Background
Like several other countries, there is a constant need to improve Nigeria's business climate and of doing business in line with emerging trends in regional and global markets. This is further accentuated by the drive to explore the enormous potential of the Nigerian economy and attract more investments. Responsively, the Nigerian government, in recent times, has attempted to remove administrative bottlenecks and create new opportunities for businesses to thrive through the enactments of industry-specific and generic legislations, such as: the Finance Acts, Petroleum Industry Act 2022, Companies and Allied Matters Act 2020, Federal Competition and Consumer Protection Act, 2019; Nigeria Startup Act 2022, among others.
Consolidating on previous effort aimed at improving the ease of doing business in Nigeria, the Business Facilitation Bill 2022 [now Business Facilitation (Miscellaneous Provision) Act, 2022] was recently signed into law. While this is historic as it marks the first of its kind in the country, it is necessary to note that the new law amends 21 business-related existing laws with proactive steps to remove bottlenecks in doing business in Nigeria.
The Business Facilitation (Miscellaneous Provision) Act, 2022 ("the BFA") was originally an initiative of the Presidential Enabling Business Environment Council (PEBEC). Notably, the BFA enjoyed popular support and gained inputs from a wide spectrum of stakeholders such as: the Nigerian Economic Summit Group (NESG), the Federal Ministry of Justice, the Nigerian Bar Association Section on Business Law (NBA-SBL), the National Assembly Business Environment Roundtable (NASSBER), the National Assembly, relevant Federal Ministries, Departments and Agencies of government, and the Nigerian Association of Small & Medium Enterprises (NASME).
Given the collegial approach taken in the development and eventual passing of the BFA, the amendments and introductions easily herald new norms for corporate and commercial business engagements in Nigeria. No doubt, there is plenty for businesses to look forward to and adjustments to be made where necessary. In the succeeding paragraphs, we will be examining the new amendments or provisions introduced under the BFA as they are key for businesses to take note and adapt to.
1. Reforms in Engagement with Ministries, Departments and Agencies ("MDA") of the Federal Government
- Transparency Requirements:
The BFA requires each MDAs of the federal government to publish on its website, up-to-date lists of all processes, documents, fees and timelines required for processing applications, approvals, registration, certification and other product and services that the MDA offers.1 MDAs are obliged to make this publication within 21 days from the commencement of the BFA. This is particularly important for tracking development, easing compliance obligations and making business plans with regards to timelines and fees required for regulatory compliance. - Default Approvals
With the enactment of the BFA, the days of vagueness over the status of applications owing to silence from regulators are over. That is, where a regulator or agency fails to communicate approval or rejection of an application within the stipulated timeline as published in the list required to be on its website, then such application will be deemed approved and granted.2 Where an application is deemed granted in light of this, the applicant may notify the relevant MDA for the issuance of a certificate or document as evidence of grant of the application3 The relevant MDA then has 14 days of receipt of the applicant's notice to oblige the applicant's request. Interestingly, the BFA equally provides that such notification from the applicant can on its own be construed as a certificate or document in evidence of grant.4 - Recognition of Electronic Acknowledgment
In addition to the physical mode of acknowledgment, the BFA provides that an electronic copy of an application can on its own equally suffice as proof of date of submission of applications. This electronic proof can be used in determining the timeline of the application.5 - Mandatory Requirements of Service Level Agreements with
MDAs
MDAs are required to prepare Service Level Agreements (SLAs) which will provide clarity on the functions and operational procedures of such MDAs. In accessing services of MDAs of the federal government, private businesses must take note of certain provisions that are now required to be contained in the Service Level agreements of the relevant MDA. Such service level agreements must contain:6 (a) a list of products and services rendered; (b) documentations requirements; (c) timelines for processing applications; (d) applicable fees; (e) a summary of the procedure of application; (f) redress mechanisms; (g) and such other requirements as the MDA may consider. - Prohibition of Touting in Port Operation
Under the BFA, the act of carrying out unlawful activities for personal gain (otherwise known as Touting) is expressly prohibited at ports in Nigeria,7 It follows that solicitation or the receipt of bribes from passengers or other port users would amount serious punitive measures such as removal from duty post, disciplinary measures and liability to criminal proceedings.8 Furthermore, there is an obligation on the staff of the Federal Airports Authority of Nigeria (FAAN), Aviation Security (AVSEC) and Nigeria Ports Authority to be properly identified in their uniforms while they are on duty.9 While for staff who are off-duty are mandated to stay away from the ports, save for express approval of the relevant MDA.10 - Single Customer Interface and Single Interface
Station
To ease navigation of and access of customers, all relevant MDAs are required to merge respective departure and arrival interfaces into a single customer interface.11 Also, the relevant MDAs in the Nigerian port authority must harmonize their operations into one single interface.12 This will enable customers or other port users will be able to at a one-stop center access all services that are available at the port. - Automation of All Application Processes at The
Corporate Affairs Commission
The BFA mandates the Registrar-General of Corporate Affairs Commission to fully automate all applications processes at the Commission.13 This is to be done within 14 days of Commencement of the Act.14
2. The Companies and Allied Matters Act 2020
- New Exemption for Foreign Companies from
Registration
The BFA adds to the list of foreign companies that can enjoy exemption from registration before carrying on their business in Nigeria. Prior to the BFA, foreign companies could enjoy such exemption as provided for under the Companies and Allied Matters Act,15 granted by the Minister of Industry, Trade and Investment16 or in line with the provision of a Treaty which Nigeria is a signatory to.17 Now, the BFA adds that foreign companies could equally be exempted from registration where an Act of the National Assembly provides for same.18 - Alterations to Mode of Increasing Share
Capital
A company now has two modes of increasing its share capital – either by the general meeting or by a resolution of the Board of Directors.19 - Pre-Emptive Right of Existing Shareholders on New
Allotment of Shares
As against the provisions of CAMA which gives blanket application of pre-emptive right of existing shareholders on new allotment of shares to all companies without any distinction,20 the BFA now stipulates that the said right only applies to private companies and the shareholders of private companies have 21 days to communicate their interest. Otherwise, the offer would be deemed declined and such new allotment of shares can proceed.21 Consequent upon this, public companies are no longer required to abide by pre – emptive right in allotting new shares. - Authority to Allot Shares of a Private
Company
The BFA overhauls the provision of CAMA22 with respect to the authority of the Board of Directors of a private company to allot shares. The new law stipulates that before Board of Directors of a private company can allot shares, such power must have been earlier granted by the Company's members at the general meeting or contained in the Company's articles of association.23 - New Time-limit for Private Companies to Register New
Allotment of Shares
Private Companies no longer have one month to file returns and deliver necessary documents to the Corporate Affairs Commission (CAC), in order to register new allotment of shares, as provided for under CAMA.24 The new amendment under the BFA puts the time limit for this at 15 days within which the allotment was done.25 - Issuance of Electronic Share
Certificates
In similar fashion as obtainable in the capital market, the BFA gives legal backing for companies to issue electronic share certificates to newly acquired shares. This, however does not extinguish the issuance of physical certificates. Either of the two would suffice.26 While this development comes with the attendant ease of issuance, access and protection, the electronic certificates must comply with features of a share certificate as outlined under CAMA.27 - Priority of Floating Charge over Fixed
Charge
By default, fixed charge will take priority over floating charge, save for instances expressly provided for under the CAMA. While section 204 of CAMA gives exception to such instances and states when a floating charge would generally have priority over a fixed charge, the provision of section 207 of CAMA makes no such exception in relation to preferential payment to debenture holders in certain cases. However, under the BFA, such right of a holder of a fixed charge would be subject to the exceptions as provided under section 204 of CAMA.28 By implication, a holder of a floating charge may in all circumstances have priority over a fixed charge except where the terms of such floating charge expressly bars the company from granting any subsequent charge with priority over the floating charge and the person in whose favour such later charge was granted had notice of that prohibition at the time when the charge was granted to him. A subsequent holder of a fixed charge in this situation would be deemed to have notice of such prohibition in the floating charge where a notice indicating the existence of such prohibition is registered with the Corporate Affairs Commission. - Definitions of Terms as They Relate to Creation and
Registration of Charges
The BFA adds to the list of defined terms relating to charges under section 222 of CAMA. "Cash" is widely defined as cash in any currency; financial collateral means either cash or financial instruments, and financial instruments include: shares, bonds or any other securities which are normally dealt in; security interest means pledge, mortgage, fixed charge or charge created as floating charge.29 - Electronic General Meetings
Contrary to the provisions of CAMA which restricts electronic general meetings to private companies,30 both private and public companies can now hold electronic general meeting as provided for under the BFA.31 - Electronic Notice of Meeting
With the deletion of subsection 244(3) of CAMA and insertion of a new 244(1) of CAMA, the BFA allows electronic mode of delivery as a means (and no longer an additional option) of serving notice of meeting on a member of a company.32 - Electronic Voting
The BFA gives the option of electronic voting as an alternative to show of hands where a resolution is to be put to vote.33 - Number of Independent Directors of a Public
Company
Under the CAMA, the requisite number of independent directors for a public company is three (3).34 However, this is no longer the law, as the BFA stipulates that such number of the independent directors should be 1/3 of the total number of the public company's directors.35 Consequent amendment in this respect is that nomination of candidates for the board which would comprise majority of members of the board, shall be minimum of 1/3 of number of persons that would be independent directors.36 - Disqualification for Directorship on Grounds of
Previous Removal
Pursuant to the BFA, before a person can be disqualified from being a director on the grounds of previous removal, such removal must have been consequent upon fraud, dishonesty or unethical conduct.37 It is also noteworthy that suspension from the position of a director is no longer a ground for disqualification for directorship.38 - Time-frame for The Resignation from Multiple
Directorship
A person can be a director in more than one company at the same time. However, a person cannot be a director in more than five public companies at the same time. In the event that a person is already a director in more five public companies, then such person has only until the next annual general meeting of the company or after the expiration of two years from the commencement of the BFA to resign in all such other companies in excess of five.39 - New Form for Financial Statements
The financial statements of a company are no longer required to comply with the requirements of the First Schedule to the CAMA. Rather, such financial statements should only comply with the requirements of the accounting standards prescribed by the Financial Reporting Council of Nigeria.40 - Determination of the Status of a Small Company for The
Purpose of a Subsequent Financial Year
Before a company can be accorded the status of a small company for a subsequent financial year, such company must have met the conditions of a small company both in the preceding year and in that year.41 - Definition of Inability to Pay Debt as Condition for
Winding up by the Court
NGN 200,000 as contained in section 572(a) of CAMA is no longer the prescribed debt that would warrant winding up by the court. Rather, the amount is now to be determined by the Corporate Affairs Commission.42 At present, no CAC regulation or guideline addresses this. We therefore await the determination of the new threshold by the CAC in light of the provision of the BFA. - Relevant Time for Determining Fraudulent
Preference
In determining the period for evaluating when a company would be deemed to have given fraudulent preference to a person, the BFA stipulates a 2-year time frame from the onset of insolvency.43 - Definition of an Insolvency Practitioner
The BFA deletes the definition of an insolvency practitioner under the interpretation provisions of CAMA.44 By implication, the qualification of an insolvency practitioner is not limited to being a legal practitioner within the meaning of the Legal Practitioners Act or being a member of the Institute of Chartered Accountants of Nigeria or such other professional bodies of accountants as are established by an Act of the National Assembly. Rather, we are now left with the qualifications of an insolvency practitioner as spelt out under section 705 of CAMA, which are; (a) a degree in law, accountancy or such other relevant discipline from any recognised University or Polytechnic; (b) a minimum of five years post qualification experience in matters relating to insolvency ; (c) authorization to so act by virtue of a certificate of membership issued by Business Recovery and Insolvency Practitioners Association of Nigeria (BRIPAN), or membership of any other professional body recognised by the Commission, being permitted to act by or under the rules of that body ; and (d) an authorisation granted by the Commission; and such other additional qualifications the Commission deems necessary to prescribe in its regulations.
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Footnotes
1. Section 3, the BFA.
2. Section 4(1), BFA.
3. Section 4 (5), the BFA.
4. Section 4(6), the BFA.
5. Section 4(4), the BFA.
6. Section 6(1), the BFA.
7. Section 7 (1), the BFA.
8. Section 7 (8), the BFA.
9. Section 7 (2), the BFA.
10. Section 7 (3) the BFA.
11. Section 7 (9), the BFA.
12. Section 7 (10), the BFA.
13. Section 8, the BFA.
14. Ibid
15. See section 78 (3)(a) of Companies and Allied Matters Act. 2020 ("CAMA")
16. See section 80, CAMA.
17. See section 78 (3) (b), CAMA.
18. Section 2, Part I of the Schedule to the Act.
19. Section 3, Part I of the Schedule to the Act.
20. See section 142, CAMA.
21. Section 4, Part I of the Schedule to the Act.
22. For the provisions under CAMA, see section 149, CAMA.
23. See section 5, Part I of the Schedule to the Act.
24. See section 154 CAMA
25. See Section 6, Part I of the Schedule to the Act.
26. See section 7, Part I of the Schedule to the Act.
27. See section 171, CAMA.
28. See section 9, Part I of the Schedule to the Act.
29. See section 10, Part I of the Schedule to the Act.
30. See section 240(2), Part I of the Schedule to the Act.
31. See section 11, Part I of the Schedule to the Act.
32. See section 12, Part I of the Schedule to the Act.
33. See section 13, Part I of the Schedule to the Act.
34. Section 275(1), CAMA.
35. See section 14(a), Part I of the Schedule to the Act.
36. See section 14(b), Part I of the Schedule to the Act.
37. See section 15, Part I of the Schedule to the Act.
38. Ibid
39. See section 16, Part I of the Schedule to the Act.
40. See section 17, Part I of the Schedule to the Act.
41. See section 18, Part I of the Schedule to the Act.
42. See section 19, Part I of the Schedule to the Act.
43. See section 20, Part I of the Schedule to the Act.
44. Section 21, Part I of the Schedule to the Act deletes definition of "insolvency practitioner" under section 868, CAMA.
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