Introduction:
The 21st Century is unarguably a more improved business world, where all facets of human lives encourage entrepreneurship and business ventures. The impact of which is enormous and can no longer be ignored for the huge contributions to the daily business activities. This modern era has also witnessed a paradigm shift in the business of products and services from the traditional means to an online platform embedded with a global audience. This is because the traditional marketing is failing to reach audiences like it used to. The overriding heft and universality of technology guarantees that business of products and services get to individuals at their fingertips, a click away on the smart phones and gadgets.
In all of these, the law still stands as the paramount agent and instrument of social control, which seeks to control not only human beings1, but also the business space, some of which are directly by the enacted laws or indirectly by regulatory agencies created by the laws. Regulatory agencies, bodies or iinstitutions function to ensure conformity and compliance to the laws and regulations in force.
Alexander Hamilton, an American military officer, and statesman2, goes on to point out that3 an inviolable respect for the Constitution and Laws — the first growing out of the last, is the most sacred duty and the greatest source of security. This also extends and applies to the security and smooth operation of business ventures in the business space and globe.
The rule of law is the bedrock4 of any and every society and one which confirms a proposition in our society of the way things are done. It amplifies the basic principle that the law applies equally to every person and entity irrespective of their status or standing. For this study therefore, the renowned concept of rule of law will be in view as to business and legal/regulatory compliance, as it as well stands as bedrock of sustainable development to any thriving business. When the necessary compliance is adhered to by business entities, it brings sustainable development to such entities.
The business space is regulated by certain requirements to be met for the effective operation of business in Nigeria and there are creation of statutes, enabling laws and regulations that imposes various compliance, failure of which, such defaulting business face the risk of being sanctioned by the relevant authorities regulating it. Sanctions for non-compliance could be in form of fines and penalties which could, in turn, affect the revenue made by the defaulting business entity; have a negative impact on the cash flow of the business and disruption of the business activities.
Whilst business entities and corporations may initially be tempted to deny the effect or status of due compliance with the laws, guidelines and regulations, the effects are more felt and noticed in breach more than in enforcement. Non- compliance can bring about bad publicity or image to the business, thereby affecting the brand integrity. Default may also lead to revocation and withdrawal of the license, permits, or grants issued by relevant authorities in the applicable sector of the business venture.
This study adorns legal and regulatory compliance as an intentional function that forms an integral part of the way business is operated without any or reduced management risk, staying true in compliance with the operative and relevant statutory provisions.
Legal/Regulatory Compliance:
Legal compliance is the process by which a company or business entity adheres to the complex rules, policies and procedures that regulate business practices in a particular jurisdiction. It involves knowing and understanding the legislation that applies to the organization and demonstrating that the business and its entities always comply.5 A foremost responsibility of any and every business entity is to ensure, promote and facilitate legal compliance. This is to ensure compliance with the laws and regulations set out for a business to operate in good standing within a particular jurisdiction and implementing sound internal compliance system imposed in accordance with rules and processes.
An effective legal compliance mechanism relies heavily on co-operation and support of the entire business entity on the law and best legal practice, to develop the procedures, policies, and systems to ensure that the company operates within clearly defined parameters, implementing effective compliance policies, legal orientations, staying informed of the various regulations with which there must be compliance; andidentifying issues that may turn into potential violations as well as procedures in place to address the issues.6
Although legal compliance continues to be complex business challenge, as new laws and regulations are introduced but a proactive strategy and approach should combine an analysis of the legal framework together with an assessment of the systems and processes which can help to ensure compliance. Robust regulatory and compliance structures can help to ensure business entities are not subject to potential hurdles and penalties.
Although the process by which the legislature turns a bill into a law and the enforcement ensured by the executive is pretty well-known and will not be repeated here, it should be pointed out that while the enabling laws or creating statutes may give direct provisions to business entities by its letter of statute on what to do and what constitutes default, such laws or statutes may also establish a regulatory ministry, agency, commission, or body which is to regulate, guide and enforce due compliance from the concerned business subjects.
Moreover, while the Legislature at any tier of government is vested with the powers of making any law or regulation, such laws can also vest authority on a body or commission to make further regulations, guidelines, or operational frameworks from time to time as may be deemed necessary. Be it as it may, if there is a regulation, guideline, or framework, it is in the best interests of any business entity who seeks to thrive well and unhindered to ensure nothing less than full compliance.
From the foregoing, it cannot be overemphasised that legal and regulatory compliance is an intentional function7 that forms an integral part of the way business is operated in Nigeria.
Legal Framework For Business Operations In Nigeria
Whilst the Constitution of the Federal Republic of Nigeria8 viably serves and stands as the grundnorm, the Companies and Allied Matters Act (CAMA) 2020 No. 3 is the primary law governing companies and business operations in Nigeria, dealing with the various business structures and operations and it is being regulated by Corporate Affairs Commision (CAC)9. Business operations in Nigeria, within the purview of the Companies and Allied Matters Act 2020 are permitted to operate as either a company10, limited liability partnership11, limited partnership12, business name13, or incorporated trustees.14 Accompanying the Companies and Allied Matters Act 202015 so closely is the Companies Regulation 2021.16 The compliance of business operations with CAMA, the Companies Regulation 2021 and such other regulations is ensured and enforced by CAC17.
A readily referred framework and regulatory agency in the provisions18 of CAMA, 2020 is the Investments and Securities Act (ISA) 200719 and Securities and Exchange Commission (SEC)20 respectively. The ISA deals with the enlarged powers and functions of the SEC over the capital market and set of new market infrastructures and wide-ranging system of regulation of investment and securities business in Nigeria, especially in Mergers, Acquisitions and Take-Over, and collective Investment Schemes. It must however be pointed out that there are plenitude of regulations, codes, and guidelines21 that are to be complied with by any concerned and related business operation.
For some laws, they are easily and readily noticed by business operations but for some others, they are peculiar to certain sectors and such laws and regulatory bodies only deal with the peculiarly related business operations. Some of the specific regulatory laws and sectors include but not limited to: Central Bank of Nigeria (CBN) Act 2007 establishing the Central Bank of Nigeria, Investments and Securities Act (ISA) 2007 establishing Securities and Exchange Commission (SEC), Nigerian Communications Act (NCA) 2003 establishing Nigerian Communications Commission (NCC), National Office for Technology Acquisition and Promotion (NOTAP) Act Cap N68 LFN 2004 establishing the National Office for Technology Acquisition and Promotion (NOTAP), Standards Organisation of Nigeria (SON) Act No.14, 2015 establishing Standards Organisation of Nigeria (SON), Federal Competition and Consumer Protection Act, (FCCPA) 2018establishing the Federal Competition and Consumer Protection Council (FCCPC), National Agency for Food and Drug Administration and Control Act Cap N1 (LFN) 2004 establishing National Agency for Food and Drug Administration and Control (NAFDAC). The regulatory agencies by their enabling laws have powers to set out the requirements for business operations to operate in the relevant sectors, guidelines for operations, and sanction for non-compliance.
The Nigerian business environment also affords regulation and protection to business interests and operations as well in relation to intellectual property22, insurance23, tax24, employment25, inter alia. In addition, law as a social engineering tool is ever dynamic in its nature and adaptability to human society, likewise as it applies to business environment. Like in other jurisdictions, it also regulates emerging areas such as digital marketing either by a combination of several statutes or a sui generis legislation. For instance, data protection in Nigeria is regulated principally by the Nigeria Data Protection Regulation which is subsidiary legislation to the National Information Technology Development Agency Act, the Constitution, Freedom of Information Act, Child's Right Act and other relevant laws and compliance is principally ensured by the National Information Technology Development Agency (NITDA).
Undoubtedly, business forms an essential feature of any thriving society and with the rise of technology and the corresponding emergence of e-commerce and electronic securities trading, the world seems not to be able to do without business ventures, culminating in business operations, which have risen to greater prominence in the contemporary world. To maximally ensure, promote and simplify effective business operation in this emerging world therefore, business operators and managers must submit their business ventures and operations to the law in force and ensure compliance with the laws and regulations guiding their business operations.
The law is unique both in substance and procedure. Its prescriptions are usually backed with sanction, regulates most, if not all aspects of a society and helps to maintain acceptable best practices. Administrative regulatory agencies in Nigeria like the NAFDAC, have done a great job by putting a lot of counterfeit drug producers under check. The Nigerian Customs Service also ensures that fake products are not imported into the country by seizing fake goods on arrival at the Sea Ports. This is done in conjunction with the Nigeria Ports Authority. The Standards Organization of Nigeria and the Consumer Protection Council of Nigeria have tried in ensuring that standards of goods produced are of good quality, merchantable and safe for human use. The National Electricity Regulatory Commission also ensures that there is improvement in electricity supply now than in the past few years. The Central Bank of Nigeria is there to monitor and control the activities of banks, giving them guidelines for making loans available, The Corporate Affairs Commission ensures that every legitimate business being carried out must be registered with a known address. The Nigerian Communications Commission ensures that the various telephone service providers make their calling rates affordable with a reduction in call drops and network problems.
Without a proper understanding through legal and regulatory consultations and advisories, business operators would be in the dilemma of what laws, regulations, and guidelines they are to comply with. A failure to provide the appropriate amount of attention to legal and regulatory compliance program can lead to a company not only falling foul of regulators but also facing fines, censures, reputational damage and, in some instances, the prospect of punitive measures on directors and individuals serving as the face of the business venture. Organizations can mitigate these risks when an effective compliance program is in place. It is pertinent to state that individuals and companies engaged in business operations should engage the necessary legal and regulatory compliance, as effective business is hinged upon this.26
Footnotes
1. Chigozie NWAGBARA, LL.M The Efficacy of the Law as an Instrument of Social Control Journal of Business & Law Research 3(1):44-52, Jan-Mar 2015 Seahi Publications, 2015 www.seahipaj.org I509, International SSN: 2360-8986, accessed through www.seahipaj.org
2. www.en.wikipedia.org/wiki/Alexander_Hamilton
3. Alexander Hamilton, "Tully No. 3," published in the American Daily Advertiser, August 28, 1794, found at https://founders.archives.gov/documents/Hamilton/01-17-02-0130
4. https://en.wikipedia.org/wiki/Rule_of_law.
5. Jessica Donohue, What Is Legal Compliance? 10 January, 2023, www.diligent.com/insights/legal-compliance/steps-evaluating-legal-compliance/
6. Ibid.6
7. www.lexology.com/library/detail.aspx?g=ae85093f-7355-4ec0-a1b4-33f7e05bb8ae#:~:text=Regulatory%20compliance%20is%20an%20intentional%20function%20that%20forms,it%20must%20comply%20with%20the%20above-highlighted%20statutory%20provisions.
8. 1999 CFRN, as amended with 2023 alterations.
9. Section 1 of CAMA, 2020. Nigerian Corporate Registry, www.cac.gov.ng
10. PART B, CAMA, 2020.
11. PART C, CAMA, 2020.
12. PART D, CAMA, 2020.
13. PART E, CAMA, 2020.
14. PART F, CAMA, 2020.
15. Section 8 (d) CAMA, 2020.
16. Regulation made under CAMA, 2020.
17. Ibid. 15
18. Section 8 (2) CAMA, 2020
19. CAP. 124, LFN, 2004.
20. Section 1 of the ISA, 2007, ibid.
21. www.sec.gov.ng/regulation/rules-codes/; www.sec.gov.ng/#; www.sec.gov.ng/?page_id=15#
22. In the categories of copyright, trademark and patents, Copyright regulated by the Nigerian Copyright commission, Trademarks, Patents and Designs regulated by the Commercial Law Department of the Registry Federal Ministry of Industry, Trade and Investment.
23. Insurance is also an important part of setting up a business in Nigeria as businesses are required to have insurance covers to be taken out under the relevant laws and regulations.
24. Companies Income Tax, Personal Income Tax, Value Added Tax, etc.
25. Pension reform Act, 2014, Section 4(5) PRA Statutory Group Life Insurance employer to maintain a Group life Insurance Policy
26. https://www.harlemsolicitors.com/
Originally published June 17, 2023
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.