Legal & Insurance

22
Aug

What Next After I Register My Company? 11 Simple Tips to Grow Your New Company)

rrrIt has been said that “no business can succeed in any great degree without being organised”- this is the truth that many failed Businesses have not mastered.

Unfortunately too, it is not all registered companies that have had the opportunity of being advised on the things that every company must take note of after becoming registered.

Many of my business students have been sparked to start their company as soon as they understood the details needed to start one, but not all of them waited to find out the details that are needed to give their company that solid foundation that will give them an organised outlook.

The tips that I will give to you in this article may be totally new, while some will come to you as a reminder, if you will put everything in place to comply with them, they will strengthen your hands to become a master Potter modelling the business ideas that you want and growing it into a reality.

Comments are welcome, and questions may be directed to my email address eyitayoogunyemi@gmail.com. Enjoy!

TIP NO 1:

As soon as you register your company, purchase a standard notebook to record the details of the members of your new company.

Put in the layman sense, your members are otherwise known as the co-owners of the company.

You can title the notebook as “Register of Members of ……. (Insert your company’s name)”.

The records of each member should include their names, address, extent of ownership in the company, date on which each person became a member, date on which the person ceased to be a member (i.e. where the person has ceased to be a member).

There are other technical details that you must bear in mind. For instance, the kind of entry that will be in your Register of Member for a Company Limited by Shares may be affected by whether or not each member has paid for the unit of shares owned by him/her. In the event too that you have converted your shares into stock with proper notice to the Cooperate Affairs Commission, your Register is supposed to show the details of the stock and not shares.

You must take inventory of the members that started the company within 28 days of registering your company, and you must take inventory of all subsequent members within 28 days of the conclusion of agreement for them to become members. Where a person ceases to be a member, you must take record of that fact within 28 days too.

You may decide to keep your Members’ Register at your registered office, or in another office of your company (if that is the place where you make up the content of the Register), otherwise, you can keep it with your Legal Adviser/ Solicitor particularly if he/she is responsible for using his/her professional competence to manage the Register on behalf of your company.

If you prefer to keep the Register at an office other than your registered office, or with your Legal Adviser/Solicitor, make sure that either your company secretary or your Solicitor notifies the Corporate Affairs Commission of the place where the Register is kept within 28 days of the company’s decision.

TIP NO 2:

Where your company has more than 50 members (maybe because there are members that are joint holders of your company’s shares or for some other reasons), you may either choose to keep an Index of the members of your company in your Register of Members, or buy a separate Standard Notebook to take inventory of the Index of members.

The index of your company will contain the alphabetic list of the names of the members of your company and must, at all times, be kept at the same place with the Register of Members.

Where you make any alteration in your company’s Register of Members which makes it necessary that a consequential alteration be made in your Index of Members, you must make the consequential alteration within 14 days after the date on which the alteration is made in the register of members.

TIP NO 3:

Your company must hold its first annual general meeting within 18 months of its registration, and within every 15 months thereafter.

An “Annual General Meeting” is the yearly general meeting of the members of a company to deliberate on the businesses of the company. By implication, the following people are entitled to receive notice of your company’s general meeting:

• Every member
• Every person upon whom the ownership of a share devolves by reason of law
• Every director of your company
• Every auditor for the time being of your company
• Your company Secretary

At the Annual General Meeting, your company may present the financial statements for the year ending, present directors and auditors’ report, elect new directors in place of those retiring, appoint members of Audit Committee, declare dividends, and fix remuneration for company’s auditor etc.

Every member is entitled to a 21 days’ notice prior to the day of meeting. A shorter notice may be valid if only all the members entitled to attend and vote at the meeting agreed for a shorter date.

You may opt to engage your solicitor to prepare the notice of meeting to be sent to the members of your company or otherwise get your company secretary to prepare it.

As a guide, here are the details that your Notice of Meeting must specify:

• the venue of meeting
• the date and time of meeting, and
• the nature of issues to be dealt with at the meeting

There are other technical details that may have to be stated in the Notice of Meeting; for instance, where your meeting is meant to consider a special resolution, the terms of the resolution must be stated in the Notice of Meeting.

In a similar vein, you are not allowed to discuss any issue which you have not stated in your letter of notice of general meeting, and failure to give notice of your company’s general meeting will invalidate the meeting unless the failure was an accidental omission on the part of the person(s) giving the notice.

It is therefore necessary that you seek proper legal advice while planning to hold the annual general meeting of your company. You may contact me for further information or explanation, and you may likewise contact your Solicitor for additional assistance or information.

TIP NO 4:

Your company must keep minutes of its meetings. To do this effectively, I will suggest that you dedicate special notebooks for that purpose so that your minutes can be sequential and orderly.

The meetings which the Corporate Affairs Commission envisages that your company should take record of are:

• Proceedings of all General Meetings
• Proceedings of Meetings of Directors
• Proceedings of Meetings of Managers (where there are Managers)

TIP NO 5:

Your company must have at least two (2) directors.

Anytime the number of directors fall below two, your company must appoint new directors within one month, otherwise, it will be illegal to continue doing business after one month of refusal to appoint a director.

The power to appoint the directors reside in the members of your company and it may be exercised at the Annual General Meeting of the company.

TIP NO 6:

The first meeting of your board of directors must be held not later than 6 months after you register your company. All other meetings may be held at any time whatsoever.

Any issue that is to be resolved at the Board of Directors’ meeting must be decided by a majority vote, and if there is an equality of votes, the chairman may have a second vote.

TIP NO 7:

You must buy a standard notebook to take record of your company’s directors and secretaries.

The notebook may be headed “Register of the Directors and Secretaries of ………………………………………. (Insert the name of your company)”

The notebook is to be kept at your company’s registered office, and will take note of the following:

• Full names of Director/ Secretary
• Any former name (s) or surname
• Residential address
• Nationality
• Business Occupation
• Details of any other directorships held by him/her
• Date of Birth
• Where your Company’s secretarial duties are outsourced to a Law Firm or Corporation, the details of the registered name and registered address or head office must be noted.

Your company is expected to file its first update with the corporate affairs commission within 14 days from the day it is registered with the corporate affairs commission, and 14 days after every subsequent change.

The Register of the Directors and Secretaries of your company is supposed to be accessible to the public.

TIP NO 8:

Where your company changes its registered address, you must notify the Corporate Affairs Commission within fourteen days of such change.

Your Company Secretary may purchase and file the appropriate form for that purpose, or otherwise, engage a competent Solicitor to assist with the process.

TIP NO 9:

One of the things that you need to do after registration is to impress your company’s name and “Registered Company Number” (i.e. “RC No”) on every form of your company’s correspondence.

Unfortunately, this aspect of company obligation is usually overlooked by business owners and investors, and where the name of the company is stated, the “RC No” is often left out.

In more specific terms, you must paint or affix (and keep painted and affixed) your company’s name and “RC No” in a very clear manner on the outside of your office, on every of your company’s business letters, notices, advertisements, all official publications of the company, its bills of exchange, promissory notes, endorsements, cheques, bills or parcels, invoices, receipts, letters of credit, orders for money or goods purported to be signed by or on behalf of the company, and on the company’s metallic seal.

TIP NO 10:

Your company must prepare and submit to the Corporate Affairs Commission an annual report on matters specified in the Companies and Allied Matters Act which are applicable to your company.

The annual report is otherwise known as ANNUAL RETURNS, and if you are operating a limited company, It will usually contain your company’s registered address, address of place where the register of members is kept, summary of share capital and debenture, particulars of indebtedness of your company (if any), list of past and present members of your company, balance sheet, auditor’s report, and profit and loss account etc.

Keeping your annual returns up to date with the Corporate Affairs Commission is about the most important obligation that you must keep up with as soon as you register your company, and considering the technical nature of the task, it is important that your company secretary should be given the necessary training to handle the task, or otherwise, same should be outsourced to a Professional to handle.

TIP NO 11:

Register your company for Tax Identification Number and Value Added Tax at the Federal Inland Revenue Services (FIRS).

To apply for TIN and VAT, you may have to design your company letterhead, rubber stamp/metallic seal, and company logo.

You can reach me for further enlightenment on tax compliance in Nigeria.

CONCLUSION:

Here, let me get back to the title of this article “11 simple tips to grow your new company”.

That title came to mind because I have seen many Businesses crumble not because they were bereaved of ideas, or money, but because they did not have somebody to put them through on their legal obligations, and as soon as they started getting penalised, they had to forfeit operating the company as it was too late to comply.

You have an opportunity to get the basic things right if you master the content of this article.

15
Jul

6 Important Points to Note in Software Agreements (Part 1)

One of the most interesting jokes that I have seen about the herculean task of software developers is illustrated in the above picture, yet the picture represents the dilemma of their work. That is why I have always emphasized that every software developer should take interest in learning the law (at least as it applies to them).
Are you a software developer and you are reading this piece? Below are 6 clauses that you must instruct your lawyer to note in preparing software agreements for your clients.
1. Do not give 100% guarantee that nothing would go wrong with your software. You probably will agree with me that something sometimes go wrong at some point. It is therefore important to have a balanced agreement with clauses that allows you and your client to share risk and responsibilities in a workable manner.

2. Correction of certain errors may take time, sometimes, you might need to deploy entirely new codes or even rewrite the software, so, do not agree to a fixed time within which to correct errors. The right thing to do is to provide in Agreement that your company will evaluate the extent of error and advice on the time frame within which the errors will be corrected.

3. Save yourself the headache of litigation by asking your lawyer to add problem solving clauses. Most times, we lawyers place emphasis on dispute resolution clause instead of problem solving clause by which parties to an agreement are made to work as a team in resolving problems. One of the beautiful things about working as a team to resolve problems is that you create a teaming bond with your client and avoid unnecessary confrontations which eventually may lead you and your client to the court room.

4. How would you feel, if your client identifies the staff that happened to be the brain behind the software and then lure him or her from your company? Terrible, I guess. Moreover, your team members may have access to the source code of the software- and that may be a top trade secret of your company. That is why you must have a clause against staff poaching by which your client agrees not to engage any of your staff for a period of time following the completion of the software.

5. Beware of the clients that are always changing their software specifications. One way to address such tendency is to insert a clause for software specification so that any proposed variation that amounts to an added task can be paid for.

6. When you have done all you can to keep a relationship and it seems that it has headed for the walls, your best bet will be to resort to third party intervention (mediation, arbitration, litigation etc.). Bearing in mind the technical nature of your profession, it is important that you opt for a dispute management mechanism by which the dispute settlers have considerable knowledge in your profession, and that necessarily means that you make court litigation your last option.

Other than the above suggested clauses, there are standard clauses which your agreement should have. In essence, the points listed in this article are not exhaustive and the peculiarity of each client’s specification may differ, it is therefore important that you seek advice from an experienced legal practitioner.

1
Jul

7 Ways I.T. Professionals (and Others at Large) Can Protect their Ideas from Pirates

Eyitayo Ogunyemi
@eyitayolaw

Years ago, people suffered from the menace of high robbery incidence, but these days, theft of intellectual materials is more rampant. There is therefore a need for owners of creative works to know how they can protect their works from intellectual thieves (otherwise known as pirates).
Before more, let me establish one fact straight away- an idea is worthless until expressed in a tangible form. That is why this article focuses on what you should take cognizance of in the process of turning your idea to a finished worked.
I pitched on I.T. professionals in this article because theirs is the most difficult to handle. For one, the internet is the most unregulated society and that is where I.T. professionals showcase their works. Secondly, when those works get copied by pirates, millions are lost.
I do not guarantee that your work will not be pirated if you follow the suggestions in this article, but I assure that you will be placed in a better position to establish your ownership and defend your claims against any pirate.
Briefly stated below are seven things you can do to establish the ownership of your works and thereby prevent them from being pirated:
1. If you are a software developer or you are into programming and coding, embed your name in computer codes that you generate so that if you need to prove ownership, you are not left stammering.

2. Keep the master copy (initial design) of your work. If you have a lawyer, seek his or her counsel for safe custody.

3. If you have support team that is working with you on the task of creating the work, ensure that they sign an agreement which recognizes you or your company as the owner of the work to be invented. Truth be told, it is easier to get your support team to sign such agreement at an early stage than when your work starts to attract millions of hard currencies.

4. Ensure that your support team signs confidentiality agreement so that they are under legal obligation to keep your apparatus secret especially when they choose to move on.

5. When you launch your invented work, remember to mention that the work is your copyright. Simple way to do this is to use the symbol “©” with your name or that of your company and the year the work was invented. For example “©Eyitayo Ogunyemi 2017”.

6. Register your ownership of the work with relevant government agency. While this is not what primarily gives you ownership right, it gives a better assurance that the work is yours.

7. Imprint your trademark in the finished work. This makes it easier to establish your ownership in case of dispute. Remember however to first register your trademark with the relevant government agency.
After you have established your ownership of the work following the highlighted steps, you can give license to people to use the work in exchange for a token or even figure out other ways to generate money from the use of the work.
Most importantly, do not release your work to the public without first protecting your ownership of it one way or the other.

12
Jun

Amazing Differences between Business Name and Limited Company Registration in Nigeria

Eyitayo Ogunyemi | @eyitayolaw
One of the questions that I usually ask my students during my training sessions for Entrepreneurs is for them to tell me what they understand by a Limited Liability Company and a Business Name, and why they will choose the business option that they are opting for.

Unfortunately, I usually do not receive an answer that captures the basic differences, and it is unfortunate too that many Investors have chosen their business option without proper guidance.

This article proffers keynote differences between a Business Name and a Limited Liability Company in Nigeria. The points stated below are not exhaustive, but they constitute some of the basic differences between a Limited Liability Company and a business name under the Nigerian Law:

DIFFERENCE NO 1:
DO YOU WANT YOUR BUSINESS TO BE YOU OR DIFFERENT FROM YOU?

Business Name: A Business Name is the name and style with which you trade; remember that it is just a “style”, and it is therefore not different from you. Being a mere style, the business does not assume a separate legal entity; cannot sue, nor be sued and properties cannot be purchased in the name of the business.

Another point that you can identify with the above is that, when the owner dies, the business also dies (since in the first place, it does not have a life of its own).

Company: The moment your Company is registered, it becomes a separate entity different from you (otherwise known in law as an “Artificial person”). The best way to understand this severance process is to consider pregnancy, and delivery process- once a child is born, the child has an independent life; can grow, stand alone (with time), and even die. The process of the growth of the child is not hinged, as such, on that of the mother.

By implication, ‘your company’ is considered to be different from you after registration; you can be broke while the company is rich, and the death of the founder does not necessarily mean the death of the company, because the company has a life of its own.

DIFFERENCE NO 2:
DO YOU WANT TO RUN A ONE MAN BUSINESS? ONLY A BUSINESS NAME WILL DO.

Company: If you intend registering a company, it takes two or more persons to form the company. The popular form of company is “Company Limited by Shares”, and at least two people must subscribe to being shareholders in the company.

Business Name: If you are interested in running a one man business where everything will revolve around you and you alone, registration of a Business Name may be suitable.

Note however that you can also register Business Name where you and any other person intend to operate as partners.

DIFFERENCE NO 3:
DO YOU WANT THE VALUE OF YOUR INVESTMENT TO BE STATED IN THE PUBLIC DOCUMENTS OF YOUR PROPOSED BUSINESS? A COMPANY MAY BE YOUR BEST OPTION

Company: If your level of ownership, stake, investment, or interest in your proposed business differs from that of your co-investors and you want this to be recorded publicly, you may choose to incorporate a company (i.e. Limited Company).

Business Name: If you register a Business Name, your level of ownership, stake, investment, or interest will not be publicly recorded. If for any reason you prefer to register a Business Name and you want the extent of your ownership, stake, investment, or interest to be clearly spelt out, you can do this preparing a Memorandum of Understanding between you and your partners. You may consult your choice Legal Consultant for further information.

DIFFERENCE NO 4:
DO YOU WANT AN EXISTING COMPANY TO OWN SHARES IN A BUSINESS THAT YOU ARE ABOUT TO START? ONLY A COMPANY REGISTRATION WILL BE SUITABLE

Company: If you operate a company that is registered, and you want that company to own shares in a business that you are about to register, or you are a foreign investor with a company already registered in your Country, you may choose to register the intended business as a Company and then purchase shares for the existing company from the allotted shares of the proposed company.

If the existing company is however undergoing a process of being wound up, it cannot join in the formation of the company to be incorporated.

In a like manner, if you already have a company in operation and what you intend to register is a Business Name but you want your existing company to have a stake in the Business to be registered, you can give instruction to your Legal Consultant to record the existing company as a partner in the new Business Name to be registered.

Business Name: You cannot use your Business Name (as an entity) to own shares in a company neither can you start a partnership in the name of your registered Business Name.

For non- Nigerians (aliens) and foreign companies seeking to do business in Nigeria, once you have complied with Nigerian laws regulating the rights and capacity of aliens who want to undertake or participate in trade or business in Nigeria, you will be allowed to join in forming company in Nigeria.

DIFFERENCE NO. 5:
IF YOU HAVE MORE THAN 20 PARTNERS, YOU MAY HAVE TO REGISTER A COMPANY

Company: Where a business is intended to be carried on as a partnership, and the partners are more than 20 people, the business can only be registered as a company but not as a business name.

Business Name: You can register these three businesses as a business name notwithstanding that the partners are more than 20 are;

a. Co-operative Societies registered under any law in Nigeria;

b. Partnership of more than 20 Lawyers each of whom is qualified to practice as a lawyer in Nigeria; or

c. Partnership of more than 20 Accountants each of whom is qualified to practice as an accountant.

DIFFERENCE NO. 6:
IF YOU HAVE MORE THAN 50 INDIVIDUAL INVESTORS, YOUR ONLY OPTION MAY BE TO START A PUBLIC COMPANY.

Company: Where the total number of persons who intend to own the shares of a proposed company is more than 50 people, the company can only be registered as a public company. In other words, a private company in Nigeria must not have more than 50 shareholders.

There are exceptions to this rule; for instance, where an employee becomes a member/shareholder upon his employment, or where the employee continues to be a shareholder during and upon the expiration of his employment; his tally may not be taken for the purpose of numbering the 50 members.

Consider the following illustrations:

1. If AZ Private Company has 50 shareholders and Bob was given a number of shares in AZ Private Company upon his employment, he is not going to be numbered as Number 51 shareholder; rather, the number of shareholders will still stand at 50 in the eye of the law.

2. In a similar vein, if Bob continues to hold shares as an employee until he stops working for AZ Private Company, and he continues to own the shares after his employment, he is not going to be numbered for the purpose of counting the 50 benchmark.

3. Two or more people, or even an Association or a Group can invest in a company jointly. They are treated as a single member for the purpose of numbering the members of the company. It is however important that your Association or group must have been registered under the appropriate law.

For further information under this heading, you may check my article titled: How to Register Your NGO, Church, Mosque, and Other Associations with Corporate Affairs Commission (C.A.C.)

DIFFERENCE NO. 7:
THE STATUS OF YOUR KEY INVESTORS DETERMINE THE KIND OF BUSINESS ARRANGEMENT

Company: In a company arrangement, your shareholders are considered as the joint owners of the company. The shareholders elect the Board of Directors who are responsible for the daily affairs of the company and also give periodic account of management to the shareholders.
Note however that a shareholder may also be a director or even the company secretary.

Business Name: In a Business Name arrangement, there is no clear-cut difference between the business holder and the director because in most cases, the director is the owner of the business.

CONCLUSION:
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This article has been designed for information purposes alone and is not intended to take the place of a legal advice. Readers are therefore advised to seek proper legal advice.

2
Jun

5 PRIORITY AREAS THAT WILL CHANGE THE FUTURE OF THE NIGERIAN ECONOMY – VICE PRESIDENT’S SPEECH AT THE PLATFORM NIGERIA 2017

The Acting President (Ag. President) of the Federal Republic of Nigeria, His Excellency, Professor Yemi Osibajo (SAN), was the Keynote Speaker at The Platform Nigeria organized by Covenant Christian Centre, which held on May 1 2017.

In his speech, the Vice President discussed the Nigerian Economic Recovery and Growth Plan (NERGP), the progress made so far and future reforms by the Federal Government (FG). The discussion centered on the five critical priority areas needed to achieve economic recovery and growth in Nigeria. These priority areas are:

Stabilizing the macroeconomic environment

Delivering agricultural and food security

Energy sufficiency which is adequacy of power and petroleum products, improving transportation infrastructure

Driving industrialization through small and medium scale enterprises

Delivering an effective social investment programme

These five priorities and their key reforms, as expounded by Professor Yemi Osibajo in his speech, are summarized below:

Stabilizing the macroeconomic environment

In stabilizing the macro-economic environment, the FG has focused on aligning fiscal policy with monetary policy and nudging the Central Bank of Nigeria (CBN) towards the objective of more market determined exchange rates. The FG is also working on replacing the 41 items not valid for foreign exchange with a more trade policy-driven restrictions taking into account those items that are required and locally unavailable raw materials.

It is important to note that the CBN had recently released a circular on thirty-six (36) items that are now valid for foreign exchange (Forex). These 36 items are items that hitherto were not valid for Forex, but are now valid. This new circular is one of the windows established by the CBN for Small and Medium Enterprises (SMEs) to provide access to Forex and ease pressure on the market.

In addition, the FG is in the process of obtaining intervention fund for agriculture through the Bank of Agriculture, and for SMEs through the Bank of Industry, as a means to reduce the high interest in the economy which is also reflective of the high inflation rate in the country. There is also the Development Bank of Nigeria which is the main vehicle for intervention banks. Furthermore, Professor Yemi Osibanjo explained that reducing the interest rates will involve borrowing less from the domestic market, however at the moment, the FG is borrowing substantially from the domestic market which is expected to change in the future.

Delivering agricultural and food security

As part of the Federal Government (FG) plan to diversify the Nigerian economy from over dependency on oil revenue, the FG proposed to achieve three objectives in diversifying into agriculture.

First is the provision of the right inputs, equipment and finance which is expected to increase the yield of farmers. The CBN Anchor Borrowers Programme has provided finance for thousands of farmers, which has resulted in increased local production and in fact, local production of rice has tripled as a result. In addition, a major problem before now was the milling of rice paddy. However, FG supplied 200 mills of various sizes to farmers with a combined effort of the public and private sector to address this issue.

Secondly, FG has sought to provide improved seedlings to farmers including rice seedlings. Thereafter, farmers would be taught simple farming practices that improves crop yield. Both Kebbi State government, IITA and Jigawa State have run excellent rice seed improvement programmes that have been of tremendous benefit. Some of the other initiative under the seedling programme are improved wheat and maize production as well as maintaining our position as Number 2 in sorghum production in the world.

The third objective is the provision of fertilizer. In 2017, there will be a major revolution in the fertilizer sector because the Presidential Fertilizer Initiative came up with a design to solve the problem of obtaining fertilizer once and for all. The Ministry of Agriculture produced a soil map for the country that determined the pattern of fertilizer distribution and this helped a great deal. Using the disaggregated soil maps, the FG was able to provide fertilizer for each soil type in different states in Nigeria. Prior to this, there was no map and fertilizers were given indiscriminately. However, after this initiative, the yield increased from 2 tonnes per hectare to between 4.5 and 9 tonnes per hectare. Also, the FG provided a concessionary working capital loan for Nigerian-based blending plants to enable them produce fertilizer locally.

The next phase of the FG agricultural diversification is the plantations of tree crops such as, cocoa, cashew, shea-butter, coconut, sesame seed, soya bean, pineapple, banana, cassava and sugar cane. These are expected to improve the revenue generated from agriculture.

Energy sufficiency

One of the important sector the FG is determined to reform is the Power Sector. The major problem has been that the private sector players have not been able to invest in the critical areas of metering, and others that guarantee improvement in the sector. Other issues include complaint about the inability to generate enough revenue to break-even due to lack of a cost-effective tariff and illiquidity in the energy generation, transmission and distribution value chain.

The Federal Executive Council (FEC) had on the 1st of March 2017 approved ₦701 billion CBN facility as a payment guarantee for Nigeria Bulk Electricity Trading Company (NBET) to guarantee payments to the power sector and in turn improve power supply. This fund will be provided to NBET at a 10% interest per annum; the Federal Ministry of Finance would in turn guarantee the repayment of the principal and interest. Indicative data presented by NBET indicates that NBET intends to pay a flat-rate of 80% of the January-2017 generation invoice. This is a good signal, representing the FG keeping to its word.

The FEC also approved that FG continue discussions with the World Bank Group (WBG) with the objective of securing financial support of US$2.5 billion for the power sector. After discussions with the WBG, the Power Sector Recovery Implementation Program (PSRIP) was created. The PSRIP will address issues such as liquidity, transparency, energy sufficiency and governance in the power sector

Driving industrialization through medium and small scale enterprises

In driving industrialization and focusing on MSMEs, the focus has largely being on creating an enabling environment for doing business in Nigeria. Many Medium, Small and Micro Enterprises (MSMEs) complain about the difficulties of obtaining financial and other assistance from government agencies responsible for one approval or the other relevant for their businesses.

As a result, the FG launched the MSME clinics across Nigeria to inform government agencies about their role as facilitators of business not obstacles. At this clinics, small business owners meet with the relevant government agencies to ask questions and deal with issues on the spot if possible.

In terms of industrial infrastructure, the FG is focusing on improving existing Special Economic Zones, and establishing new ones. ₦50 billion has been set aside in the 2017 budget for the existing free trade zones. The plan is to accelerate the implementation of the National Industrial Revolution Plan (NIRP) through the special economic zones. The zones will focus on priority sectors to generate jobs, promote exports, boost growth and upgrade skills with an objective of creating 1.5 million jobs by 2020.

Growing the digital industry and innovation has also been a priority for the government. After the Aso Villa Demo Day, 30 out of over 4000 innovators emerge and the presidency in collaboration with the World Bank through the GEM programme, further selected 81 innovators through a competitive process. These innovators were provided funds for their businesses through the ₦756.3 million fund set aside for the project.

The FG is also promoting innovation hubs in 6 geo-political zones in Nigeria. The hubs are essentially to provide training for a wide range of technology related skills, empowering youths for entrepreneurship and employment.

Delivering an effective social investment programme

The National Social Investment Programme (SIP) was introduced by the FG in 2016. The programme covers the following:

Homegrown School Feeding Initiative which is targeting 5.5 million primary school people in all the states of the federation from primary 1-3. Eleven states are set to fully start the scheme which would involve feeding 3.5 million school children.

Job Creation Initiative aimed at training 500,000 university graduates, who would be deployed to work in their local communities as teachers, agriculture workers and health support workers. The graduates would be receiving a monthly stipend of ₦30,000 monthly for a period of two years.

Conditional Cash Transfer Initiative, where one million caregivers would be given ₦5,000 monthly for a period of two years. The focus would be on the extremely poor and vulnerable in our society and special emphasis is on the North Eastern part of the country where there are a lot of Internally Displaced Persons.

Enterprise Promotion Programme, which is a loan scheme handled by the Bank of Industry. The loan would be available to 1.66 million people, made up of market women, traders, artisans, small businesses and youths and would be from ₦10,000 to ₦100,000.

The next phase of FG reform is anchored on three pillars which are deepening existing reforms, initiating sub-national reforms, which will culminate in the sub-national ranking of all 36 states and the FCT in 2018 and introduction of a new reform area “Trading within Nigeria”, which will push initiatives aimed at improving business processes and regulations within Nigeria, and ease the movement of goods within the country.

Based on the above, the Vice President concluded that the opportunities are limitless for Nigeria, our population is young, vibrant, bolder, more creative and more entrepreneurial than the youths of any other country in our region. Therefore, we must not allow the failures of the past to hold us down or become an excuse for our failure. We must lead and shape the future as the future is already here.

30
Dec

Tax Obligations of Sole Proprietorships, Partnerships and Incorporated Companies

It is no longer news that the Nigerian government has become increasingly keen on enforcing compliance with tax laws. Therefore, it is important for business owners to have basic knowledge of Nigerian tax system. To start with, different levels of government make laws and regulations related to taxation of businesses and individuals, respectively. Hence,  a first step will be to understand the various taxes and levies  administered by Federal, State and Local Governments in Nigeria.

A reference point would be the Taxes and Levies (Approved List for Collection) Act CAP T2 LFN 2004. Some interesting highlights include making it unlawful for Tax Collectors to mount roadblocks for the purpose of collecting taxes. In addition, there are limits to the use of Police to enforce tax collection.

For business owners seeking to know their tax obligations under the law, provided below is a succinct guide:

  1. Sole Proprietorships and Partnerships

Taxation of  sole proprietorships and partnerships are somewhat similar as both are subject to the Personal Income Tax Act (PITA), which makes provision for the direct assessment of the tax liabilities of the business on the sole proprietor or partners.
“Partnership” and “Sole Proprietorship” as business entities do not pay income tax. Rather, the tax (that is, the Personal Income Tax) is levied on the owner’s  share of profit after the distribution of the profit or loss made by the business.

For a full understanding of your tax  obligations, you can consult the Personal Income Tax Act.

In summary:

  • Your partnership or sole proprietorship is not ‘itself’ chargeable to tax
  • What is chargeable to tax is the share of profit from the partnership or sole proprietorship.

 

  1. Incorporated Companies

An incorporated  company, for tax purposes, is treated as a separate legal entity from the owners and therefore pays taxes accordingly. Based on the Companies Income Tax Act, the income of a company on which tax is payable are  the profits of a company from whatever source and irrespective of whether such profits are distributed as dividends or not.

Hence, your company should do the following as far as the tax law is concerned:

  • Find out if the income accruing to your company and its line of business is chargeable under the Companies Income Tax Act. You can share your line of business with me so as to enable me give a proper advice in this regard.
  • Pay 2% of your assessable profit as annual Tertiary Education Tax. This tax represents your company’s social responsibility to the Nigerian education sector.
  • If your company does any of the lines of business stated below, and have an annual turnover of NGN100M (one hundred million naira) and above, your company will be mandated by law to pay 1% of its profit before tax or the net profit figure as disclosed in your company’s account as the National Information Technology Development (NITD) Levy. The businesses affected are:
        1. Banking and Non-Bank Financial Institutions (NBFIs) such as capital market operators, mortgage institutions and microfinance banks
        2. Insurance Services and Brokerage
        3. Cyber and Internet Services
        4. Pension Fund Administration, Pension Management and allied activities, and
        5. GSM Services and Telecommunication.

 

  1. General Tax Duties Affecting Sole Proprietorships, Partnerships and Incorporated Companies

  • Value Added Tax (VAT):

VAT is an indirect tax imposed on the supply of services and goods in Nigeria, except for items that are exempted by the VAT Act (please consult the Value Added Tax Act for more information). VAT is calculated at 5% flat rate.

Every business owner in Nigeria (whether an incorporated company, sole proprietorship or partnership) is required to be an agent of the Federal Government to collect and remit VAT (Value Added Tax). Your duty is to include 5% of the total goods and services supplied as VAT on your invoice when sending to your clients/customers. When you receive payment, the VAT should be remitted to the Federal Inland Revenue Service (FIRS) on or before the 21st day  of the month following the month the goods or services were sold. For example, VAT collected in January should be remitted on or before 21st February.

  • Capital Gains Tax:

When your company (whether incorporated company, sole proprietorship or partnership) sells an asset, it must pay 10% of the chargeable gains accruing from the sales. For purposes of computation, you must be guided by the provisions of the Capital Gains Tax Act.

  • Withholding Tax (WHT):

WHT is an advance payment of tax and is deducted at source. By implication, your company (whether an incorporated company, sole proprietorship or partnership) merely acts as collection agent for onward transmission to the appropriate tax authority. Your company should deduct at source the WHT from gross payments made to individuals, partnership, community trustees, executors, family and body of individuals in respect of the following income sources:

    • All aspects of building, construction, civil work and related activities;
    • All types of contract activities or agency arrangements other than outright sales and purchase of goods and property in the ordinary course of business;
    • Professional services;
    • Technical services; and
    • Commissions

The current rates for withholding tax are as follows:

S/N

Types of Payments

Rates

(Companies)

Rates

(Individuals/ Partnerships)

1.

Interest, Rents & Dividend

10

10

2.

Royalties

10

5

3.

Building and Construction

5

5

4.

All types of contracts and agency arrangement, other than sales in the ordinary course of business.

5

5

5.

Consultancy and Professional Services

10

5

6.

Management Services

10

5

7.

Technical Services

10

5

8.

Commission

10

5

9.

Directors Fees

10

10

 

Conclusion

A good understanding of how tax system operates in Nigeria is necessary to the long term success of your business. It is therefore imperative that you embrace the knowledge shared in this article and use it to structure your business for purposes of effective compliance with government tax regulations.

 

Please note that the thoughts expressed in this article are the author’s opinion. This should not be used in making business or investment decisions and is not intended to serve as a tax advise.