first directors by the subscribers to the memorandum of association. The names of all directors (and their nationalities, if they are non-Nigerians) must be listed in the Register of Directors kept in the company’s registered office and disclosed on its trade catalogues, trade circulars, show cards and business letters.
The remuneration of directors is determined by the company in a general meeting. The directors may also be paid all travelling, hotel and other expenses properly incurred by them in the course of their duties.
With certain exceptions, a company may not make a loan, directly or indirectly, to a director unless with the permission of its shareholders. Similarly, companies may not compensate a director for loss of office without shareholders’ approval. Directors are officers of the company. The secretary of the company and other officers are appointed by the board of directors. The title of ‘‘chairman’’ is used in Nigeria much in the same way as it is used in the United Kingdom and the United States. However, instead of ‘‘president’’ as is used in the United States, a Nigerian company generally uses the title of ‘‘managing director’’ for its Chief Executive. There may also be a ‘‘vice-chairman’’ and or ‘‘deputy managing director’’. The chief financial officer is usually called chief accountant or finance director (or, occasionally, controller) and, in most cases, will also carry out the duties of a treasurer.
The payment of dividends is not subject to statutory limits in Nigeria, to the extent that it is supported by profits. Therefore, a company may declare its entire profit after tax as dividends if it decides not to keep it in retained earnings. Dividend payments are subject to 10% withholding tax (7.5% for bona fide beneficiaries based in a country with which Nigeria has a double taxation agreement (DTA), subject to the satisfaction of the conditions specified in the DTA).
At the annual general meeting, the shareholders cannot approve any amount exceeding the amount recommended by the directors, as the dividend. In general, and as may be provided in the articles of association, the directors may declare and pay interim dividends between one annual general meeting and another.
2.10 Bonus (Scrip) Issue
A company having accumulated earnings or reserves may distribute stock dividends (bonus shares) out of those earnings. The earnings are thereby capitalised and share certificates will be issued proportionally to existing shareholders.
2.11 Statutory Books of Account
The CAMA requires every Nigerian company to keep proper books of account that give a true and fair view of the state of the company’s affairs and are sufficient to explain its transactions. Such books must be kept at the company’s registered office or such other place in Nigeria as the directors think fit, and shall at all times be open to inspection by the officers of the company.
In addition, a company must keep the following statutory books:
- Register of members;
- Minutes book (to record proceedings at meetings of shareholders and directors and committee meetings, if any);
- Register of directors and secretaries;
- Register of charges (to record every charge created by the company, for example, a mortgage of the company’s real estate, a floating charge on all assets from time to time or a charge relating to debenture issue);
- Register of shares or stock transfers;
- Register of directors’ interests in shares and debentures; and
- Register of debenture holders.
2.12 Key Regulatory Agencies
2.12.1 The Corporate Affairs Commission (CAC)
The CAC was established pursuant to the CAMA and is responsible for administering the CAMA, including the regulation and supervision of the formation, incorporation, registration, management and winding-up of companies. It also has powers to arrange and conduct an investigation into the affairs of any Nigerian company if and when the interests of the shareholders and the public demand.
2.12.2 The Nigerian Communications Commission (NCC)
The NCC was established by the NCC Act, No. 75 of 1992 to regulate the Nigerian telecommunications industry. In 2003, the Act was repealed and replaced with the Nigerian Communications Act (NCA), No.19 of 2003 (now Cap N97, LFN, 2004).
Based on the NCA, the functions of the NCC include:
- the facilitation of investments in and entry into the Nigerian market for provision and supply of communications services, equipment and facilities;
- the protection and promotion of the interests of consumers against unfair practices, including matters relating to tariffs and charges for, and the availability and quality of, communications services, equipment and facilities;
- ensuring that licensees implement and operate at all times the most efficient and accurate billing system;
- the promotion of fair competition in the communications industry, and protection of communications services and facilities providers from misuse of market power or anti-competitive and unfair practices by other service or facilities providers or equipment suppliers;
- granting and renewing communications licences whether or not the licences themselves provide for renewal in accordance with the provisions of the NCA and monitoring and enforcing compliance with licence terms and conditions by licensees;
- proposing and effecting amendments to licence conditions in accordance with the objectives and provisions of the NCA;
- fixing and collection of fees for grant of communications licences and other regulatory services provided by the NCC;
- the development and monitoring of performance standards and indices relating to the quality of telephone and other telecommunications services and facilities supplied to consumers in Nigeria having regard to the best international performance indicators; and
- making and enforcement of regulations made pursuant to the NCA.
2.12.3 The National Broadcasting Commission (NBC)
The NBC was established by the NBC Act, No. 38 of 1992 (now Cap N11, LFN, 2004) as the regulatory authority of the Nigerian broadcasting industry. Under the NBC Act (as amended), the powers of the NBC include:
- • receiving, processing and considering applications for the establishment, ownership or operation of radio and television stations, including cable television services, direct satellite broadcast and any other medium of broadcasting; and radio and television stations owned, established or operated by the Federal, State or Local Government;
- recommending applications, through the Minister of Communication Technology, to the President for the grant of radio and television licences;
- regulating and controlling the Nigerian broadcasting industry;
- receiving, considering and investigating complaints from individuals and corporate bodies regarding the contents of a broadcast and the conduct of a broadcasting station;
- establishing and disseminating national broadcasting code and setting standards with regard to the contents and the quality of materials for broadcast;
- regulating ethical standards and technical excellence in public, private and commercial broadcast stations in Nigeria;
- approving the transmitter power, the location of stations, areas of coverage as well as regulating types of broadcast equipment to be used; and
- ensuring strict adherence to the national laws, rules and regulations relating to the participation of foreign capital in relation to local capital in broadcasting.
Based on the final draft version of the National Information and Communications Technology Policy (NICTP) that was published in August 2012, there are indications that the NCC will become a converged ICT regulator by assuming the communications technology regulatory functions of the NBC on the one hand, and the regulatory functions of the National Information Technology Development Agency and the Nigerian Postal Service on the other.
2.12.4 The Central Bank of Nigeria (CBN)
The CBN was established by the CBN Act of 1959. The Act was repealed and replaced by the CBN Act of 1991, which was also repealed and replaced by the CBN Act, No. 7 of 2007. The Federal Government of Nigeria is the sole subscriber to the share capital of the CBN.
The principal functions of the CBN, as stated in the CBN Act and the Banks and Other Financial Institutions Act (BOFIA), 1991 (now Cap B3, LFN, 2004), are to:
- serve as a banker and financial adviser to the Federal Government of Nigeria;
- ensure monetary and price stability;
- issue legal tender currency in Nigeria;
- maintain external reserves;
- safeguard the international value of the legal tender currency;
- promote a sound financial system in Nigeria; and
- license, supervise and regulate the activities of banks and other financial institutions such as microfinance banks, finance companies, leasing companies, primary mortgage financial institutions and bureaux de change.
2.12.5 Nigeria Deposit Insurance Corporation (NDIC)
The NDIC was established by the NDIC Act, 1988. The Act was repealed and replaced by the NDIC Act, No. 16 of 2006 under which the NDIC has the responsibility to:
- insure all deposit liabilities of licenced banks and such other deposit-taking financial institutions operating in Nigeria so as to engender confidence in the Nigerian banking system;
- provide assistance to insured institutions in the interest of depositors in case of imminent or actual financial difficulties particularly where suspension of payments is threatened, to avoid damage to public confidence in the banking system;
- guarantee payments to depositors, in case of imminent or actual suspension of payments by insured institutions up to the maximum amount specified in the Act;
- assist monetary authorities in the formulation and implementation of banking policy so as to ensure sound banking practice and fair competition among insured institutions in the country; and
- pursue any other measures necessary to achieve the function of the NDIC provided that such measures and actions are not repugnant to the objects of the Corporation.
The NDIC, which is independent of the CBN, has the general responsibility of instilling and maintaining public confidence in the Nigerian banking industry. The NDIC is empowered to, in consultation with the CBN, acquire, manage and dispose of impaired assets of a failing insured institution, either directly or through an Asset Management Company. The NDIC, in consultation with the CBN, may also set up bridge banks to assume the assets and liabilities of failing insured institutions. The NDIC exercised these powers in 2011 when it transferred the assets and liabilities of three Nigerian banks to newly incorporated bridge banks, namely, Mainstreet Bank Limited, Keystone Bank Limited and Enterprise Bank Limited.
Furthermore, the NDIC may terminate the insured status of an insured institution where such an institution violates the provisions of the NDIC Act. The CBN may revoke the licence of such an insured institution, in which case the NDIC shall act as liquidator of the failed insured institution with powers conferred on a liquidator by CAMA. The NDIC is supervised by the Federal Ministry of Finance.
2.12.6 Department of Petroleum Resources (DPR)
The DPR is responsible for ensuring compliance with the terms governing the award of oil licences to companies engaged in petroleum operations. It monitors oil companies’ operations to ensure consistency with international industry standards and practices.
Its other functions include:
- enforcing safety and environmental regulations;
- keeping and updating records on petroleum industry operations, particularly on matters relating to petroleum reserves;
- advising government and relevant agencies on technical matters and public policies, which may affect the administration and control of petroleum;
- processing all applications for licences to ensure compliance with laid down guidelines; and
- ensuring timely and adequate payments of all rents and royalties as and when due.
Any company wishing to render any service to the oil industry in Nigeria is required to register with, and obtain a permit from, the DPR.
2.12.7 National Petroleum Investment Management Services (NAPIMS)
NAPIMS is the arm of the Nigerian National Petroleum Corporation that oversees the Federal Government’s investments in the Joint Ventures with international oil companies (IOCs) and interests in Production Sharing Contracts (PSCs) and Service Contracts.
The functions of NAPIMS are to:
- maximise Petroleum Profits Tax and guarantee a high rate of return through efficient cost reduction mechanisms;
- ensure that a reserve base is maintained and that reserve targets are met;
- ensure that production targets are also met;
- encourage gas utilisation and commercialisation;
- promote the transfer of managerial skills and technology;
- diversify the country’s revenue base in the hydrocarbon sector through the development of gas initiatives;
- ensure zero gas flare-out;
- negotiate and manage all third-party operating agreements; and
- promote maximum co-operation in communities of oil and gas producing areas and ensure that environmental protection standards are strictly maintained.
2.12.8 Nigerian Export Promotion Council (NEPC)
The NEPC was established by the NEPC Act, Cap N108, LFN, 2004 to:
- promote the development and diversification of Nigeria’s export trade;
- co-ordinate, monitor and promote the development of export-oriented industries in Nigeria;
- collect and disseminate information on products available for export;
- maintain adequate and effective representation to other countries and provide services to trade delegations in export-related matters; and
- administer grants and other benefits related to export promotion and development.
All companies engaged in export-related activities are required to register with the NEPC prior to exporting goods out of Nigeria.
2.12.9 National Agency for Food and Drug Administration and Control (NAFDAC)
NAFDAC, established by the NAFDAC Act of 1993 (now Cap N1, LFN, 2004), has wide-ranging responsibilities in the area of food, drug administration and control. It formulates policies and issues guidelines on product specification and quality control for all foods, drugs, cosmetics, medical devices, bottled water, raw materials used in production processes, manufactured in, exported out of, or imported into, Nigeria.
The NAFDAC also carries out inspections and tests on these products (to ensure compliance with its stipulated standards and guidelines) and the raw materials and the production processes in factories and other establishments. All foods, drugs, cosmetics, etc. produced, distributed or to be imported into Nigeria must be registered with the NAFDAC, which in turn issues out licences to evidence such registration. The NAFDAC also issues a quality certification of foods, drugs, cosmetics, etc. intended for export.