TWO OPTIONS FOR CONVERTING NPDC’S UNINCORPORATED JOINT VENTURES TO INCORPORATED JOINT VENTURES

TWO OPTIONS FOR CONVERTING NPDC’S UNINCORPORATED JOINT VENTURES TO INCORPORATED JOINT VENTURES

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In a recent article, it was announced
that President Buhari had given the Nigerian Petroleum Development Company
(“NPDC”) the approval to corporatise its joint venture assets and
convert them into Incorporated Joint Ventures (“IJV”). The IJV structure has
been floated at least since 2008 when the first draft of the Petroleum Industry Bill
(“PIB”) was issued. That draft of the Bill mandated the formation of IJVs with
respect to joint ventures between the Nigerian National Petroleum Corporation
(“NNPC”) and its partners (mostly international oil companies). The
IJV was seen as a solution to the perennial difficulties faced by NNPC in
financing its share of the joint venture cash calls. This was based on the
theory that an IJV was likely to be in a better position to raise money from
loan and equity markets. This concept, loosely based on the NLNG model, was
resisted by the joint venture partners for a variety of reasons and was removed
from subsequent drafts of the PIB.

 The recent proposal is a bit
different. Firstly, it is targeted at companies in joint ventures with NPDC, a
subsidiary of NNPC. These companies are typically Nigerian owned and/or
Nigerian-led companies. The assets recommended for conversion into IJV status
are detailed in the table below:
Asset
Joint Venture Partner
Key shareholders*
OML 30
Shoreline Natural Resources Nigeria
Ltd
Shoreline (indigenous) & Heritage
(foreign)
OML 26
First Hydrocarbon Nigeria Ltd
Afren (foreign)
OML 34
ND Western Ltd
NDPR (indigenous), Petrolin
(foreign), First E & P (indigenous), WalterSmith (indigenous)
OML 40
Elcrest E & P Nigeria Ltd
Eland(foreign) & Starcrest
(indigenous)
OML 42
Neconde Energy Ltd
Nestoil (indigenous) & Kulcyzk
(foreign)
OMLs 71 & 72
West African Exploration &
Production Company Ltd
Dangote & First E & P (both
indigenous)
 *from publicly available data
and news reports
It is not clear whether NNPC/NPDC
believes that the local companies are soft targets for implementing the
IJV strategy or whether this is a first step which may be extended to all
companies in a joint venture with NNPC. Whatever the case, it is worth noting
that unlike the IOCs, most of these companies are single asset companies, which
means two things. One, the success of the asset means everything to the
company, its owners and its employees. Therefore, these stakeholders will be
averse to any change which they consider may affect the economic potentials of
the company. Two, most of the companies and/or its owners are substantially
leveraged from the acquisition of the assets and the lending banks will have a
say in any proposed reforms.
There is no indication (at least not
yet), that these companies would be compelled by law, as previously proposed
under the 2008 PIB draft, to enter into these IJVs. This allows for detailed
negotiations on the form and substance of the IJV structure which may emerge.
This brief paper will not be examining
the merits or demerits of the IJV structure. It only seeks to enunciate two
options, which may be taken by the NPDC and the joint venture partners in
achieving the IJV structure. In doing this, we show that the process of
conversion itself is not that simple and requires all parties to put a lot of
thought to the issues likely to be faced.
Background
Before looking at the options
available, it would be useful to comment on the characteristics of the current
unincorporated joint venture structure, which may impact on its
conversion. 
Rights to explore for, develop and
produce petroleum are granted in Nigeria through the award of Oil Prospecting
Licences (“OPL”) and Oil Mining Leases (“OML”). Typically, two or more parties
would become the licensee and enter into a joint venture governed by a joint
operating agreement (“JOA”). The JOA, amongst others, spells out the
participating interest (or the share of costs and oil) to which each party is
entitled. Each joint venture party holds its participating interest as an asset
on its own books and is entitled to assign the asset (subject to certain
controls) and to pledge the asset. It is worth mentioning that the pledge of OML/OPL
assets is not typical in Nigeria due to the requirement for ministerial consent
and the time it takes to achieve such consent.
Option 1 – Reverse
Takeover
This is not an RTO in the technical
sense where a private company takes over a (dormant) public company. Under this
structure, NPDC transfers its rights in the underlying OML in exchange for
shares in the indigenous company. The indigenous company would be required to
substantially increase its share capital in order to allot the requisite shares
to NPDC. This option, therefore, requires a thorough valuation of the assets
and the liabilities of the indigenous company as well as that of NPDC’s
interest in order to determine the appropriate level of shareholding to be
allocated.
This process is likely to lead to NPDC
holding majority shares in the indigenous companies (hence the RTO) and where
the shareholdings of the companies are already relatively fragmented, NPDC
would be the largest shareholder by a significant margin. This may raise
concerns from the existing shareholders in terms of their ability to influence
the operations of the new entity. A number of these concerns may be dealt with
by putting in place a robust shareholders’ agreement which addresses voting
rights, pass mark issues and other minority protection mechanisms.
NPDC may also be concerned that at the
end of this process, it would have only transferred assets and not achieved the
capacity building objectives of this exercise. This concern may be ameliorated
by allowing the process to accommodate the transfer of staff.
Regulatory &
Other Considerations
The transfer of assets from NPDC under
this option would require the consent of the Minister, which is unlikely to be
a problem, given that this initiative is being driven by the government side.
The process may also require the approval of the Securities and Exchange
Commission as it is likely to fall under the mergers and acquisitions rules of
the Investments and Securities Act. Further, the required increase in share
capital by the indigenous companies would incur fees at the Corporate Affairs
Commission as well as stamp duty fees. Banks and other lenders to the
indigenous companies as well as those of its existing shareholders may also
need to approve the transaction under the terms of their existing loan
arrangements.
Option 2 – Transfer
to A New Company
A second option which may be utilised
to achieve the IJV structure is for both parties – NPDC and the indigenous
companies, to transfer their assets and liabilities with respect to that OML to
a newly created entity. In this scenario, the shareholders in the new company
would be NPDC and the existing indigenous company. The post-transaction
shareholding structure should broadly reflect the current participating
interest ratio between NPDC and the indigenous company on the asset. This may
provide some level of comfort for the indigenous shareholders as they may act
as one block, reducing NPDC’s influence as the majority shareholder. It will
still be necessary to put in place a shareholders’ agreement which addresses
minority protection rights.
In adopting this structure, however,
there may be concerns about the tax exposure of the shareholders of the
indigenous company. Under the current arrangements, the indigenous company pays
petroleum profits tax (“PPT”) after which its shareholders may take dividends
from the remainder profit. The dividends are not subject to the payment of tax
under Nigerian law although the company which receives the dividends may be
further subject to companies income tax (“CIT”) on any profits it makes. The
addition of another layer through the establishment of this new company may
subject the current shareholders in the indigenous company to additional tax,
potentially whittling down profits.
Regulatory &
Other Considerations
The transfer of assets from NPDC under
this option would also require the consent of the Minister. As the option would
require the incorporation of a new company with sufficient share capital to
accommodate the assets being transferred, there are likely to be substantial
CAC fees as well as stamp duty fees. Banks and other lenders to the indigenous
companies and/or its existing shareholders may also need to approve the
transaction under the terms of their existing loan arrangements. The process is
unlikely to require SEC approval.
Concluding Remarks
There are a number of questions which
need to be asked around the desirability of the proposed conversion to IJV
status. As private sector entities, concerns may be raised around governance of
such an institution, incorporation of politics into the affairs of the
organisation and public procurement obligations amongst other issues. Even
where these hurdles are scaled, the fulfillment of the process requires both
NNPC/NPDC and the private companies to think through how to implement the
change. That process will not be straightforward and may take a number of years
to reach an agreement.
During that period, however, the
NNPC/NPDC and its joint venture partners must come to an agreement on appropriate
structures to enhance the efficiency of these joint venture operations. This
means agreeing on alternative finance structures and how operations are managed
and this would involve at the very least executing new joint operating
agreements.

by: Dr. Adeoye Adefulu 

Dr Adeoye Adefulu is an Energy Partner in the law
firm of Odujinrin & Adefulu and the Managing
Editor of Petroleumindustrybill.com. Adeoye regularly
writes on Nigerian energy matters. 
BEFORE YOU SIGN THAT DOCUMENT by Feranmi Akinluyi.

BEFORE YOU SIGN THAT DOCUMENT by Feranmi Akinluyi.

 

Credits – www.budapesttelegraph.com

 INTRODUCTION

Generally, all oral contracts for sale of land are prohibited and where such contract exists, it will not be enforceable. The reason for this is because of the provisions of the Statute of Fraud 1677 which requires that there must be some memorandum or notes in writing in respect of contract for sale of land, otherwise such contract is unenforceable. It must be noted that regardless the relationship between the vendor (seller) and the purchaser (buyer), the contract must be in writing.
Black’s Law dictionary 2nd simply states:
|”The word “land” includes not only the soil, but everything attached to it whether attached by the course of nature, as trees, herbage, and water, or by the hand of man, as buildings and fences. Land is the solid material of the earth, whatever may be the ingredients of which it is composed, whether soil, rock, or other substance.”
It could also mean “a well-defined geographical location which can be located physically, or through the help of a map, it may or may not contain a structure and which has been properly documented with the appropriate authorities.”
POSITION OF LAW

In Nigeria, the enactment of the Land Use Act 1978 has vested all lands in the Governor of a state to hold in trust for the people of the state. Hence, all rights associated with lands have now been vested in the governor as a custodian, such rights being exercised by his prerogative and discretion. This empowerment has made all land transactions ranging from mortgage, to outright sale, to purchase, all subject to the Governor’s consent without which such transaction can be declared an exercise in nullity. The complexity of land administration in Nigeria now makes it necessary to ensure proper documentation and assertion of lands before execution otherwise an investor may be at the mercy of the Almighty God.
In any land transaction, proper care must be taken to ensure that the history of the land is traced and ascertainable, and not just some mere speculation nor the narration of a fantastic story-teller. A purchaser or a mortgagee whose rights becomes a priority after the transaction must never be in an hurry to part with his funds, neither must he take the narration of the vendor or mortgagor hook, line and sinker. He must investigate the history of the land.
Where the land is a communal land, i e belonging to the community or family, the consent of the principal members and heads of the community or family must be obtained before any valid sale. Also, town planning laws and regulations may restrict the sale and transfer of land where the purpose of which they are intended to be used are contrary to the purpose of town planning laws. For instance, some areas are preserved for commercial or industrial use only or government reserved area (G.R.A).
Credits – businessdayonline.com
Further, a purchaser or a mortgagor must sight the title document of the land in question. He must demand that he sight the original copy of the document and must also demand that a copy of the document is given to him. The essence of a copy is for him to conduct searches at the land registry and appropriate land bureau in the state. He must ensure that the property is not subject to any encumbrance or impediment that can otherwise affect his title to land. He must exercise strong caution when any red flag is raised. The mere production of a valid document of title does not necessarily mean that it is a good root of title. The document given must have the following characteristics.
a. Genuine and valid
b. Be duly executed, stamped and registered
c. The grantor has the authority and capacity to make the grant.
d. It has the effect claimed by the holder of the instrument.
A purchaser or a mortgagor is in the position of an investor, therefore, he must exercise due caution to ensure that he does not invest his funds in a wrong transaction. He must safeguard himself against loss, he must ensure the proper documents are prepared and properly executed. He must not be penny wise, pound foolish; he must not try to avoid the requisite legal fees. He must ensure that no documentation is left unattended.
CONCLUSION
Finally, it may just be safe to get professional help from a lawyer.  A lawyer would help in ensuring that his client gets the best deal; is properly advised all along the transaction, while also ensuring the preparation and execution of all legal documents pertaining to the land. A lawyer would save the expenses of running around in confusion trying to get the governor’s consent.
In the end, land ownership is usually defined by the validity of the document in a party’s possession and not by the price or receipt of the land. Just like the share certificate issued by a company’s registrar; land document is the proof of title to that well-defined geographical location. What tragedy would it be for you to realize at the hour of need that those sheets are just some worthless pieces of paper. A tragedy that occurs on a daily basis; it is safe to fact-check before your sign those papers.  
Feranmi Akinluyi.
Bonitas Solicitor
WHY WE NEED STATE POLICE

WHY WE NEED STATE POLICE


Credits – punch.com

 We have all heard the
arguments, we know the immense advantage establishing state police in Nigeria
will bring. Nigeria is a country with a population of over 170 million people,
compare that with the measly 500,000 man strong Nigerian police force and it’s
obvious to everyone that there is a huge imbalance with the numbers. Our Police
force is stretched out to the maximum with one police man having to cater to
340 people. This system is definitely not sustainable
I could posit that
employing more men in the federal police force would be a solution but adequately
managing and equipping the current number seems to be enough of an herculean
task currently for the institution.  Though
the police have always been funded, it is yet to reach its potential and
provide adequate protection for the teeming populace. For instance, currently in
Lagos State, hoodlums and thieves assaulting motorist in traffic and robbing
them of their possessions is quickly becoming a fad.

A friend told me she keeps
an empty hand bag in her car so when the thieves strike, she would offer them
the empty hand bag while she plots her escape. The sad thing about her
experience is the fact that she has had to find a way to manage the situation,
a scenario where the hoodlums would be arrested and stopped never crossed her
mind, she already expects it to happen again and again.
I believe Nigerians will
have better security if States were empowered to operate state police. Another advantage
is the number of unemployed graduates who will find jobs securing their local
communities. Officers who will serve with better dedication knowing the lives
of their families and friends are in the balance. Insecurity will gradually
fade away. Securing the lives and property of everyone in Nigeria is not a task
that can be handled solely by the Federal Government. State Governments should
be allowed to contribute as well.
It should be noted that
unofficial security outfits operate in many states in Nigeria, examples are the
OPC and the Bakassi boys. However, a proper institution for state policing
should be created and properly enabled. Many argue that state police will
empower governors to be ruthless with power but there are a number of ways that
may be prevented. The police could be empowered to run independently of state
politics. Others have raised the issue of clashing jurisdictional issues
between state police and the federal police force but this could also be solved
by clearly establishing the jurisdiction given to the state police. Moreover,
state police need not be mandatory for states that do not have the capacity to
sustain its operation. States who have the capacity should however be
encouraged.
The clamour for state
police is getting louder, it is no longer a question of whether we should
create the institution of state police but rather when we should establish
same. Because, truth is, if Nigeria must truly embrace evolution and growth,
state police will become mandatory. It is the only way to provide adequate
security of lives and property for everyone in Nigeria. The desire for state
police must however graduate into a constant interaction with the Legislature
and other stake holders on putting in place policies that will support state
policing. You can begin by writing a message to your local and state government
representatives sharing with them your thoughts on the issue.
Adedunmade Onibokun Esq. 
@adedunmade 
dunmadeo@yahoo.com
COMPLIANCE CHALLENGES OF LAGOS STATE CONSUMPTION TAX by Sogo Akinola

COMPLIANCE CHALLENGES OF LAGOS STATE CONSUMPTION TAX by Sogo Akinola


Credits – www.govtoday.com.ng
The World Travel and
Tourism Council, WTTC, has projected that the travel and tourism industry in
Nigeria would contribute 1.6 per cent directly to the Gross Domestic Product of
the country by 2024, which represents N1.366 billion. The Council also
projected that the travel and tourism industry would support direct employment
to the tune of 1,194,000 employees in the next decade, which represents 1.4 per
cent total employment in the country.
In the wake of the
fall of oil prices which is seriously hitting the country’s financial muscle,
the need to diversify the country’s income cannot be understated. The
enforcementand strict compliance of existing tax laws to generate larger
revenue also cannot be undermined; for example the Iranian government is
earning more from tax than oil as a result of its policy to shift its
traditional reliance on oil money to taxes in the face of plummeting oil prices,
thus the possibility of earning from taxes in Nigeria is important.

The consumption tax
law
is
anexisting law which needs to be explored , especially for a commercial state
like Lagos which has an average of 3,000 hotels, one can safely assume that
such a number is a marginal field, unfortunately this has not been thoroughly
explored by the government.
Lagos State Hotel
Licensing Law
Given the enormous
size and even bigger potential of the hospitality and tourism industry, it is
clear why the desire to regulate the industry can be seen as a big deal. For a
long time the industry has been regulated solely by the Nigerian Tourism
Development Corporation (“NTDC”). Lagos State challenged the status quo by
introducing laws to regulate the industry in theState leading to the debate on
the constitutionality of the Lagos State Hotel Licensing Law 2003 (and its
amendment) and the Hotel Occupancy and Restaurant Consumption Law 2009.
The Hotel Licensing
Law and the 2010 amendment established the Lagos State Hotel Licensing
Authority (“LSHLA”) and made other provisions for the licensing of hotels. It
further empowered Lagos State to make laws to regulate, make standardsand grade
tourism operations which was previously under the exclusive preserve of the NTDC.
In the exercise of
its powers to license and regulate hotels, the Lagos State House of Assembly
enacted the Hotel Occupancy and Restaurant Consumption Law. The law imposes a
5% tax on consumption of goods and services in hotels, hotel facilities, events
centres and restaurants.
What the court
thinks?
The federal
government (before the Supreme Court) challenged the right of Lagos State to
make laws on tourism specifically where the National Assembly had already
legislated on the same issue through the NTDC Act.
The apex court
dismissed the federal government’s suit and delivered its judgment in favour of
Lagos state. It was the view of the court that the NTDC Act went beyond its
powers as stated in the Exclusive Legislative List of the Constitution which is
to regulate “tourist traffic”. This effectively challenged the
constitutionality of the NTDC’s powers to unilaterally regulate and control of
hotels and tourism in Nigeria. The court therefore validated the respective
laws of Lagos State.
However, the judgment
did not address the issue of the imposition of tax and whether or not Lagos
State has the constitutional right to impose consumption tax on hotels,
restaurants and event centres.
Who is liable to
consumption tax?
Section 1 a-b of the Hotel
Occupancy and Restaurant Consumption Law 2009 provides that the tax is imposed
on any consumer who pays for the use or possession of any hotel, hotel facility
or event centres or purchases goods or services in any restaurant whether or
not located within a hotel in Lagos state.
The operators are
therefore mere agents of the government for the purpose of tax remittance. The
Act further provides for penalties and distraining powers on defaulting agents.
Compliance Issues
According to the former
Commissioner for Tourism and Inter-governmental Relations, Mr. Disun Holloway
in early 2015 stated that no fewer than 1000 hotels operate in Lagos without
obtaining license from the Lagos State Licensing Authority.
He further stated
that 1,328 hotels, event centres, bars and restaurants are yet to comply with
the law as opposed to the 1,162 that have complied. This figure which is rising
daily represents more than 60 percent of tourism establishments domiciled
within Lagos.
It is pertinent to
note however, that most hotel operators have expressed complaints about multiple
taxes and charges imposed on them such as consumption tax, value added tax,
company income tax, withholding tax, health certificate, and waste operation
permit.
The Way Forward
·        
The government needs an aggressive
approach towards registration of members with theThe Hotel and Personal
Services Employers Association of Nigeria (HOPESEA) to capture more operators into
the tax net.
·        
Adequate and sufficient sensitization
to show that operators are mere government agents.
·        
Tax credits and awards for compliant
operators.
·        
Innovation of technology/software that
would automatically deduct  tax due from
the restaurant money machines accounts, which will aid the tax authorities in assessment.
·        
A presumptive income tax system should
be introduced for operators that do not comply with the
systems in place.
SOGO AKINOLA

ARBITRATION CLAUSE IN DOMESTIC AND INTERNATIONAL COMMERCIAL TRANSACTION

ARBITRATION CLAUSE IN DOMESTIC AND INTERNATIONAL COMMERCIAL TRANSACTION



INTRODUCTION

Arbitration is “a method of dispute resolution involving one or more
neutral third parties who are usually agreed to by the disputing parties and
whose decision is binding” (as defined by Black’s Law Dictionary 119,9th ed. 2009)
. It is a form of alternative dispute
resolution (ADR), a technique for the resolution of disputes outside the
courts. Arbitration has become very important in the business world and
certainly a common feature in international and domestic commercial
transactions. It is therefore not unusual to find an arbitration clause in most
commercial agreements as a key component of how disputes are to be resolved.
PURPOSE:
The purpose of an arbitration clause
was well enunciated in the case of
SINO-AFRIC AGRICULTURE & IND COMPANY LTD V. MINISTRY OF FINANCE
INCORPORATION & ANOR (2013) LPELR-22370 (CA)
where the learned judge
stated that:

“Arbitration Clause is intended
to save both parties the time and expense of a lawsuit. Other notable reasons
are that it may lessen the risk of punitive damages awards, may decrease
exposure to class actions or other forms of aggregate litigation, may result in
more accurate outcomes because of arbitrator expertise and incentives, may
better protect confidential information from disclosure, enhance the ability of
the parties to have their disputes resolved using trade rules and it may enable
the parties to better preserve their relationship. It may also provide a
neutral forum”. The judge went further to state the effect of including an
arbitration clause in an agreement thus: “If the contract contains an
arbitration clause stating that either party to the contract may choose
arbitration instead of litigation, it may not matter that the word
“may” was used to try and make arbitration optional instead of
mandatory. It is established that in approaching the question of construction
it was necessary to inquire into the purpose of the arbitration clause. In
choosing arbitration the parties showed an intention to have their disputes
decided by an arbitrator which they had chosen.” Per ORJI-ABADUA, J.C.A.
(Pp. 32-33, paras. E-C).
Credits – suitsbysuits.com
KEY
FEATURES OF ARBITRATION CLAUSES
For parties to have an effective means
of resolving their disputes in an arbitration proceeding, the arbitration
clause of the contract is very important. In drafting the clause, careful
thought needs to be given to its contents and the following are some of the
things to consider.
How to commence the arbitration
Arbitration clause
should specify how the arbitration is to be commenced, notice to be given and
who and how such is to be given.
Seat
of arbitration
The
seat is the place or venue the arbitration is to be held. The arbitration
clause should state the seat. The seat chosen will determine the applicable
procedural rule that will govern the arbitration. The procedural rule of the
country in which the seat is situated will apply. It is therefore important to
give careful thought to this before making a choice. The attitude and support
provided by the domestic courts need to be considered too. Also, important is
the enforceability of an arbitral award is the seat chosen. For enforcement
purpose, it is important that the country is a party to the New York Convention
on enforcement of arbitral awards, before that convention can apply.
Number and method of
appointing the arbitrators
It
is important to specify the number and state the method of appointing the
arbitrators. Most arbitral tribunals have one or three arbitrators, though
there is nothing stating different number of members cannot be appointed.
Oftentimes, the value and complexity of the contract determine the number of
arbitrators to specify. The clause should also specify method of replacement,
which may be required due to death, resignation, removal, and illness of an
arbitrator or for any other compelling reason.
Language
of arbitration
It
is always good practice to specify the language of the arbitration. This will
also help in choice of arbitrators that are comfortable with that language and
help in avoiding cost of translation.
Type
of Arbitration
The
clause will need to make clear whether it is an institutional arbitration or an
adhoc one. Institutional arbitrations are administered and supervised by
recognized arbitral institution such as the ICC.
Governing
law
The
law governing the subject of the dispute, sometimes termed the substantive law
has to be specified. The parties should decide on the law they wish to apply to
any dispute that arises and the tribunal will apply that law to the merits of
the dispute. This may not necessarily be stated as part of the arbitration
clause, but it is helpful to still state it somewhere in the contract as it
helps the arbitrators to determine which law applies to the subject-matter of
the dispute.
REASONS WHY ARBITRATION IS PREFERRED IN COMMERCIAL TRANSACTION
Enforceability:
The
ability to
resolve disputes in a neutral forum and the enforceability of binding decisions
are often cited as the main advantage of arbitration. The principal instrument
governing the enforcement of commercial international arbitration agreement
awards is the “United Nations Convention
on the Recognition and Enforcement of Foreign Arbitral Awards of 1958”(New York
Convention)
which has been ratified by more than 140 countries, including
most countries involved in significant international trade and economic
transactions. For example, United States of America, United Kingdom, Canada are
all signatories to the New York
Convention
(with notable exceptions like Iraq, which, not
having ratified the New York Convention, cannot be assumed to give effect to
arbitration decisions rendered in other countries)
. The convention requires the states
that have ratified it to recognize and enforce international arbitration
agreement and foreign arbitral awards issued in other contracting states. As a
practical matter, what that means is that an international award originating in
a country that is a party to the New York Convention may be enforced in any
other country that is also a signatory as if such were actually rendered by the
domestic courts in that second country. Nigeria is a signatory to the New York
convention. Local legislations have also given confidence to the use of
arbitration to settle disputes instead of loading our ever busy courts with
disputes that can be resolved alternatively.
Fit
for Purpose
: Resolution of
disputes in the ordinary courts is subject to the rules of the court and is
administered by judges appointed by the state. Litigants have little input into
how those judges are appointed, the rules governing their procedure, the venue of
the trial, those who can attend the proceedings, and other things involved in
the administration of justice. On the other hand, the flexibility of
arbitration, which allows parties to make substantial input into arbitration
proceeding, makes it a more attractive proposition, especially in commercial
transactions. Parties appoint their arbitrators, determine the rules, decide on
the fees of the arbitrators and do many more to make it fit for purpose. It is
usually simpler, more efficient, and more flexible for scheduling than
litigation.
Avoids
hostility:
Because the parties in an arbitration are
usually encouraged to participate fully and sometimes even to help structure
the resolution, they are often more likely to work together peaceably rather
than escalate their anger and hostility towards one another, during and after
the arbitration, as is often the case in litigation.
Professional: Parties to arbitration are at
liberty to appoint arbitrators who are experts and professionals in the subject
matter of the dispute. This is very important in any business environment as
those appointed understand the issues at stake better and are at a better
position to reach a quick and more acceptable decision to the satisfaction of
parties. Arbitration is not hamstrung by strict adherence
to the sometimes time consuming and confusing rules of evidence and procedures.
Simplified
rules of evidence and procedure:
The
often-convoluted rules of evidence and procedure do not apply in arbitration
proceedings, making them less stilted and more easily adapted to the needs of
those involved. Importantly, arbitration dispenses with the procedure called
discovery that involves taking and answering interrogatories, depositions, and
requests to produce documents – often derided as a delaying and game-playing
tactic of litigation. In arbitrations, most matters, such as who will be called
as a witness and what documents must be produced, are handled with a simple
phone call.
Faster
than litigation:
Arbitration is faster. This is because
decisions are reached quicker without any preliminary objection or unnecessary
appeal. There have been instances in the regular courts where preliminary
matters alone can take up years before the substantive matter is heard.
Confidential:
Arbitration proceedings are generally held in private.
This is important in most corporate
and business cultures.
 And
parties sometimes agree to keep the proceedings and terms of the final
resolution confidential. Both of these safeguards can be a boon if the subject
matter of the dispute might cause some embarrassment or reveal private
information, such as a company’s client list or trade secret.
CONCLUSION
An arbitration based on a well thought
out arbitration clause is more likely to result in timely justice than court
litigation. In the mind of business people, most legal disputes are cost
centers and the sooner they end the better. Further, as the public justice
system of large metropolitan areas continue to be cash strapped and forced to
reduce employee and services thereby lengthening the time it takes to get to
trial, more businesses will opt out for private justice system of arbitration
and mediation.
Business is all about managing towards
an objective, i.e. profitability, and that includes reducing uncertainty caused
by delays. A business wants disputes resolved reasonably quickly and wishes the
resolution of disputes to cause as little disruption to its core business and
employees as possible. Failure to incorporate a business-oriented arbitration
clause leaves too many decisions up to parties mired in the midst of dispute.
It is better to create the framework for dispute resolution when the parties
are at the beginning of a contract. A good arbitration clause can foster timely
justice.
Feranmi Akinluyi.
Doing Business in Nigeria: A Brief Legal Guide by Babatunde Ibidapo Obe

Doing Business in Nigeria: A Brief Legal Guide by Babatunde Ibidapo Obe

Credits – ngex.com

Company
structure
The
primary law governing companies and businesses in Nigeria is the Company and
Allied Matters Act (CAMA). It deals with the various types of company
structures, eligibility, process for registration, and rules for operation. The
regulatory body that is in charge of implementing the provisions of the CAMA is
the Corporate Affairs Commission (CAC).
The
various business structures allowed in Nigeria are – registered business name,
company limited by shares, company limited by guarantee, unlimited company (all
companies may be private or public), and incorporated trustees For the purposes
of this guide, we will deal with only a private company limited by shares.

What
are the requirements?
  • A company must have a minimum
    of 2 members, and a maximum of 50 members
  • Founding members must not be –
    under the age of 18 years old (unless at least 2 other members are over
    the age of 18), of unsound mind, an undischarged bankrupt, or disqualified
    by CAMA from being a Director
  • Foreigners and foreign
    companies can be founding members of a company alongside Nigerian citizens
  • The current minimum share
    capital of a company to be registered in Nigeria is N10, 000
 What
documents are needed for incorporation?
  • Memorandum and Articles of
    Association
  • Notice of registered address of
    the business
  • List, particulars, and consent
    of the first Directors of the company
  • Statement of compliance by
    legal practitioner
Upon successful registration, the
company is presented with a Certificate of Incorporation.
To
find out a bit more about registering a company/business in Nigeria you can
read up on the below articles: 
Intellectual
Property (IP) Protection
The
Nigerian legal system affords protection to IP rights in the following
categories – copyright, trademark, and patents.
Copyright 
A
copyright is a legal right that grants the creator of an original work
exclusive right to its use and distribution, usually for a limited time. The
exclusive rights are not absolute; they are subject to certain limitations.
 In
Nigeria, the primary piece of legislation for copyright is the Copyright Act,
and the body charged with the enforcement and protection of copyright is the
Nigerian Copyright Commission (NCC).
The
ownership of copyright is the creator of a copyright work, usually referred to
as the “author” of the work. He/she owns the copyright in the work in the first
instance. However, the author is at liberty to transfer his rights to a third
party. In such a case, the person who has obtained the right by transfer or
other legal means becomes the owner of copyright.
What
is eligible for copyright protection?
  • Literary works; Musical works;
    Artistic works; Cinematograph works; Sound recording; and Broadcasts
For
it to be eligible for copyright protection, the work must be sufficiently
original, and must be in a form which can is expressed e.g. in writing, a
painting, a musical recording etc. You can’t have copyright protection over
something in your head, which has not been expressed.
Originality and expression are the
key pillars for eligibility
 Do
you need to register a copyright?
You
do not have to register your copyright. Copyright subsists automatically in a
work from the moment the work is created.
However,
the NCC has established a voluntary copyright registration
scheme
designed to enable authors and right owners notify the
Commission of the creation and existence of a work. The NCC justifies the
establishment of this scheme based on the following benefits:
  • It provides an independent
    source of verifying data relating to a work or its author to the general
    public;
  • The acknowledgement certificate
    issued provides prima facie evidence of the facts shown on it;
  • It provides a depository for
    preserving original copies of works notified;
  • The information and data
    contained in the Notification database offers reliable rights management
    information to members of the public and prospective licensees to the work
Trademark
A
trademark is a word, phrase, symbol or design, or a combination of words,
phrases, symbols or designs, that identifies and distinguishes the source of
the goods of one party from those of others.
Once
a trademark is registered, it enables the trademark owner to amongst other
things- take legal action against anyone who uses the registered mark without
permission, sell and/or license the registered trademark (so in a sense it
becomes an asset), and allows the owner to legally put the ® symbol next to the
brand – to show ownership and warn others against using it.
In
Nigeria, the legislation, which governs the registration of trademarks, is the
Trade Marks Act (and the Trade Mark Regulations made pursuant to it). 
 What
is eligible for trademark registration?
  • Device, brand, heading, label,
    ticket, name, signature, word, letter, numeral, or any combination
    thereof;
For
it to be eligible for registration it must contain or consist of at least one
of the following essential particulars –
  • the name of a company,
    individual, or firm, represented in a special or particular manner;
  • the signature of the applicant
    for registration or some predecessor in his business;
  • an invented word or invented
    words;
  • a word or words having no
    direct reference to the character or quality of the goods, and not being
    according to its ordinary signification a geographical name or a surname;
  • any other distinctive
    mark
 Do
you need to register a Trademark?
In
order to have exclusive use of your trademark, it is imperative that you
register it.
Unlike with copyright, protection
does not vest automatically in the owner. Not registering a trademark would
mean that you do not have exclusive right to use it.
If
someone were to use the same mark as you, the only recourse you would
potentially have would be an action for the tort of passing off. So, yes you
should register your trademark.
 A
trademark is valid for an initial period of 7 years, and then for further
renewable 14-year periods.
Patent
A
patent is an exclusive right granted for an invention, which is a product or a
process that provides a new way of doing something, or offers a new technical
solution to a problem.
What
a patent does is that it basically grants the inventor a temporary but
exclusive monopoly of the commercial exploitation of that invention. It gives
the inventor the right to exclude others from making, using, or selling the
claimed invention in that country without their consent, for the duration of
the patent.
 In
Nigeria, the primary legislation that governs the grant of patents is the
Patents and Designs Act. 
What
is eligible for Patent registration?
Patents
are granted for the invention of products or processes. However, for it to be
patentable, the invention 
  • Must be new,
  • Must have an inventive step
    that is not obvious to someone with knowledge and experience in the
    subject,
  • Must be capable of being made
    or used in some kind of industry and not be, a scientific or mathematical
    discovery, theory or method, a literary, dramatic, musical or artistic
    work, a way of performing a mental act, playing a game or doing business,
    the presentation of information, or some computer programs, an animal or
    plant variety, a method of medical treatment or diagnosis,
  • And must not be against public
    policy or morality.
 Do
you need to register a Patent?
Yes.
In order to be able to exclusively commercially exploit an invention, it must
be patented. The rights to a patent are vested in the “Statutory
Inventor” i.e. the first person to file and register the patent. However,
the law in Section 2(2) of the act enables the possibility of redress by
reassigning the rights to an invention, to a person who is adjudged to be the
true inventor whether or not he is the first to register a product.
 Once granted, a patent is
valid for 20 years.
Insurance
Getting
the requisite insurance coverage is an important part of setting up a business
in Nigeria. Below we will highlight a number of mandatory insurance policies
that businesses have to obtain in order to lawfully operate in Nigeria.
These
compulsory insurance policies are those that are mandated to be taken out by
the relevant laws for the protection of third parties and the general public.
  • Statutory Group Life Insurance
 Section
4(5) of the Pension Reform Act 2014 makes it compulsory for every employer to
maintain a Group life insurance policy in favour of each employee for a minimum
of three times the annual total emolument of the employee. If the employer
refuses or omits to pay for the policy, the employer is liable to make
arrangement to effect the payment of claims arising from the death of any staff
in its employment during such period
  • Builders Liability Insurance
 Section
64 (1) of the Insurance Act provides that during the construction of any building
with more than two floors, there must be insurance coverage protecting injury
or death to person, or damage to property caused by negligence.  
  • Occupiers Liability Insurance
 This
insurance is compulsory for all “public buildings” i.e. any building that is
not 100% used by the owner for residential purposes. These include tenement
houses, hostels, residential buildings occupied by tenants, lodgers or
licensees, and any other building to which members of the public enter and exit
for the purpose of educational, recreational or medical services (e.g. schools,
cinemas, hospitals, malls, petrol stations, etc).
  • Employee Compensation
    Contribution
 Section
33(1) of the Employee’s Compensation Act 2010 requires all employers to make a
minimum monthly contribution of 1% of the total monthly payroll of employees to
the Employee Compensation Fund. The Fund shall be used to provide compensation
to employees or their dependants for any death, injury, disease or disability
arising out of or in the course of their employment.
  • Motor 3rd Party Liability
 All
owners of Motor vehicle whether private or commercial vehicle are required to
insure their vehicles by virtue of Section 68 of the Insurance Act 2003. This
type of insurance provides compensation in the event of death, bodily injury,
and property damage to members of the public.  
Tax
Nigeria
is a Federal State, and as such all the different levels (Federal, State, and
Local) have taxing powers. For the purposes of this guide we will focus on
Federal taxes, as they are applicable in all states of the Federation.
The
Taxes and Levies (Approved List for Collection) Act, CAP T-2, Laws of the
Federation of Nigeria (“LFN”), 2004 provides a list of the taxes that each tier
of government can charge in Nigeria.
  • Companies Income Tax
 This
is a tax chargeable on all companies (other than Companies engaged in petroleum
operations) registered in Nigeria. It is an annual tax on the profits of
registered companies, which profits must accrue in, be derived from, brought
into, or received in Nigeria.
  • Personal Income Tax
This
is a tax payable by all individuals and registered businesses and partnerships
except those registered under Part A of Companies and Allied Matters Act 1990
(incorporated companies). The State Inland Revenue Service administers the tax.
  • Capital Gains Tax
This
is a 10% tax imposed on Capital Gains arising from a sale, exchange or other
disposition of properties known as chargeable assets. 
Capital
gains are the profits that an investor realizes when he or she sells the
capital asset for a price that is higher than the purchase price. Capital gains
taxes are only triggered when an asset is realized.
  • Education Tax
 This
is a tax chargeable on all companies registered in Nigeria at chargeable
profits as contribution to the Education Tax Fund. All registered companies in
Nigeria are required to pay a percentage of their assessable profit into an
Education Tax Fund. This fund is disbursed for the rehabilitation, restoration
and consolidation of educational institutions in Nigeria. The tax is charged at
2%
  • Withholding Tax
 This
is an advanced payment of income tax deducted at source of specific
transactions. This advance tax must be remitted to the relevant tax authority
for the latter to issue a withholding tax credit note or receipt. The recipient
of the income is entitled to utilise the withheld tax credit note or receipt,
against the final tax obligations.
  • Value Added Tax
This
is a tax payable by the consumer at 5% of the net value added based on eligible
transactions once consumed. It is a tax imposed on the supply of goods and
services.
  • Petroleum Profits Tax
 This
is a tax charged on the chargeable income for companies engaged in upstream
petroleum operations. The amount of tax to be paid varies, depending on the
commercial arrangement entered into between the Federal Government and the
company.
  • Stamp Duties
 The
Stamp Duties Act requires that all written instruments in Nigeria, that are of
a contractual nature, must be stamped before they can be admissible in any
judicial or quasi-judicial proceedings. Non-payment of stamp duties on an
instrument does not create criminal liability however it prevents the unstamped
document from being admitted in evidence in judicial or quasi-judicial
proceedings.
  • Information Technology Tax
 This
tax is payable by specified companies (GSM service providers and all
telecommunications companies, cyber companies and internet providers, pension
managers and pension related companies, banks and other financial institutions,
and insurance companies) who have an annual turnover of One Hundred Million
Naira (N100, 000,000).
The
companies are to pay a levy of one per cent (1%) of their annual profit before
tax to the National Information Technology Development Fund (“NITD Fund”). This
tax when paid is tax deductible for company income tax purposes.
*Below
are a couple of articles you might find interesting on registering for tax in
Nigeria:
 Employment
 There
are 4 key pieces of legislation pertaining to labour and employment rights,
which employers need to be mindful of. They are the Labour Act, the Employee
Compensation Act, the Pension Reform Act, and the Local Content Act.
  • Labour Act Cap L1 LFN 2004– This law lays out the protection of employees in
    Nigerian companies with respect to their remuneration, employment terms,
    etc.
  • Employee Compensation Act 2011 – This Law makes comprehensive provisions for payment
    of compensation to employees who suffer from occupational diseases or
    sustain injuries arising from accident at workplace or in the course of
    their employment.
  • Pension Reform Act 2014 – This Law governs and regulates the administration of
    the uniform contributory pension scheme for both the public and private
    sectors in Nigeria. The Law amongst other things establishes a
    contributory pension scheme, lays out the provisions on the rate of
    contribution, exemptions, and management of the scheme, and deals with the
    authorisation and regulation of Pension Fund Administrators (PFAs) and
    Pension Fund Custodians (PFCs).
Regulatory
Bodies
For
companies wishing to operate in certain sectors, there are specific Nigerian
agencies that have been set up by the Government to regulate the companies that
provide goods and services within those specific sectors.
These
agencies have powers to set out the requirements to operate in the relevant
sectors, guidelines for operations, and sanctions for non-compliance. A few of
them include:
  • Central Bank of Nigeria
  • Securities and Exchange
    Commission
  • National Agency for Food Drug
    and Cosmetics
  • Nigerian Communications
    Commission
  • National Office for Technology
    Acquisition and Promotion
  • Standards Organisation of
    Nigeria
  • Consumer Protection Council
This
is an abridged version of the article Doing Business in Nigeria: A Brief
Legal Guide
originally posted on our website.
If
you have found this guide helpful, then you should check out our website: www.lawpadi.com,
we have got loads of other useful articles for Nigerian businesses and
individuals.

DIRECTORS: LEGAL APPROACHES TO CONFLICTING CORPORATE INTERESTS by Adeleke Solanke

DIRECTORS: LEGAL APPROACHES TO CONFLICTING CORPORATE INTERESTS by Adeleke Solanke

Credits – Bloomberg.com


Introduction

Who
are corporate directors?
The
phrase “corporate director” is a combination of the words “Corporate” and
“Director”. The word “corporate” is defined as “of or relating to a corporation
especially a business corporation”. The word “director” is also defined as
“1. One who manages, guides or orders; a chief administrator. 2. A person
appointed or elected to sit on a board that manages the affairs of a
corporation or other organization by electing and exercising control over its
officers”.
From
the above definitions, a corporate director can be simply defined as one who
directs, regulates, guides or manages the affairs of a business corporation and
who sits on the board of such corporation.

In
some jurisdictions[3], one of the cardinal requirements for the formation of a
company is the appointment of person(s) to act as directors of the company by
the subscribers to the memorandum of association of the company. The names of
such person(s) are usually submitted as part of the requirements for the
registration of the company. The minimum number of directors vary from
jurisdiction to jurisdiction and after incorporation the first directors may be
changed, re-appointed or added to.
Directors
are not regular employees of a company but they are officers for the purpose of
making a company vicariously liable for their negligence while engaged in the
business of the company.[4]
Conflict within the Board
The
management of a company is vested in the board of directors collectively so as
to ensure the collective knowledge and wisdom of the board is available and to
ensure discussions take place before decisions are made. The board is made up
of different persons (natural and juristic) and it is reasonable to expect that
discussions will bring as many varying ideas and opinions to the fore.
Disagreements and conflicts may arise in the course of these discussions
therefore it is important for a company to have a systematic and efficient way
of resolving these conflicts because of the negative impact they may have on
the company.
A
board that has identified a pragmatic approach to resolving its conflicts may
discover that not only will they resolve disputes more efficiently but they
would also enhance their collaborative problem-solving and decision-making
capabilities. It is important that these conflicts are recognized, managed and
turned into a positive force for advancing the goals of an organization.
Conflicts
are more likely to occur between directors that were subsequently appointed
after the first directors. This may be because the first directors were
involved in the formation of the company and are likely to have similar goals
and approaches on the direction and management of the company. Subsequent
directors however come with different opinions from different backgrounds and
to mix these with differing temperaments may make conflicts inevitable. On the
other hand, conflicts between board members may also be a spill-over from the
existing and unresolved conflicts between sitting directors who may have been
influential in the appointment of the new directors to the board. The new
directors may have a prejudice against some directors as possibly influenced by
the sitting directors.
The
personality of certain board members may also make conflicts inevitable. In a
situation where a director has a domineering personality and as such appears to
be keen on influencing the decision of the board often, there is the likelihood
of a constant face-off between such domineering director and other members of
the board. A conflict may also arise within the board where a director with the
highest shareholding in the company appears to be keen on running the affairs
of the company parallel to the authority of the board.
Possible
conflict scenarios abound and arise in the normal course of running a company.
The need to resolve board conflicts quickly, efficiently and effectively cannot
therefore be over emphasized. Several methods of resolving board conflicts may
be adopted and each method may be more suited for peculiar scenarios. An
effective conflict-management plan must however begin with the board itself[5].
It is advisable that when boards are appointing new directors, people
management skills and the ability to respond constructively to developing and
full blown conflicts should be considered. Some of these essential skills
include but are not limited to: individual initiative, negotiation skills,
informal mediation skills, investigative skills, decision making ability and
people management skills.
The
sitting directors should take the pain of evaluating and appraising each
potential director to identify their traits, orientation, background and
overall nature. This will help expose the possibility of a conflict arising
between in-coming directors on one hand and between an in-coming director and a
sitting director on the other.
Alternative
Dispute Resolution (ADR) methods have been identified as one of the most
effective methods of resolving board conflicts mostly because it is interactive
and less divisive. The model more described as the Collaborative Problem
Resolution (CPR) which was developed based on the principles of ADR has been
identified as one of the most successful methods of resolving board conflicts[6].
CPR process helps in the early detection of conflicts and turning same into a
productive stimulant for growth. Through regular interaction, official or
unofficial, the body language of some board members can reveal a brooding
conflict and therefore can create an avenue to address same early. CPR is
designed to guide disputing participants through the initial stage of
negotiation to mediation, then to conciliation and finally to arbitration[7].
The
CPR process also involves the participation of a third-party outsider who would
help the disputing directors and the board as a whole in walking through
unresolved conflicts and arriving at a resolution. Collaboration, however, does
not mean all parties must agree but it behooves them to have a mutual
understanding towards a collaborative effort in the overall interest of the
company. Encouraging collaborative methods and efforts increases the
opportunity to solve problems quickly among those directly involved.
 

credits-fortune.com

It
is not unusual for the board to be divided on issues that they collectively
lack expertise on. Companies in the course of their usual business activities
are faced with making decisions on issues that boarder on specialized fields.
When such occasions arise, the board may have different opinions on how to
approach the issues and what steps to take. Each director’s opinion may be
based on limited experiences gathered overtime which may be similar to but not
identical with the scenario at hand. In such a situation, it is advisable that
the board considers adopting the expert-opinion approach.
The
appointment of an expert requires an independent and non-bias approach. If the
board decides to appoint an expert, such expert is best appointed based on
his/her expertise in the field and affiliation with the relevant professional
body to which the conflict relates.
The
expert opinion process is less divisive. The only shortfall however is that it
only resolves conflicts that are based on particular subjects and may not be as
effective for feuds that are more personal. It is also advisable that before
the board decides to go with the expert opinion approach, the board must agree
that the expert opinion will be final save for undue external influence from
the directors.
The
unique position board members hold in companies may require a more distinct and
discreet approach to resolving issues that may not be met through existing
conflict resolution structures within the company. A conflicting board may
require an independent, highly competent and confidential resource that can
help resolve a conflict discreetly and efficiently. In potent or sensitive
matters, it may be inappropriate for a director to seek advice from an internal
resource regarding problems with a fellow director[8]. These factors have added
more credence to the role of a board ombudsman in resolving board conflicts.
The
power of the board ombudsman stems from the individual’s credibility as an
independent and neutral resource as well as an objective person and he acts as
counselor, go-between, informal fact-finder, or upward feedback provider in the
service of the board. The board ombudsman fills a need by acting as a
confidential resource for informal, independent assistance and as a source for
shuttle diplomacy and should be available on as as-needed basis[9]. The
directors are given the option to decide when to seek the assistance of the
board ombudsman so that the internal conflict resolution machinery is not
completely jettisoned in situations where they may be applicable.
The
board ombudsman could also have broader ongoing responsibilities to the board
as one who can identify troubling patterns or trends developing within the
board and to advice the board on how to efficiently control such brooding
conflict.[10] It is however important that the ombudsman is independent of the
formal internal structures of the company.
To
achieve the desired result, the ombudsman needs to listen and understand issues
while remaining neutral with respect to the facts. The ombudsman must be
conscious not to judge or to decide who is right or wrong but to see issues
from the perspective of each individual. This is a critical step in developing
options for resolution.
Fiduciary duties of Directors
The
nature of the legal duties owed by directors to the company is a reflection of
the legal analysis of the relationship between the company and its directors
because directors are regarded as agents and trustees of the company. Directors
are required to exercise their powers with competence, reasonable skill and
diligence in the best interest of the company. This duty is usually described
as a fiduciary duty because the obligation to act in the best interest of the
company, at its core, is an obligation of loyalty, honesty and good faith.
Directors are trustees of the company and as such their fiduciary duty is
primarily owed to the company even though there are instances where the
fiduciary duty extends to shareholders. Directors must observe good faith
towards the company and directors who use their powers to obtain benefits for
themselves at the expense of the company cannot retain those benefits and must
account for them.
The
fiduciary duties of directors are not closed or limited. In some jurisdictions,
the duties are provided for by statutes while some are identified by case law
over time. Predominantly however, the clearly identifiable fiduciary duties of
directors include but are not limited to: the duty not to act ultra vires the powers
of the company, the duty not to act ultra
vires
the power given to them by the company, the duty to act bona
fide, the duty to act honestly in the interest if the company, the duty to
exercise their powers for the benefit of the company, the duty not to make
secret profit from the use of company assets, information or opportunities, and
the duty not to maintain a conflict between their personal interest and the
overall interest of the company.
In
the event of a breach of their fiduciary duties, many jurisdictions have
remedies available to the company and, in some instances, shareholders. These
remedies have overtime been backed up by statutory provisions, giving more
legitimacy to their application which may range from removal from office to
restitution.
Legal approaches to conflicting corporate interests
Directors
are obligated to act in the interest of the company, to ensure their interests
do not at any time conflict with that of the company and to have undivided
loyalty to do what is best for the company and its shareholders. This duty is
so important that it is reflected in statute in some jurisdictions[11].
Conflict of interest may take whatever form but at its core is the principle
that the interest of the company is paramount.
The
theory of corporate interest means that directors when making management
decisions are obligated to act in the best interest of the company, usually
commercially. This is more so as most companies are usually set up to make
profit.  At common law, transactions which were not ostensibly beneficial
to the company were set aside as being void as against the company and
transactions which though are outside the powers of the company and thus
outside the scope of the directors’ authority may be ratified by shareholders
thereby making same binding on the company because such transaction was to the
benefit of the company.[12]
A
director cannot use his position to further his or a third party’s interest at
the detriment of the company but it is not strange for directors to have
interests that have the potentials of conflicting with the interest of the
company and if not well handled may result in a breach of the director’s
fiduciary duties to the company. Directors may, for example, have interests in
an entity which has entered or is about to enter into a contract with the company.
A director may also, in his personal capacity, be interested in a business
venture which the company could pursue. It is also not strange for a director
to sit on the board of one or more companies, whether in the same line of
business or not, and the director may find himself in a dilemma as to which
company’s interest should come first in such situations. In whichever scenario
the director finds himself, he must not abdicate his duty to act in the best
interest of the company and must been seen to have acted fairly to the company.
In
resolving the issue of conflicting corporate interests some jurisdictions have
taken the extra step of addressing possible conflict situations through by
legislation. In the Federal Republic of Nigeria, for example, there is a
restriction on dual directorship for some statutory flavoured
appointments[13]while there is also a duty on directors interested in a
contract or a proposed contract to disclose the nature of their interests in
the contract to the board failing which they will be liable to pay a fine.[14]
The state of Nevada in the United States of America also addresses the issue of
conflicting corporate interest in the Nevada Revised Statutes 2010[15].
In
summary, the law[16] provides that a transaction is not void or voidable merely
because of the presence or involvement of an interested or common director and
went further to list instances where the exceptions may apply as summarized: 1.
Where the board, though aware of the interest of the director proceeds to approve
the transaction in good faith while excluding the vote of the interested
director. 2.  Where the shareholders though aware of the interest of the
director, approve the transaction in good faith by a majority vote, including
the vote of the interested director. 3. Where the common director himself is
unaware of the interest at the time the transaction is brought before the
board, and 4. Where the contract in itself is fair to the company as at the
time it was approved.
The
principles enunciated above[17] provide a guideline to managing instances of
conflicting corporate interest but the ultimate test is the fairness test. The
directors must be seen to have acted fairly and that the transaction was a fair
one failing which there would be a breach of their fiduciary duty to the
company. Furthermore, where a potential conflict situation arises, the
concerned directors are advised to voluntarily alert the board of the potential
of a conflict and then excuse themselves from participating in the transaction.
This eliminates the possibility of a breach their fiduciary duties.
In
a situation where a director takes steps which are perceived not to be in the
overall interest of the company, the transaction may be set aside for not being
fair. The company can also enforce the fiduciary duty of the director and seek
compensation for breach and the director may also be held personally liable.
Conclusion
The
interest of the company is paramount and overrides the interest of any other
stakeholder including directors. As such directors must ensure to act in good
faith and in the interest of the company at all times. Directors must also
realize that internal conflicts can cripple the company and stifle its growth
and must avoid such at all cost. Companies that wish to grow and stay relevant
in business cannot ignore the need to have an efficient conflict resolution
method in place but as earlier stated an efficient conflict management method
must begin with the board itself coupled with the genuine desire of its members
to put the interest of the company before theirs.
 By: Leke Solanke

Foot notes
[3]
The Federal Republic of Nigeria and the United Kingdom
[4]
Palmer’s Company Law, 24th Edition, 1987 page 875
[6]
Ibid. 4 pg 2
[7]
Ibid.
[8]
Ibid.
 [9]
Ibid
[10]
Some schools of thought have argued against this due to the need for the board
ombudsman to strictly maintain his independence and neutrality
[11]
a. Section 279 (3) of the Companies and Allied Matters Act, Laws of the
Federation of Nigeria 2004 (CAMA). b. Section 172, The Companies Act of the
United Kingdom 2006 Chapter 46.
[12]
http://en.wikipedia.org/wiki/Interest_of_the_company
[13]
Section 10 (2) of the Central Bank of Nigeria (CBN) Act 2007 prohibits a
Director of the CBN from holding a similar office in any government establishment
to the exclusion of private organizations.
[14]
Section 277 of the Companies and Allied Matters Act, Laws of the Federation of
Nigeria 2004
[15]
Section 78 (140) (1) and (2)
[16]
Ibid.
[17]
Ibid 14, 15,
16
Is Presumptive Tax the answer to Tax Evasion in Nigeria? by Sogo Akinola

Is Presumptive Tax the answer to Tax Evasion in Nigeria? by Sogo Akinola

Credits – Nigerianbestforum.com

Tax avoidance and evasion
have become the culture of some individuals and businesses operating in
Nigeria.One of the latest indexes, “Paying Taxes 2015”, which compares tax
systems across the world, ranked Nigeria the 3rd worst globally in
tax compliance. The assessment is based on three major indicators; total tax
rate, number of payments and compliance time.
The survey reveals that it
takes the Nigerian taxpayer an average of 908 hours to comply, followed by
Bolivia about 1,025 hours, and the worst being Brazil- about 2,600 hours. Out
of the 189 economies, Nigeria –Africa’s largest economy by GDP size, ranks low
at 179 with total tax rate at 32.7 percent.

With the decline of oil
revenues and the uproar for alternative sources of revenue and poor global
ranking of Nigeria’s tax compliance, The Federal Inland Revenue Service
(“FIRS”) must embrace the Presumptive Income Tax Assessment (“PITA”) into the
Nigerian tax system.
What is the Presumptive
Income Tax Assessment?
Presumptive tax can be
traced to Milan, as early as the 17th century when the value of land was used
to estimate tax instead of the actual production from that land. This
stimulated increased production on the land because taxpayers wanted to
maximise production so as to beat the system.
Presumptive income
taxation is primarily used in economies where ‘hard-to-tax’ taxpayers comprise
the majority of the population and administrative resources are scarce. In
these societies, most taxpayers lack integrity or financial transparency that
allows for effective taxation by the relevant tax authority. The result is that
governments estimate or presume the appropriate income on which taxes should be
levied.
In Ehtisham Ahmad&
Nicholas Stern‘s “The theory & practice of Tax reforms in developing
countries” 276 (1991) defines Presumption Tax system as the use of indirect
means to ascertain tax liability which differs from the usual rules based on
the taxpayers account.
The tax payer captured
under this regime are the ones who are hard to assess because they earn low
incomes; they sell their goods and offer services largely for cash which makes
it impossible to apply withholding tax; they are compelled by non-tax reasons
to keep books of accounts and their number is too great which renders it
impossible to intensively scrutinize a reasonable fraction of them, they could
be mostly classified in the informal sector. This makes it easy for such a
tax-payer to conceal their incomes.
Presumptive tax system
must conform with the five major canons of a good tax system. These include;
certainty, Economy, convenience, fairness/equity and simplicity.
Many scholars try to
derive the legality of presumptive tax system from the provisions of Section 65
of the Companies Income Tax Act which empowers the Tax Authority to use the
best of its judgment to assess a company but there is no expressly stated
provisions for the system in any tax regulation or Act in Nigeria.
What do we stand to gain?
·       
It simplifies tax administration and
improves compliance by small scale taxpayers.
·       
It minimises tax evasion and avoidance.
·       
It improves tax assessment.
·       
It minimises the adverse effects of
progressive taxation.
Likely challenges?
·       
Potential Taxpayers  might not be willing to pay presumptive tax
because they think they pay many more other taxes and levies such as toll gate
fees, and other.
·    Potential taxpayers “associations” need to
be involved in the process of coming up with tax levels for purpose than if the
tax rates are imposed on them.
·   
The usual taxpayers may result to
presumptive tax because the costs of maintaining proper books of accounts from
which to base normal income tax would be very high and so presumptive taxation
is a cheaper option.
CONCLUSION

Presumptive taxation is undoubtedly a way of curbing
widespread tax avoidance without employing excessive government resources
because it addresses the concerns of both the taxpayer and the tax authority.
The chances of the system working in Nigeria depends on how the relevant tax
authorities apply it.
HOW TO REMOVE A MEMBER OF THE NATIONAL ASSEMBLY

HOW TO REMOVE A MEMBER OF THE NATIONAL ASSEMBLY


Credits – Naij.com

Members of Jude’s
community are not happy with Senator Bala and Honourable Tiwa, they believe
that the politicians who rode to success at the last elections on the backs of
the people’s vote have abandoned the agenda of the constituency and have begun
to seek only personal gratification to the detriment of the people. Now the
community will like to recall the Senator and Honourable.
Ever wondered what you can
do if you are not satisfied with the conduct of your constituency’s
representative in the National Assembly? I mean your Senator or Honourable? What
if you elected him or her to the noble position but has now decided to work
contrary to the interest of his or her  constituency, what do you do? Do you have to
wait till the next elections before you can sack or recall your representative,
the answer is no.

The Constitution in
Section 69 contains the provisions on how you can recall your Senator or member
of the House of Representatives. It provides that – 
69. A member of the Senate or of the House Representatives
may be recalled as such a member if –
(a) there is presented
to the Chairman of the Independent National Electoral Commission a petition in
that behalf signed by more than one-half of the persons registered to vote in
that member’s constituency alleging their loss of confidence in that member;
and
(b) the petition is
thereafter, in a referendum conducted by the Independent National Electoral
Commission within ninety days of the date of receipt of the petition, approved
by a simple majority of the votes of the persons registered to vote in that
member’s constituency.
Though the above provision
of the law is contained in the constitution, it has never been used as no
senator or house of representatives member has ever been recalled by his constituency
but maybe there will be a first very soon. The procedure seems cumbersome as it
may be difficult to get the required signatures to recall a member of the
National Assembly especially as many politicians have been used to use violence
and bribery to achieve their aims.
Adedunmade Onibokun
@adedunmade
HOW TO AMEND THE NIGERIAN CONSTITUTION

HOW TO AMEND THE NIGERIAN CONSTITUTION


Credits – Naij.com

Usman could not believe
his ears as he listened to the morning news update in his Toyota Camry while
driving to drop the kids off in school. According to the reporter, the Senate would
begin the process of amending the Constitution to include a clause granting
immunity from prosecution to the Senate President, the Speaker of the House and
the Chief Justice. Usman immediately felt bitter, he and his friends had always
concluded that the Senate only thought about themselves and never about the
common man. They had always argued that there were a number of provisions in
the Constitution which needed to be reformed to make the law more agreeable
with the changing society but granting immunity to more public officials was
not in their books, they were rather of the opinion that the immunity clause
should be totally removed from the Constitution. 

On arriving, at the
office, Usman decided to place a call to his lawyer Felix to inquire what the
procedure for amending the constitution was. Felix informed Usman that the procedure
for amending the Nigerian Constitution could be found in Section 9 of the
Constitution itself. It states that;
9. (1)
The National Assembly may, subject to the provision of this section, alter any
of the provisions of this Constitution. 
(2)
An Act of the National Assembly for the alteration of this Constitution, not
being an Act to which section 8(State creation & boundaries) of this
Constitution applies, shall not be passed in either House of the National
Assembly unless the proposal is supported by the votes of not less than two-thirds
majority of all the members of that House and approved by resolution of the
Houses of Assembly of not less than two-thirds of all the States. 
(3)
An Act of the National Assembly for the purpose of altering the provisions of
this section, section 8 or Chapter IV(Fundamental Human Rights) of this
Constitution shall not be passed by either House of the National Assembly
unless the proposal is approved by the votes of not less than four-fifths
majority of all the members of each House, and also approved by resolution of
the House of Assembly of not less than two-third of all States. 
(4)
For the purposes of section 8 of this Constitution and of subsections (2) and
(3) of this section, the number of members of each House of the National
Assembly shall, notwithstanding any vacancy, be deemed to be the number of
members specified in sections 48 and 49 of this Constitution.
The above serves as the
provision of the Constitution regarding its alteration. It specifically states
the number of members of the Senate and the State House of  Assembly need to support a proposal to amend
the Constitution before it could be rightfully altered. 
Usman was quite surprised
to find out that altering the Constitution was quite a cumbersome process and
was secretly hoping that the Senate was not successful in its new bid to
include an immunity clause for any more public officials and if the Senate insisted
on the proposal, he will be the first to start a petition asking that the
representatives of his constituencies be recalled.
Adedunmade Onibokun Esq
@adedunmade