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Redefining The Concept Of Damages For Use And Occupation Of Land And Mesne Profits – Tanimola Anjorin

by Legalnaija | Sep 6, 2016 | Uncategorized

Redefining The
Concept Of Damages For Use And Occupation Of Land And Mesne Profits[1]
–

For starters,
it should be noted that the concept of damages for use and occupation of land is
a remedy available to the Landowner/Landlord in the event that a contractual
tenancy ceases to exist and the tenant/occupier thereafter enjoys statutory
protection under the Law[2].
By all standards, the requirement to pay compensation for use and occupation of
land is only applicable to a tenant[3].

According to
the Lagos State Tenancy Law 2011, a tenant includes a sub-tenant or any person
occupying any premises whether by payment of rent howsoever or by operation of
law and not persons unlawfully occupying any premises under a bona fide claim
to be the owner[4].
Undoubtedly, in a valid claim for damages for use and occupation, a tenancy
which may be contractual or statutory[5]
must exist.

Where a
tenancy is created by operation of law, the tenant does not become a trespasser
until the tenancy has become duly determined according to law[6]. This position was emphasized by the apex
court in African Petroleum v Owodunni[7]
as follows:

“Because a claim for ‘Mesne profits’ is based on trespass
and is inappropriate in respect of lawful occupation as a tenant, it can only
be maintained when the tenancy has been duly determined and the tenant becomes
a trespasser…where a tenancy is created by operation of law, the status of
trespasser will not arise, until the tenancy is duly determined according to
law… however, the lawful use and occupation of the land and premises implies an
agreement to pay damages for use and occupation of the land and premises. It is
a quasi-tenancy which the law recognises…”

This
presupposes that when a person holds over having the status of a statutory
tenant, he is not liable to pay mesne profits since he is not a trespasser but
would be liable to pay compensation for use and occupation. This position
appears to have received statutory backing. The Kaduna and Rivers landlord and
tenant laws provide that, where in the absence of an express subsisting tenancy
one person uses or occupies property of another person by his permission or
sufferance, there shall be implied a promise by the user or occupier to make a
reasonable payment for such use or occupation[8].
It goes further to provide that where an implied promise to pay for use and
occupation of property arises under this edict, it shall be enforceable by
action to be known as action for use and occupation[9].

For a claimant
to be entitled to compensation for use and occupation, there must have been
some tenancy, express or implied, between the claimant and the defendant during
the period in respect whereof the compensation is claimed and it is not enough
that the claimant was really entitled to the property. For example, where the
defendant occupied the property as tenant of another person from whom he
obtained the possession (aside from the landlord/landowner), or as a mere wrong
doer or willful trespasser, no action can be maintained. In the latter part of
this paper, judicial authorities shall be reviewed to ascertain whether there
is a distinction between these two concepts.

While the
concept of damages for use and occupation is well appreciated under common law
and a couple of judicial authorities have tried to make a distinction, the laws
on recovery of premises of most States seek to merge these two separate heads
of claim without making any distinction[10].

DISTINCTION BETWEEN DAMAGES FOR USE AND
OCCUPATION OF LAND AND MESNE PROFITS

Rent
is different from damages for use and occupation of land and mesne profits. Rent
is liquidated and ceases once the tenancy is determined while damages for use
and occupation commence immediately after determination of the tenancy and runs
until the court orders the tenant to vacate the property. Upon the obtention of
a valid court order, mesne profit begins to runs against the occupant who is
now adjudged a trespasser in the eye of the law.

The
basic similarity between these two heads of claim is that they both seek to
compensate the Landowner/ Landlord either as damages for use and occupation
under a quasi-contract in the case of a statutory tenant or as mesne profits
under the law of tort in the case of a trespasser. Idigbe JSC
defined the term ‘statutory tenant’ in Pan
Asian African Co. Ltd. v. National Insurance Corporation[11]
as:

“an occupier, who when his
contractual tenancy expires, holds over and continues in possession by virtue
of special statutory provision”.

On the other hand, a trespasser
according to the Merriam-Webster online dictionary is defined as:

“one who enters or remains on the real property of another
wrongfully or without the owner’s or possessor’s authority or consent”.

Stemming from
the above, a statutory tenant is a lawful occupant while a trespasser is
undoubtedly an unlawful occupant. Therefore, by all standards in our law, damages
for use and occupation is different from mesne profits.

Whether a
tenant holds over at common law or as a statutory tenant under the relevant
statute, the contractual obligation of payment of rent hitherto binding on the
tenant becomes extinguished upon the expiration of the contractual term.
However, the law, general or statutory, compensates the landlord for the loss
of use and/or occupation and in appropriate cases where the tort of trespass is
established, for ‘mesne profits’. The two heads of claim differ from the
contractual rent in two material particulars. First, while damages for use and
occupation is usually liquidated at the agreed rent[12]
and certain, the quantum of mesne profit payable to the landlord in the event
of adversely holding over by the tenant is unliquidated and may not necessarily
follow from the amount initially fixed as rent. Secondly, while damages for use
and occupation is operative during the subsistence of the statutory tenancy,
mesne profit starts to run only after the expiration of the statutory tenancy
and the tenant holds over.

LAGOS STATE AND RIVERS STATE LAWS AS
A CASE STUDY

The
Lagos State Tenancy law 2011, has a different view as to how and when mesne
profits can be claimed. First we shall look at Section 47 Lagos State Tenancy
Law which defines mesne profit as follows:

“Mesne profit means the rents and
profits which a tenant holds over during his occupation of the premises and
which he is liable to pay as compensation to the person entitled to
possession”.

Section 31 of the Lagos State Tenancy
Law also provides:

“Where mesne profits or a sum for
the use and occupation of the premises are claimed, the claim shall show
the rate at which such is claimed, and where it is proved, judgment shall be
entered for the amount so proved”.

The
Lagos State Tenancy Law 2011 does not make a clear distinction between the
period mesne profits and damages for use and occupation of premises may be
claimed. By virtue of the use of “or” in Section 31, the law recognises that
there is a distinction between these two concepts but it does not fully
appreciate or elucidate on any of these distinctions.

From
the above underlined it means that mesne profit can only be claimed where it is
proven and judgment is to be given for the amount proven. The operative words
here are prove and judgment. What can therefore be deduced
from Section 31 of the Tenancy Law 2011, is that for the Landlord to claim
mesne profits same must have first been proven and judgment granted to the
landlord. There needs to be a revision of the Lagos State Tenancy Law 2011 to
make a clear distinction between these two heads of claim. The Law needs to
expressly provide for what is to be proven i.e. how damages for use and
occupation is to be measured, how mesne profits is to be calculated, the
prevailing rent in that locality for similar premises, the need to provide
expert evidence to confirm the prevailing rent amongst others.

Asides
from the Lagos State Tenancy Law, Landlord
and Tenant Law Cap 75 Laws of Rivers State, 1999 does not have any specific legislation on mesne
profits but only provides for damages for use and occupation. Section 101 of
the Rivers Law[13] provides:

“(1) Subject to this Law or any other
written Law in force in the State and in the absence of an express subsisting
tenancy, where one person uses or occupies property of another by his
permission or sufferance, there shall be implied a promise by the user or
occupier to make a reasonable payment for such use or occupation.

Provided that no such promise shall
be implied where the circumstances clearly negative it.

(2) Nothing in this section shall
apply where a person uses or occupies a property without the knowledge of the
owner or a trespasser or otherwise against the will of the owner”.[14]

The
effect of Section 101 and 102 of the Law is to the effect that a claim for
mesne profits is impliedly subsumed under the concept of damages for use and occupation.

ANY PRACTICAL JUSTIFICATION FOR THE
DISTINCTION?

In
appreciating the distinction, it must be noted that damages for use and
occupation is only applicable to a statutory tenant. The follow up question is:
Can mesne profit be claimed against a statutory tenant? Under common law and
judicial precedents, a statutory tenant cannot be liable to pay mesne profits.
Professor I. O Smith SAN in his work also submits that it is a misnomer to
claim mesne profits from a statutory tenant[15].
He opined that since a claim for mesne profits can only be maintained when the
tenancy has been duly determined and the tenant becomes a trespasser, the
concept of mesne profit is only applicable after the determination of the
statutory tenancy and an order to deliver vacate possession has been obtained.
Where the defendant remains in possession after the date mandated by the court
and execution does not follow immediately, liability of the tenant may then lie
in mesne profits for it is only on such rare occasion that his occupation can
be said to be wrongful and there after become a trespass.[16]

A
practical justification for a distinction between these two heads of claim is
founded on the fact that while damages for use and occupation is classified
under a quasi-contract between the landlord and the tenant being a tenant
protected by statute, a claim for mesne profits can only be founded under the
law of tort. Another practical justification for the distinction is that the
measurement of liability under these two heads of claim differs. The liability
of a statutory tenant is usually measured at the rate of the rent fixed under
the expired or terminated contractual tenancy while a tenant adversely holding
over at common law is a trespasser liable to pay mesne profits which is usually
unliquidated and need not be the equivalent of the amount of rent fixed under
the expired or terminated contractual tenancy but rent obtainable in similar
premises within the same locality.

ATTITUDE OF THE NIGERIAN COURTS

The
judicial authorities on the point are conflicting. This is due to the fact that
different judges have given their own independent judgements and opinion on the
subject matter of mesne profits. It is worrisome that in recent times, lawyers
and our courts (particularly the magistrates’ court) have failed to appreciate
the distinction between these two heads of claim which is why a claim for ‘mesne profit for use and occupation’ at
the agreed rent is usually prayed for and the same granted by some courts[17].
We shall however analyse some of these different views vis-à-vis the relevant
statutory provisions.

The
earliest reported decision on in this regard appears to be Yekinni v. Etti[18], where De Lantang CJ observed:

“A tenant who holds over under
the Rent Restriction Act is not a trespasser and does not become one until he
disobeys an order of the court ordering him to give up possession. Strictly
speaking therefore rent should be claimed up to the date of the order of
possession and mesne profits thereafter. In practice it is immaterial whether
the claim is labelled rent or mesne profits as there is usually no monetary
difference between rent and mesne profits”.

The
decision above appeared to have been based on the Rent Restriction Act which was
the applicable law at that time. However, Section 18(2) of the Rent
Control Law 1976 (Lagos) suggests that the two items of claim may be different.
It provides as follows:

“If mesne profits are claimed and the
writ or plaint shows that the rate at which such mesne profits are claimed
is the same as the standard rent of the premises, judgment shall be entered for
the ascertained amount as liquidated claim and if the mesne profits are claimed
at the rate of the said rent up to the time of obtaining possession the
judgment shall be extended to include such claim and shall be a second
alternative in Form J”.

Further,
the learned Chief Judge stated that mesne profits are recoverable, not from the
determination of the tenancy, but from the date the tenant is ordered to vacate
possession by a competent court. But the provisions of the rent control
statutes are to the contrary. For example, Section
13 of the Rent Control and Recovery of Premises Act, Abuja provides that the
amount claimed under any writ or plaint for arrears of rent and mesne profit
shall be treated as one claim[19].

The
above law clearly states that mesne profits, may and can be claimed from the
determination of the tenancy or any day appointed for hearing, or any day named
in the plaint. In other words, it must not be from the date of judgement.

In
Adebajo Vs Tennessee Nig Ltd[20] a tenant who was
granted a one-year term with expiry in January 1966 failed to surrender the key
until August 1966. The Supreme Court held that the landlord was entitled to
compensation for the tenant’s use and occupation of the premises from February
to August 1966. Elias CJN (as he then was) observed:

“where a tenant holds over after the
expiration of lease he is liable to the landlord an amount adjudged by the
court to be due for the use and occupation of the premises concerned’.

In
Oshinfekun Vs Lana[21] a monthly tenant
held over after a valid determination of his tenancy. In an action to recover
possession, the landlord joined a claim for $108.65.8d as compensation for the
use and occupation of the premises during the period of 13 months he held over.
The landlord’s action was dismissed for claiming the wrong relief. This is
quite different from the decision handed down by Odesanya J in Dafe Vs Macaulay[22] where the
landlord claimed a sum as compensation for use and occupation instead of
arrears of rent. Although the learned Judge gave the landlord’s counsel a
swipe, he remarked;

‘The description of rent as money due
for use and occupation did not occasion and could not in any case have
occasioned any miscarriage of justice’

Notwithstanding
the argument that the tediously technical aspect of real property law should
not be permitted to adversely affect a landowner in his just claim, the law
still remains that the court cannot grant a relief which has not been asked by
the Claimant[23].

The Supreme Court in African Petroleum Ltd v. Owodunni[24]
while delivering the lead judgment succinctly explained the distinction thus:

“…In order to be
able to decide the second issue, it is necessary to consider the followings
namely:

(i) Would the
plaintiff be entitled to mesne profit or to damages for use and occupation of
the premises? Or are the two expressions interchangeable?

(ii)When could
the claim for mesne profit or for damages for use and occupation properly begin
to run?

(iii) What is
the right measure?

Now According to
Wharton’s Law Lexicon (14th Ed.) at p. 652: “Mesne profits” are
the rents and profits which a trespasser has or might have received or made
during his occupation of the premises, and which therefore he must pay over to
the true owner as compensation for the tort which he has committed. A claim for
rent is therefore liquidated, while a claim for mesne profit is always
unliquidated.

It follows
therefore that a claim for mesne profit is inappropriate when the occupier is
still a tenant. It can only be maintained when his tenancy has been duly
determined and he becomes a trespasser. In this respect, a statutory tenant
such as the defendant, though merely a protected tenant cannot properly be
adjudged to be liable for mesne profit unless and until his tenancy has been
duly determined according to law. On the other hand, where a tenant who entered
upon a premises lawfully occupies the land or premises of another without an agreement
with or consent by the true owner, what he has to pay is not rent, because as
there is no longer a demise, he no longer has an estate, he will not pay mesne
profit because he is not a trespasser. Rather, he will be liable for damages
for his use and occupation of the land or premises. The action arises out of an
implied agreement to pay out of what may be called a quasi – tenancy rather
than a relationship between a landlord and a tenant (see Woodfall: On Landlord and Tenant (21st Ed.) p.666. See also Rochester (Dean and Chapter v. Pierce) (1808) 1 Camp 466.

So, the
defendant would be liable for damages for use and occupation. He could not be
liable for mesne profits because the element of wrongful and tortuous
occupation was absent. In the circumstances, for the Court of Appeal to have
made an award as “mesne profits for use and occupation” was an error.
But it did not lead to a miscarriage of justice”.

The court also went
further to make a fine distinction between the commencement date for calculating
mesne profits and damages for use and occupation. The apex court held thus[25]:

“Another area of
difference between mesne profits and damages for use and occupation is the date
of commencement. Mesne profits start to run from the date of service of the
process for determining the tenancy (see Canas Property Co. Ltd. v. K.L. Television Services Ltd. (1970) 2 Q.B. 433. But damages for use and occupation
start to run from the date of holding over the property, the function of the
court being to ascertain an amount which may constitute a reasonable
satisfaction for the use and occupation of the premises held over by the
tenant. The previous rent may sometimes be a guide, but may not be
conclusive.”.

From the plethora of judicial
authorities cited above, there are clear distinctions between these two
concepts and pitiably, they are yet to be appreciated by subsequent
legislations and lower courts despite the established doctrine of stare decisis[26].

RECOMMENDATIONS

It is noteworthy that these two heads of
claim need to be redefined from the current statutory and judicial
interpretation which fail to actually create a laudable distinction. The laws
should be revised to actually make damages for use and occupation apply when
the tenant holds over at the expiration of the contractual and statutory
tenancy. The reason for this suggestion is that damages for use and occupation
should be calculated against a trespasser at a higher rate putting into
consideration the going rate in similar apartments and also to place a penalty
in the form of a high interest rate from the period of holding over till delivery
of judgment.

Alternatively,
parties to any agreement relating to land or property may insert provisions in
the agreement which will expressly state the consequences of holding over to
include the mode of computation of damages for use and occupation. This is a
more reliable and effective way to prevent tenants or occupiers from holding
over after the expiration of their tenancy and not having to pay adequate compensation
to the landlord/landowner after several years of litigation.

By: Tanimola
Anjorin

[1] Tanimola
Anjorin holds a bachelor’s degree in History
and International Studies from Lagos State University. He thereafter obtained a
Bachelor of Laws degree from Lagos State University and was called to the
Nigerian Bar. He is also an Associate of the Chartered Institute of Arbitrators
(UK) Nigeria Branch.

[2] The applicable law is the Recovery of Premises Law of the various
states. For the purpose of this paper, I shall consider the laws of Lagos, Rivers
States and Abuja.

[3] The requirement for tenancy under the law is lawful occupation. See
Ibiyemi Odunje v Nigerian Airways Ltd
(1987) NWLR Pt. 55 P.126

[4] There are corresponding provisions in the interpretation sections
of the Recovery of Premises Law of other states.

[5] A tenancy is said to be contractual where the consent of the
landlord is granted and statutory where the tenancy is necessitated by
operation of law.

[6] See Omotosho v Oloriegbe
(1988) 4 NWLR Pt. 87; 225

[7] (1991) 8 NWLR Pt 210 P. 418 Para B

[8] ^.Section 101 (1) of Landlord and Tenant Law Cap 75 Laws
of Rivers State, 1988 and section105(1) of Recovery of Premises Law, Kaduna
State

[9] Section 105 of the Landlord and Tenant Law Cap 75 Laws of Rivers
State, 1999 and section 109 of the Kaduna State Law

[10] See section 101 and 102 of the Landlord and Tenant Law Cap 75 Laws
of Rivers State, 1999; Section 31 of the Lagos State Tenancy Law 2011

[11] (1982) 9 SC at p.13

[12] The Supreme Court per Ariwoola JSC in Ayinde v Lawal &Ors (1994) 7 NWLR Pt. 356 p. 263 held that: “
…It is the duty of the court to ascertain an amount which may constitute a reasonable
satisfaction for the use and occupation of the premises held over by the
tenant. It has been held that while previous rent may not be conclusive, it may
sometimes be a guide…”

[13] Landlord and Tenant Law Cap 75 Laws of Rivers State,
1999

[14] Section 102 of the Landlord and Tenant Law Cap 75
Laws of Rivers State, 1999 provides for who is liable for payment for use and
occupation

[15] Smith, I. O The
Status and Liability of a Tenant Holding Over Under the Rent Control &
Recovery of Premises Law in Nigeria (1992)3 Nos (9-10)

[16] A trespasser is a person in wrongful occupation of land or premises
and does not acquire lawful occupation by his act of trespass.

[17] Anyanwu v Sangosanya:
Suit No. MCY/2491/15 (Unreported) where the claim was made for possession and mesne
profits at the agreed rent from the determination of the tenancy until
possession is given up.

[18] (1964)
ANLR 482, (1964) ALL NLR 69

[19] This is a faulty legislation which needs to be revised
so as to appreciate the clear distinction between these two separate claims.
See also Section
20 of the then Rent Control Law of Lagos 1976 which contains similar
provisions.

[20] (1974) 1 ALLNLR 24

[21] (1958) WNLR 122

[22] (1975) CCHCJ 381

[23] Ativie v
Kabelmetal Nig Ltd. (2008) 10 NWLR Pt. 1095 P. 309

[24] (1991) 8 NWLR
(Pt.210)391 per Nnemeka-Agu JSC

[25] African
Petroleum v Owodunni (Supra)

[26] Stare decisis et non queta movere – stand by what has
been decided and not to disturb and unsettle things which are established. See Adesokan v Adetunji (1994) 5 NWLR Pt.
345; Okeke v Okoli (2000) 7 NWLR Pt.
642 p. 654 Para D-F

The Importance Of Registering A Business – Adeolu Adesuyi Esq.

by Legalnaija | Sep 5, 2016 | Uncategorized

The importance of registering a business
can never be over-emphasized. For one, when it comes to doing serious business,
many agencies will never take you serious if your company is not registered.

Secondly, you might have to discover that people and that includes you and I,
feel more comfortable paying for services and products into a corporate account
with the name of an organization than paying into Individual account. You may
have missed an important sale because when your prospect made up his mind to
buy, the account number you sent him was an individual account in your name. He
thought it too risky because it was a sizable amount involved.

People feel if the account is in a corporate name, the organization can be
traced if the transaction went foul. If you register your company, you can use
the documents to open a corporate account with less stress.
In this post, you’ll be learning simple steps you can take to register your
business name with the corporate affairs commission in less than 21 days.

REQUIREMENTS FOR INCORPORATING A PRIVATE
COMPANY IN NIGERIA.

The steps for incorporating a new company at the nation’s registry, The
Corporate Affairs Commission, can be summarized in the following 10 steps:

i. Submission of the proposed Company Names to the CAC. This is the first step
in the entire process. The promoters of the company must decide on a company
name and submit for approval. The government officials reserve the right to
approve or deny company names submitted for a number of justifiable reasons –
availability, suitability, legality, similarity, etc.

ii. Details of Directors: Long story short, you will be required to provide the
biodata of the Directors of the proposed company. This information include:
Full Names, Residential Address, Nationality, Age, Valid Identification
Document and Signature of the Directors. The minimum number of directors for a
private company is 2 and maximum is 50. There is no maximum for public
companies. There are statutory requirements for being a director, one of which
is that the directors must not be less than 18 years old.

iii. Shareholders/Subscribers. The legal minimum number of shareholders in a
private company in Nigeria is 2 and a maximum of 50. The shareholders subscribe
to the memorandum and articles of association and are allotted shares in the
company.

iv. Appoint a Company Secretary. Every Nigerian company must appoint a Nigerian
Company Secretary, as it has become a legal requirement. The company secretary
of a private limited company needs no formal qualifications. It is the
directors’ responsibility to ensure he/she has the appropriate knowledge and
experience to act as a Secretary of the company.

v. Registered Address of the Proposed Company. The company must have a Nigerian
business address. This requirement needs no much explanation and not debatable
either.

vi. Core Areas of the company’s business activities (Nature/Objects of
company). Nigerians and Non-Nigerians are allowed to carry on all forms of business
provided it’s legal and not in the “Negative List”. If the company will engage
in specialist services (Hospital, Consultancy, Schools, Media &
Advertising, etc), the directors may need to provide an evidence of
professional proficiency. E.g. Certificate of a professional body/trade
association, Academic Certificate, or both.

vii. Valid Identification. Although this requirement has been stated earlier,
it is worthy of mention here again. A photocopy of Identification of all the
directors is required. (E.g. National ID card, Data Page of your National
Passport, Voter’s Card or Driver’s License).

viii. The Company’s Share Capital and Allotment. In simple terms, the share
capital of a company (usually in monetary terms), is the amount of capital the
subscribers have to carry on the business. The minimum share capital of a
private company must not be less than N10, 000:00 (Ten Thousand Naira only)
However, for economic reasons, it is advisable that an average Nigerian company
incorporate a N1, 000,000: 00 (One Million Naira only) share capital company. A
company’s share capital is also industry-dependent. For example, advertising
agencies must have at least N10 million as share capital. The law also
stipulates a minimum of N10 million share capital for a Nigerian company with
foreign ownership. Your regulator or adviser should advice you appropriately. A
minimum of 25% of the authorized share capital must be subscribed and paid for.
Once the issue of share capital has been decided on, then the subscribers must
also decide on allotting the shares. If there are 2 persons that formed the
company, they could share it 50% each.

ix. Draft the Memorandum of Understanding and Articles of Association (MEMART).
This is a legal document that spells out the business objectives and the
framework on which the company intends to run its business within the
acceptance of the law. This legal document also shows the particulars of the
shareholders and their shares allotment.

x. Payment of Stamp Duty and Statutory Filling Fees. The total fees payable to
the Stamp Duty office and the Corporate Affairs Commission is dependent on the
company’s share capital.

These are the basic requirements for incorporating a private limited liability
company in Nigeria.

If
you need professional service to register a limited liability company, please
contact the writer via the email address or phone number supplied below. If you
have any questions on the content of this article, please do not hesitate to
send a mail.

Adeolu Adesuyi Esq.

https://deolumike.wordpress.com/

An Analysis of The Federal Competition And Consumer Protection Bill 2015 – Oluyori Ehimony Jr.

by Legalnaija | Sep 5, 2016 | Uncategorized

AN
INTRODUCTION TO COMPETITION LAW AND POLICY: AN ANALYSIS ON THE FEDERAL
COMPETITION AND CONSUMER PROTECTION BILL. 2015. PROTECTING THE CONSUMER AND
ENLARGING THE MARKET.[1]

In
Market economies, there is inherent danger that market players may distort or
even eliminate competition in order to maximize profits, or in order to acquire
and abuse their market power. This has demanded legislative and policy
intervention and for many countries, such intervention has taken the form of
competition law and policy. In its simplest form, competition law and policy
aims at playing the role of an umpire in what may conveniently be regarded as a
market jungle, where financial might is right and profits can be made by
unscrupulous manufacturers, often at the consumers chagrin.

It
therefore follows that if left unchecked, financially buoyant corporations will
muscle out the financial less fortunate firms, create entry barriers, and
reduce innovation, quality, efficiency and output in the market. This has an
overwhelming effect in the production and distribution channels in the society.
Consumers are forced to pay so much for so little as they are manipulated by
the greed of entrepreneurs and lack of a functional competitive market.

To
allay the consternation of consumers and to protect the market, many countries
around the world have enacted competition laws and designed pro-competitive
policies to meet the many needs of the society at large, as the effect of an
anticompetitive regime has larger ramifications on the society. For instance,
industries will fail to compete in the market, consequently, they will not need
to employ labour as there is no need for expansion in a ‘one way’ market
industry, and they may even be tempted to lay off personnel; these increases
unemployment, inefficiency and by extension, crime rate.

It
therefore becomes imperative for the law to create a benchmark of acceptable
trade practice. This is done by the creation of rules to regulate their
business activities in such a manner that they conform to fair and equal
standards of trade. These rules are known as Competition Laws or Antitrust.

Competition
law is a set of rules, disciplines and judicial decisions maintained by
governments relating either to agreements between firms that restrict
competition or to the concentration or abuse of market power on the part of
private firms.[2] These laws prohibit the misuse of market powers by firms and
businesses. For instance, preventing undertakings which are dominant in their
markets from overcharging their customers or imposing unfair trading terms and
conditions upon them.[3]

Competition
law authorizes and regulates government intervention against anticompetitive
behavior, such as price fixing and price rigging, and the concentration of
economic power. When the law succeeds in safeguarding or increasing marketing
competition, such that both buyers and sellers are generally price-takers, it
brings widely economic benefits, boosting economic efficiency, growth and
innovation and thus, both consumer and aggregate welfare.[4]

In
a similar vein, Bob Lane defines competition as “the struggle by firms to
achieve superiority over other firms in the market place” and further defines
competition law as “the rules limiting the freedom by which they may do so”.[5]

The
lack of Competition legislation in Nigeria has been described as the reason why
producers of utilities do not feel obligated to answer the queries of the
consumers. There are sectorial regulations in some industries but this only
raise the question of how enforceable are these regulations and do they really
live up to their billing and hype? This has prompted the Government to send a
proposed bill to the national assembly to pass same and create some balance and
accountability in these sectors. Another role to be played by a competition
regulation is to eliminate entry barriers in certain businesses and encourage
new players in the market: such entry will naturally create competition and the
consumer will undoubtedly be the king of the market.

The
Bill is an Act which aims at repealing the Consumer Protection Act, CAP C25,
LFN, 2004; Establish the Federal Competition and Consumer Protection Tribunal
for the development and promotion of Fair, efficient and Competitive Markets in
the Nigerian economy, facilitate access by all citizens to safe products,
secure the protection of rights for all consumers in Nigeria and for other
related matters.[6]

The
objectives of the proposed Act are to promote and maintain competitive markets
in the Nigerian economy,[7] promote economic efficiency,[8] protect and promote
the interest and welfare of consumers by providing consumers with competitive
prices and product choices. The bill further seeks to prohibit restrictive
business practices which prevents, restricts or distorts competition or
constitutes an abuse of a dominant position of market power in Nigeria; and
contribute to the sustainable development of the Nigerian economy. The Act is
applicable to all undertakings and all commercial activities within, or having
effect within Nigeria.[9]

Establishment
of the Federal Competition and Consumer Protection Commission;

The
Act establishes the Federal Competition and Consumer Protection Commission
(“the commission”) for the purpose of carrying out the functions, duties and
responsibilities as conferred upon it by virtue of the provisions of the
Act.[10] The Bill provides that the commission shall be independent in the
performance of its functions, duties, powers and responsibilities so conferred
on it. In a bid to ensure fairness and sincerity in purpose, the Bill directs
that any member of the commission who has a personal interest in any contract
or arrangement or matter to be considered by the commission or of a committee
shall forthwith disclose such interest to the commission or committee and shall
not vote on any question relating to the contract, arrangement or matter. This
is in an initiative to forestall a case where a member of a committee has a
conflict of interest and might be minded to manipulate the system to favor such
interest. This provision seeks to ensure objectivity among the members of the
commission.

Also,
the Act provides for the establishment of a Competition and Consumer Protection
Tribunal.[11] The Tribunal is expected to adjudicate over every conduct
prohibited under the Act. The tribunal shall hear appeals from or review any
decision from the exercise of the powers of any sector specific regulatory
authority in a regulated industry in respect of competition and consumer
protection matters; issue such orders as may be required of it under the Act;
and make any ruling or such other orders as may be necessary or incidental to
the performance of its functions under the Act.[12]

RESTRICTIVE
AGREEMENTS;

The
2015 Bill provides that “Any agreement among undertakings, or the decision of
an association of undertakings that has the purpose of actual or likely effect
of preventing, restricting or distorting competition in any market shall be
unlawful and, subject to Section 61 of this Act, void and of no legal
effect whatsoever”.[13] This is a strong stand against any form of restrictive
trade practice among associations, cartels or any commercial unit.

For
avoidance of doubt, the bill lists out the particular acts to be prohibited by
the proposed Act. They include;

a;
Directly or indirectly fixing a purchase or selling price of goods or services,
this is subject to Section 108 of the Act.

b;
dividing markets by allocating customers, suppliers, territories or specific
types of goods and services.

c;
limiting or controlling the production or distribution of any goods or
services, markets, technical development or investments, subject to Section 109
of the Act.

d;
engaging in collusive tendering, subject to Section 110 of the Act.

e;
making the conclusion of an agreement subject to acceptance by the other
parties of supplementary obligations which by their very nature or according to
commercial usage, have no connection with the subject of such agreement.

The
prohibited acts which contravene certain Sections of the bill have been itemized
for avoidance of doubt by commercial undertakings which have formed the habit
of often using ignorance of the law and the absence of an active antitrust
legislation to breach competitive lines.

In
a related breath, Section 64 prohibits any term or agreement for the sale of
any good or services, if the purport of such term or agreement is to establish
or provide for the establishment of minimum prices to be charged on the resale
of the goods or services in Nigeria. In other words, this Section proscribes
minimum resale price maintenance in the market. It has been identified as a
major trade restrain among experts in antitrust and a major setback in market
competition. Interestingly, the Bill creates a new form of restrictive trade
practice prohibition, where it prohibits the unlawful withholding of products
from a dealer by a supplier.[14] For the purpose of the Act, an undertaking
will be treated as withholding goods or services from a dealer if the
undertaking refuses to supply those goods or services to the order of the
dealer,[15] the undertaking refuses to supply the goods or services to the
dealer except at prices or on terms or conditions as to credit, discount or
other matters which are significantly less favorable than those at or on which
the undertaking normally supplies those goods or services to other dealers
carrying on business in similar circumstances;[16]

ABUSE
OF DOMINANT POSITION[17]

The
2015 Bill goes further to give an elaborate description on instances where a
corporation may be designated as a dominant firm in the market. It provides
that, for the purpose of the Act, a corporation will be considered to be in a
dominant position if it is able to act without taking account of the
reaction of its customers, consumers and competitors.[18] This
definition puts into consideration in defining a dominant firm, the effect the
act of a large firm might have, not only to its competitors, but also on the
consumers and the competitors. Much has been said on the subject in the last
chapter, the argument was made that there is nothing fundamentally wrong with a
firm being a dominant firm in the market. Its status might have been achieved
by dedication to purpose, hard work, investment and goodwill; hence a large
corporation should not be punished for excelling in the market environment. It
has quickly been added, that a large firm, in making decisions and carrying out
its business acts must be extremely considerate and cautious on the effect
(usually adverse) such acts or decisions might have on the consumers, customers
or the competitors in the same market and within the same geographical
location.[19] As a punitive and prohibitive step, the bill provides in Section
74 (3) that any undertaking that abuses its dominant position in the market
commits an offence under the proposed Act and on conviction be liable to a fine
of not less than ten (10) per cent of its turnover in the preceding business
year or such higher percentage as the court may determine under the
circumstances of the particular case.

MONOPOLY[20]

Where
it appears to the commission that there are convincing grounds for believing
that a monopoly situation may exist in relation to the production or
distribution of goods and services of any description or in relation to the
export of any goods and services of any description in Nigeria, it shall cause
an investigation to be held into a particular type of agreement across various
sectors to determine the extent of the situation in relation to the market. The
Bill identifies a situation of monopoly to exist in relation to;

1. the supply of goods of any description’

2. the supply of services of any description,; or

3. the exports of goods of any description from Nigeria,
to the extent that it has an effect on competition in a market in Nigeria.[21]

MERGERS[22]

For
the purpose of the proposed Act, a merger occurs when one or more undertakings
directly or indirectly acquire or establish direct or indirect control over the
whole or part of the business of another undertaking.[23] This control may be
achieved by way of the purchase or the lease of the shares, an interest or
assets of the other undertaking in question, the amalgamation or the
combination with the other undertaking in question, the amalgamation or
combination of the other undertaking in question.[24] It could also be by way
of a joint venture.[25] It is further explained that an undertaking has control
over the business of another undertaking if it beneficially owns more than one
half of the issued share capital or assets of the undertaking; is entitled to
cast a majority of votes that may be cast at the general meeting of the
undertaking or has the ability to control the voting of a majority of those
votes, either directly or indirectly; is able to appoint or to veto the
appointment of the directors of the undertaking. Subject to the notification of
threshold to be determined from time to time as set out in Part XII, a proposed
merger shall not be implemented unless it has first been notified to and
approved by the commission.

Section
95 of the proposed Act provides that when considering a
merger or a proposed merger, the commission shall determine whether or not the
merger is likely to substantially prevent or lessen competition. This shall be
done by assessing the strength of competition in the relevant market and the
probability that the undertakings in the market, after the merger, will behave
competitively or co-operatively, taking into account, any factor that may be
relevant to competition in that market, including, the ease of entry in the
market, the level and trends of collusion, the level of countervailing power in
the market, among other considerations.[26]

CONCLUSION

On
the whole, the bill looks promising and all-encompassing, it touches on both
competition regulations as well as consumer protection, and the danger however
remains in the management of the commission if by chance the bill is passed
into law. The commission will need to be manned by professionals who are
knowledgeable in antitrust laws, economics, intellectual property and
representatives of the various sectors of production. It is essential that all
necessary bodies are carried along for a productive dispensation of competition
policy in Nigeria.

That
competition law and policy has continued to enjoy a remarkable growth rate
across the world in recent times need no lengthy discussion. Its advantages
have been seen to cut across economic efficiency, consumer choice boost and
protection, removal of entry and exit barriers, protection of small and
intermediate firms in the market, improvement of the foreign direct investments
(FDI) of countries, while boosting the chances of local firms to compete
internationally. This work has therefore argued that, left unchecked, the
untoward and unregulated trade practices will continually relegate Nigerian
markets to the background and have extremely adverse effects towards the
economic and trade development and growth in the country.

RECOMMENDATIONS

The
first step to take is to harmonize all pending Bills before the National
Assembly, remove offensive sections contained in the Bills[27] and create
independent enforcement institutions. The Bills were products of legal
transplants which did not necessary take the peculiarities of Nigeria trade and
market system into consideration.

Competition
policy and law offers developing nations an added tool to manage their affairs.
The challenge then is to design a competition policy that fits local realities
and meets local needs. This is an aspect that often deludes the attention of
many enthusiastic proponents of competition law and policy.

Evidently
a “one size fits all” approach is practically inappropriate in developing
competition policy and law. It is essential to create a distinction between
countries at low levels of development and hence meager institutional capacity
on one hand, and semi-industrialized countries with greater institutional
capacity on the other hand.

Second,
for competition law and policy to make any meaningful success in Nigeria,
allied policies such as privatization, liberalization and commercialization
have to be placed on the front burner. Their functional existence shall ease up
the market system and usher in competition law and policy. Otherwise it would
only make a mockery of the process.

Third,
any eventual competition law and policy must be wary of falling into the
temptation of inundating itself with too many competition goals and objective.
Much has been said about the lack of infrastructural capacity and structural
facilities in the country, thus, blindly transplanting the U.S. Antitrust in
its entirety or the U.K. Competition Act will be delirious and quite
wasteful. The E.U. Competition law is recommended to the extent that it
advocates for opening up of markets. For a country like Nigeria, operating
Cartel is not so significant and may not necessarily be an objective of the
competition law, in its stead, emphasis may be laid on the extermination of
monopoly, opening up the cement industry for example, focusing on merger activities,
and abuse of dominance in significant public services such as power,
agriculture, shelter, flood, water and other sectors.

Fourth,
Government’s fettering of competition process must be cautioned by law. Due to
vested interest in the markets, and owing to the outrageous level of greed and
corruption in developing countries, governments seem to protect the producers,
(from where their campaign funds emanate from) instead of the consumers. A
major reason why competition regimes have not seen the light of day in Nigeria
is because the government lacks genuine incentives to create a competitive
environment. Most political office holders, legislative members and other
public office holders have vested interests in the thriving monopolies ranging
from the power sector to the various production industries, water supply and
importation activities. The Federal government needs to provide overall
direction for the development competition in Nigeria. This may include
employing capable personnel in the implementation process.

Fifth,
there is need to intensify on competition law and policy advocacy in the polity
about the benefits inherent in the regime. The markets are perishing due to
lack of knowledge of this importation subject. Even worse is the fact that the
legislature, which is on the front seat to bring to life this budding Bill,
lacks any appreciable knowledge of competition law and policy. It was reported
that one of the reasons why the Federal Competition Bill was not sent for the
second reading was because the National Assembly were of the opinion that the
country already had a consumer protection agency. It is therefore recommended
that a crash course seminar be provided for the public to sensitize them on the
imperatives and benefits of this global trend.

The
fact that competition policy should contribute towards economic development is
more or less an agreed concept, it is largely the barriers to competition that
exist that are sources of apprehension. There is need therefore, for
competition culture to prevail in the whole economy to remove distortions. This
should start at the helm of administration before it can cascade to the
consumer.

Political
will turns out to be one of the key factors that determine the success of
implementation of competition policy and laws. If competition law and policy is
to yield all the envisaged benefits, political will and consensus for reform is
a necessary condition.

[1]
The Federal Competition and Consumer Protection Bill 2015 SB 544
(Executive Bill)

[2]
Dimgba. N. 2008. The Needs and Challenges to the Establishment of a
Competition Law Regime in Nigeria. Ibid. P.4.

[3]
Green, N., Hartley, T.C., Usher, J.A. 1991 Single European Market. Oxford
University Press, New York. P.207. the authors further defined competition laws
as that (which) prohibit undertakings from getting together to fix the prices
they will charge their customers.

[4]
Buthe, T.,2014 The politics of Market Competition: Trade and Antitrust in a
Global Economy. Ed. by Martin, L. Oxford handbook of the Politics of
International Trade. Gellorn, Kovacic and Calkins are other authors who have
been persuaded to view the roles and effects of Competition law from the same
perspective. See their book: Antitrust Law and Economy in a Nutshell. 2004. 5th
ed. St. Paul, MN: West Publishing.

[5]
Lane, B. 2000. EC Competition Law. Longman, Harlowe et al, P. 6

[6]
See the preamble of the Bill.

[7]
Section 1 (a)

[8]
Section 1 (b)

[9]
Section 1 (c) & (d)

[10]
Section 3 (1)

[11]
See Section 39 of the Bill.

[12]
Section 48

[13]
Section 60, Part viii

[14]
See Section 67

[15]
Section 67 (1)[a]

[16]
Section 67 (1)[b]

[17]
Part IX Section 71

[18]
Ibid

[19]
Section 73 (1) of the proposed Act list the considerations necessary in
decided the dominance of a firm.

[20]
Part X, Section 77

[21]
Section 78

[22]
Part Xii, Section 93

[23]
Section 93 (1) [a]

[24]
Ibid, [b]

[25]
Ibid (b)[iii]

[26]
See generally, Section 95.

[27]
These provisions include:

1. Empowering the Ministers of Justice and Trade
unregulated powers to interfere with the activities of the Commission’

2. ‘Tying’ the funds of the enforcement institutions to
the governments account. This shows insecurity of purpose,

3. Fusing the goals of the Laws together, without any
direction as to the objectives of the Laws.

Oluyori Ehimony Jr.

Yori
is a lawyer with a very high premium for excellence, intensely focused on
solving client’s most important problems with a diverse practice skillset. He
also possess the ability to team effectively with clients and associates. Yori
has gained considerable experience in Commercial litigation, Antitrust/
Competition law, Mergers and Acquisitions, Corporate and general legal
practice. He is building a track record of original and groundbreaking
solutions and innovations that have a dramatic impact on business and law.

Ed’s
Note – This article was originally published here.

Franchising: A Pathway To Entrepreneurial Success In Nigeria – Franklin Okeke

by Legalnaija | Sep 5, 2016 | Uncategorized

Franchising is a
business model that businesses use to expand their brand and operational
footprint. A franchisor is a company, business or person that has developed a
system/name and grants a third party the right to operate a business under the
system and name in consideration of fees from the third party. According to the
International Franchise Association, a franchise is “the agreement or license between two legally independent parties which
gives: a person or group of people (franchisee) the right to market a product
or service using the trademark or trade name of another business (franchisor);
the franchisee the right to market a product or service using the trademark or
trade name of another business.’’ The essence is to enable the franchisee
enjoy commercial success in his business by ‘riding on the coat tails’ of the
franchisor. There is usually a fee (the ‘franchise fee’ or royalty) attached to
the use of the system.

There is a popular
saying that owning a franchise allows you to
go into a business for yourself, but not by yourself. The advantages of
franchising includes – access to an established product or service which
already enjoys widespread brand-name recognition, effectively giving the franchisee the benefits of a
pre-sold customer base which would ordinarily take years to establish, thereby significantly
increasing his prospect of success. It provides
franchisees with a certain level of independence where they can operate their
business, and offer consumers the attraction of a certain level of quality and
consistency mandated by the franchise agreement. The franchisee is willing to
pay for association with time tested and trusted products and methods (which
would otherwise take him years to create), through the franchise arrangement.

Some examples of
franchises in the quick service restaurant (QSR) sector in Nigeria include: Mr.
Biggs’, Domino’s Pizza, Chicken Republic, Kentucky Fried Chicken (KFC),
Debonair’s Pizza, Tastee Fried Chicken (TFC) and Tantalizers. Four of the above
examples are homegrown Nigerian brands.

STRUCTURE
AND CONSTRUCT OF A FRANCHISE AGREEMENT

A franchise
agreement (FA) by its complex and technical nature is accompanied by a bundle
of Intellectual Property (IP) rights (trademarks, service names, patent,
designs, technological know-how etc.), which are protected and regulated not
only by the FA between the parties, but also by relevant laws regulating the
transfer of such, especially where there are cross border dimensions. The IP
rights are the basis upon which the FA is built because a franchisor would be
unwilling to enter into an FA if it feels its IP rights would not be adequately
protected.

Issues can arise regarding
the impact of a franchisor’s bankruptcy or liquidation on the FA and its
resultant effect on the franchisee. What would be the fate of the IP rights vis-à-vis the franchisee’s interest? If
a liquidator is appointed over the franchisor company, the liquidator takes
control of the company and can enforce its rights against franchisees. The
franchisee must continue to pay the agreed fees and adhere to the franchise
system.

The role of the Liquidator
would be to sell the franchisor company to a third party or in the alternative
sell the assets of the franchisor which includes the IP rights. If the franchisor
company is sold to a third party (which is more preferable), then the FAs could
be assigned to the new owner and the franchisees can continue to do business as
usual. On the other hand, if the assets of the franchisor are sold, nothing
prevents the franchisee(s) from acquiring the IP Rights. It must be stated that
an FA does not terminate simply because the franchisor has gone into
liquidation. This is however subject to the express terms of the Agreement.

Franchise lawyers
spend a considerable amount of time drafting and negotiating FAs, since the FA is
the cornerstone of the franchise relationship and is likely to be in place for
a number of years. While no two FAs may be identical, most include provisions such as the
grant of a trademark license, the right to operate the franchised business,
payment of fees, terms of the rights granted, limitations on how the franchisee
can use the franchisor’s trademarks, indemnity clauses, operational standards
and specifications, reporting requirements, default, termination,
post-termination obligations, non-compete clauses and disclosure of
confidential information, and procedures for dispute resolution.

However, these
clauses are subject to judicial interpretation. In Canada, the court recently
held that a ‘non-compete’ clause in an FA may not be enforceable in all
circumstances against the franchisee. A non-compete clause is a clause which
estops a party from engaging in a business similar in nature to that which the
particular agreement is centred upon. In an FA, these clauses are used to
ensure that the franchisee does not, with the know-how obtained from the
franchisor during the course of the relationship, operate a business which
would be in unfair competition with the franchisor and other subsequent
franchisees. However, a recent Canadian decision seem to suggest that the fact
that there is a non-compete clause in a franchise agreement, does not make it
enforceable. The Ontario Court of Appeal, in MEDIchair LP v DME Medequip Inc, 2016 ONCA 168, refused to enforce
a franchisee’s non-compete covenant because the evidence demonstrated that the
franchisor did not intend to open a franchised store within the restricted
territory.

The Court concluded
that non-compete covenants must protect “the legitimate interest of the
franchisor”, but cannot extend beyond that. In this case, the franchisee had
de-identified its franchise and opened a similar business in the same location;
however, because the franchisor did not intend to operate in the protected
territory after the franchise relationship ended, the franchisor was found not
to have the requisite legitimate interest to restrict competition by the
franchisee within that territory. However, where a franchisee is declared to be
in breach of these provisions, the franchisor can take out injunctions in order
to protect its position. In the Nigerian
case of Andreas Koumoulis v. Leventis
Motors Limited, (1973) ALL NLR 789, the appellant was sued for breach of
his contract of service as spare parts Sales Manager. Clause 6 of the contract
provided that the appellant shall not for at least a year, after leaving the
employment of the respondent, operate a similar business as that of the
respondent within a 50 miles radius from any trading station owned by the
respondent. The Supreme Court affirmed the decision of the trial court and held
that the clause was enforceable against the appellant.

Finally, as with
any business relationship, there is a dispute resolution component to franchise
arrangements. Franchise litigation lawyers typically deal with claims such as
violations of franchise sales laws or franchise relationships laws,
misrepresentations during the franchise sales process, failure to pay amounts
due, failure to make required refunds, and failure to provide contracted support.
Franchisors typically try to control litigation somewhat with contractual
provisions that require the franchisee to submit certain claims to mediation or
arbitration or require the franchisee to litigate only in a specific forum. In
2013, an Australian franchise, Pie Face,
was on the wrong end of series of legal action from its franchisees for
misleading representation about potential sales and profitability. In order to
avoid litigation, it is essential that the franchisor and the franchisee
clearly lay out the duties and obligations of both parties, warranties (if any)
and expected timelines for the performance of the said duties.

LEGAL
FRAMEWORK FOR FRANCHISING IN NIGERIA

Till date, there is
no specific franchising legislation in Nigeria. However, it must be stated that
there are several regulatory provisions, existing in bits and pieces that affect
franchising in Nigeria. An example is the National
Office for Technology Acquisition and Promotion (NOTAP) Act Cap. N62 LFN 2004
which established NOTAP. It would however be erroneous to state that NOTAP Act
is the regulatory Act for franchising in Nigeria. This is because NOTAP deals
only with the transfer of technology from foreign entities. Arguably, if an FA
was to be executed between local entities there would be no need for NOTAP registration.
However, there are still some legal issues to be sorted such as trademark
registration, incorporation of entities etc. For example, a company considering
franchising may wish to form a new entity to offer franchises and must decide
what type of entity to form, how to organize it, and what organizational
documents are necessary. Due to the fact that franchisees buying into a system
will want the unrestricted right to use the name and mark used by the system, a
franchise lawyer will work with the franchisor to obtain registration of the
trademarks. Section 4(d) and (e) NOTAP
Act grants NOTAP the power to register franchise agreements involving foreign
franchisors. The section goes further to state that the agreement shall be
registrable if in the opinion of NOTAP, it involves the use of trademarks, the
right to use patented inventions, the supply of technical expertise in the form
of the preparation of plans, diagrams, operating manuals or any other form of
technical assistance of any description whatsoever, the provision of operating
staff or managerial assistance and the training of personnel etc.

By virtue of Section 7 of the NOTAP Act:

‘…no payment shall be made in Nigeria to
the credit of any person outside Nigeria by or on authority of the Federal
Ministry of Finance, the Central Bank of Nigeria or any licensed bank in
Nigeria in respect of any payments due under a contract or agreement mentioned
in section 4(d) of this Act, unless a certificate of registration issued under
this Act is presented by the party or parties concerned together with a copy of
the contract or agreement certified by the National Office in that behalf.’

Regulation
4 of the Income Tax (Transfer Pricing) Regulation 1, 2012, states
that where a connected taxable person has entered into a transaction or a
series of transactions to which the Regulation applies, the person shall ensure
that the taxable profits resulting from such controlled transactions are in a
manner consistent with the arm’s length principle otherwise the FIRS shall make
necessary adjustments. Arm’s length principle simply means that the conditions of a
controlled transaction should not differ from the conditions that would have
applied between independent persons in comparable transactions carried out
under comparable circumstances. The arm’s length principle is relatable to
franchising in that it seeks to guide the relationship between connected parties
(companies that share common control or participate directly or indirectly in the
management, control or profit of one another). For example, agreements between
Group and Holding companies, subsidiaries, companies with the same directors
etc. However, this provision would arise in the event of future collaborations/transactions
(JVs, Technical Services Agreement etc.) between the franchisor and the
franchisee as a means of preventing unfair advantage in the dealings of related
entities. There are other provisions of the NOTAP Act which deals with
franchising such as section 6 providing
for the basic requirements which must be included in the service agreement
(including FAs) for it to be approved by NOTAP.

The basic
problem with NOTAP regulating FAs between local and foreign entities is its
lack of transactional focus. Some of the provisions in the NOTAP Act are too
bureaucratic in nature without paying particular demands to the tenets and
dynamics of the franchise Industry. Unfortunately, the same lack of
transactional mindset is exhibited by many Nigerian regulatory agencies, whose
consequent poor performance weighs businesses down, and negatively impacts
competitiveness of Nigerian businesses.

INTERNATIONAL PERSPECTIVES

Other
jurisdictions have already begun to enact and amend their laws in order to maximise
the advantage of franchising. In the United States, some provisions of the California Franchise Relations Act (CFRA)
were revised through the California Bill AB-525 which was passed into law in 2015.
This sweeping new law gives franchisees across California more protections when
purchasing, transferring and terminating their FAs. Sponsored by the Coalition
of Franchisee Associations (CFA), the law affects new franchisees (i.e., those
who are granted or renew an agreement after January 1, 2016) and current
franchisees upon sale, transfer or termination of their FA. Specifically, the
law amends the CFRA to generally make FAs, more franchise friendly. The changes
made were more significant in the sale, transfer and termination of FAs. For
instance, the law changed the 30 day notice and cure period required before a
franchisor can terminate an FA to a 60 day notice and cure period.

The
franchise industry within the United States is showing no signs of slowing
down. Franchising and distribution continue to make up a large part of the
United States’ economy. According to The
Franchise Times of 2014, the top 200 franchise systems on its rankings had
total annual sales in 2013 of $590 billion.

In South
Africa (like Nigeria), there is also no singular law regulating franchising.
However, franchising is adequately provided for in South Africa’s Consumer Protection Act 2008, which defines
franchising and its various concepts. It also covers provisions on certain
consumer rights which afford protection to potential franchisees, chief among which
are:

(a)The
right to obtain a disclosure document when assessing a franchise opportunity fourteen
days before signing the franchise agreement. The disclosure document should
contain the number of franchise outlets, list of current franchisees,
franchisor’s turnover and net profits etc.; (b) the right to cancel the
agreement with no penalty within 10 business days of signing it (cooling off
period); and (c) Protection against unfair discrimination by suppliers; and (d)
protection against a franchisor receiving a direct or indirect benefit or compensation
from suppliers to its franchisees or its franchise system unless the fact
thereof is disclosed in writing with an explanation of how it will be applied.

CONCLUSION

In order
for Nigeria to fully leverage franchising as a tool for economic development,
it would be necessary to enact laws to guide franchise transactions. Franchising,
as a form of strategic alliance holds a lot of promise for economic development
by building up entrepreneurial capacity of local business people, indigenising
the economy, and contributing to halt capital flight; hence, it should receive
institutional support. FAs are more often than not, one-sided in favour of the
franchisor and as such, most franchisees would require protection through specific
laws. General contract law cannot fully embrace the challenges therein. An
example can be drawn from the Landlord-Tenant relationship. Before the passing
of the Tenancy Law of Lagos State 2011, it was the norm for Landlords to
collect multiple years rent in advance. Section 4 of the Law put a stop to this
oppressive act (although it is yet to be seen whether compliance has been as a
result of the positive impact of the law or due to the commercial
impracticability which has made such practice financially disadvantageous).
Nigeria should take a leaf in franchise regulation from United States and South
Africa. The Disclosure Document and ‘cooling off’ period that are required in
South Africa are additional points aiding the cause for franchise regulation in
Nigeria. This would be particularly important where the franchisor is a foreign
company; the franchisee needs to be adequately protected in a fair and balanced
FA. Proper franchise regulation would go a long way in unleashing the
entrepreneurial energy of Nigerians and also in creating an atmosphere which while
inviting investment is also conducive for growth.

Franklin
Okeke, Esq. is a commercial lawyer focusing
on franchise arrangements and practices with Messrs LeLaw Barristers & Solicitors, Lagos

New CBN Guidelines For Banks On The Treatment Of Dishonoured Or Dud Cheques – Bolanle Oduntan, Esq.

by Legalnaija | Sep 1, 2016 | Uncategorized

The Central Bank of
Nigeria has issued new guidelines to all banks on dishonoured or dud cheques.
It is instructive for individuals and businesses to understand these guidelines
which take effect from 28th June, 2016 and the consequence of issuing dud
cheques.

As reported in the media,
the CBN has installed additional regulatory measures against the issuance of
dud cheques by individuals and corporate customers in other to strengthen the
confidence and integrity of negotiable instruments issued within the country.
The key points to note in the new CBN Guidelines are that all banks are
mandated to;

1.
Perform status check on all potential
customers to ensure they are not dud cheques issuers before granting credit
facilities to them or opening an account for them,

2.
Forward the details of cheques issued by a
customers and returned “insufficient funds” whether presented over the
counter or through a licensed Credit Bureaux and the Credit Risk Management
System (CRMS) on monthly basis,

3.
Cancel all unissued cheque books of
customers who have issued dud cheques three (3) consecutive times or more
across banks, and

4.
Prevent all inter-bank cheques issued by such
customer for a period of five (5) years.

The guidelines also
provides that the details of offending customers will be listed in the database
for a period of five (5) years from the date of submissions after which the
name will be eligible for removal. Also subsequent default following a removal
of an offenders name from the list will attract a permanent listing of such
defaulter in the Credit Bureaux database and such defaulter can only be removed
from the listing with the approval of the Central Bank.

It is also worth noting
that, the principal legislation criminalising the issuance of dud cheques
is the 1977 Dishonoured Cheques (Offences) Act. The rather
brief law makes it an offence for any person anywhere in Nigeria to induce
the delivery of any property or to purport to settle lawful obligations by
means of a cheque which when presented within a reasonable time is dishonoured
on the grounds that no funds or insufficient funds were standing to the credit
of the drawer of the cheque. This law has however been sparsely tested with the
sad consequence that there are professional debtors who obtain services under
the pretense that the cheques they issue will consequently be honoured by the
banks.

The crux and key
provisions of the Dishonoured Cheques (Offences) Act are as follows:

1.
Section 1
of the Act makes it an offence to obtain delivery of goods or credit by means
of a cheque that, when presented for payment not later than three months
after the date of the cheque, is dishonoured on the ground that no funds or
insufficient funds were standing to the credit of the drawer of the cheque in
the bank on which the cheque was drawn;

2.
An individual found guilty of this crime is
liable to imprisonment for two years, without the option of a fine;

3.
A body corporate found guilty of this crime
is liable to be sentenced to a fine of not less than N5,000. Note that a
minimum fine is prescribed by the law; a judge may apply discretion to increase
the fine applicable on a case by case approach; and

4.
The Act in Section 2 however
provides for the lifting of the corporate veil where the offence involves a
body corporate. It provides that “where the offence is committed by a body
corporate is proved to have been committed with the consent of or connivance
of, or to be attributable to any neglect on the part of any director, manager,
secretary or other similar officer, servant or agent of the body corporate (or
any person purporting to act in any such capacity), he, as well as the body
corporate, shall be deemed to be guilty of the offence and may be proceeded
against and punished in the same manner as an individual.”

For businesses in general,
one of the factors considered when investors seek out promising ventures to
invest in, is the creditworthiness of the business (and in some cases that of
it key principal actors such as directors and principal members). What
creditworthiness says about a company is a company’s ability to meet its
financial obligations and pay its debts and the main way to improve on
creditworthiness is to pay bills and meet financial obligations on time.
Issuing a dud cheque is certainly not a way to achieving this.

At a time when direct and
foreign portfolio investment has plunged, importation of foreign capital
declined to a low of $647.1 Million in the 2nd Quarter of 2016 (according to Financial Times) and with the country officially in a
recession, it is important to note that future investments in Nigeria (when we
are able to come out of this recession) will come with even tougher scrutiny
and due diligence by investors, commercial banks and prospective business
partners.

The truth is that being a
serial debtor with an open display of opulence, is fast becoming an acceptable
trend. Start-ups looking to raise capital investment will among other
considerations undergo even greater scrutiny; not just the business
operations and financials but also its principal members to determine the
viability of prospective investments.

Five years is a long time
to have an individual or a corporate entity listed as an issuer of dude
cheques, in other words, as a person or organisation that chronically does not
honour its financial and business obligations. A lot of business goodwill and
credibility can be lost within this period with deep financial consequences.

Large businesses already
have internal credit rating systems, this move will go further by providing an
even larger pool of data to work with. Finally, this move by the CBN, coupled
with existing BVN infrastructure will ultimately help with a better enforcement
of existing laws as the appropriate prosecuting agencies will have a credible
list of offenders for prosecution.

***
‘Bolanle Oduntan is a corporate lawyer, litigator and ADR
practitioner. He advises start-ups, SMEs, multinational companies and
provides legal support and expertise. He practices in Lagos the commercial
capital and business nerve center of Nigeria and indeed West Africa.

**
If you have any question about this post, please contact ‘Bolanle,
your solicitors or financial advisers.

*
This article does not constitute legal or financial advice nor does it create a
contract between the reader and the writer.

Ed’s Note – This article
was originally published here.

Photo Credit – here

Reinforcing The Freedom Of Information Act Through Digital Citizens Engagement

by Legalnaija | Sep 1, 2016 | Uncategorized

In any democracy, citizen participation is a basic principle because governments
derive their authority and power from the people. Therefore, Governments have
an obligation—and not just the discretion—to respond to the needs of the People
while Citizens have both the right and the responsibility to demand
accountability and to ensure that government acts in their best interests. It
is guaranteed by Section 14 of the Constitution of the Federal Republic of
Nigeria that;

“POWER BELONGS TO THE PEOPLE OF NIGERIA from whom government through the
Constitution derives all its powers and authority… PARTICIPATION by the
people in their government shall be ensured in accordance with the provisions
of this Constitution.” – Section 14 (2) (a) and (c) Constitution of the Federal Republic of Nigeria
1999 –

One of the most common ways by which governments try to ensure this right
of the citizens to participate is the enactment of the Freedom of Information
Act (FOIA). In Nigeria, the FOIA was passed since 2007. However, there are
questions about its effectiveness in enabling people to participate in
governance. When you visit the FOIA website you cannot miss the slogan “to provide unfettered access to public
information”. Yes, but then again, “unfettered
access” does not mean merely making information available to be obtained. Clearly,
empowering the people to participate means providing UNFETTERED ACCESS to
public information as opposed to making information available but limiting access
as we have it today. Under the current
arrangement, the FOIA requires that anyone seeking public information must
request for it. What this implies is that information is available but costly to
obtain – not easily accessed.

Many Countries including the United States and the United Kingdom have
since realised the shortfall of the FOIA. These countries are driving
innovations that promote citizens’ participation and open governance in order
to reinforce the FOIA and their parliaments are helping to legitimatise the
reinforcement of the FOIA. This is illustrated by this excerpt from the United
States Open Government Act of 2007:

“The effective functioning of a free government like ours depends
largely on the force of an informed public opinion. This calls for the widest
possible understanding of the quality of government service rendered by all
elective or appointed public officials or employees.”

(2) the PEOPLE firmly believe that our system of government must itself be
governed by a presumption of openness;

(3) the Freedom of Information Act establishes a “strong presumption
in favour of disclosure” as noted by the United States Supreme Court in
United States Department of State vs. Ray (502 U.S. 164 1991), a presumption
that applies to all agencies governed by that Act;

(4) “DISCLOSURE, NOT SECRECY, is the dominant objective of the
Act,” as noted by the United States Supreme Court in Department of Air
Force v. Rose (425 U.S. 352 1976);

(5) IN PRACTICE, THE FREEDOM OF INFORMATION ACT HAS NOT ALWAYS LIVED UP TO
THE IDEALS OF THAT ACT; AND

(6) PARLIAMENT should regularly review THE FOIA in order to determine
whether further changes and improvements are necessary to ensure that the
government remains OPEN AND ACCESSIBLE TO THE PEOPLE and is always based NOT
upon the “NEED TO KNOW” but upon the fundamental “RIGHT TO
KNOW”

(Source: A
MOTION REFERRED TO 110TH COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM CONGRESS
– 1ST SESSION S.2488 UNITED STATES HOUSE OF REPRESENTATIVES DECEMBER 17, 2007)
– emphasis mine.

This holds true for Nigeria. It may be correct that
Information is available and the FOIA covers anyone who can follow through the
bureaucracy to request and obtain it but this is not the question. The question
is how accessible is public information? Not the bad news published in the
dailies but valuable information that can translate to actionable intelligence.
Beyond its availability, public information ought to
be;

·
Accessible – Without
barrier, whether it is solicited or unsolicited

·
Accurate – correct and not misleading

·
Clear – understandable to
the vast majority, especially the ordinary citizens

·
Useable – available before
and after the fact when citizens can still convert the information to
actionable intelligence

·
Up-to-date – Not outdated

There is a New Age of Governance which is driven by advancements in ICT. An age of massive people participation where
the ICT has empowered the people to mobilise, define public good, determine
policies, seek public good, and reform or replace institutions that do not
serve public good.

The day Hosni
Mubarak resigned as president of the Arab Republic of Egypt, Wael Ghonim,
Google’s Middle East marketing director and Egyptian activist, told CNN:

“If you truly intend to liberate a country,
give them the internet”.

ICT enabled citizens’ engagement or digital citizens’ engagement has been
described by some as “Liberation technology”. Diamond (2010: 79) defines a
Liberation Technology as any form of information and communication technology
(ICT) that can expand political, social, and Economic freedom”. This is what
PETITIONA is all about.

PETITIONA (www.petitiona.org) is a Launchpad for active engagement between citizens and government of
Nigeria in a way that it gives Citizens’ a stake in decisions that affect their
lives. Its aim is to shift the focus from a “need to know” to the fundamental right of citizens to demand to
know – “right to know”. PETITIONA
enables Nigerian Citizens to demand transparency, accountability and
responsiveness from public institutions while also offering a platform for
public servants and elected officials the chance to respond to citizens’
demands.

“Often times, Citizens only
have a chance to participate in decisions that affect their lives during
elections. This happens once every four years. We believe this can change.

“PETITIONA” is a Launchpad
for two-way interaction between Citizens and Public Service Providers. Through
this platform, Citizens can actively participate by demanding the changes they
want to see – Public Institutions can also engage with Citizens by issuing
official response to such demands.

We are aware that the
Nigerian Government is trying to engage with Citizens trough the Presidency
Office for Digital Engagement (PODE) but Citizens Engagement is not about informing
Citizens about what is about to happen or what has already happened. Rather, Citizens
Engagement is a complete feedback loop which entails exchange of information
between Citizens and their Government. It is two-way feedback loop (top-down
and bottom-up). It is deliberately designed to strengthen responsiveness and
transparency which will ultimately lead to improvements in quality of public
service as well as more effective public institutions (Dayo Akin-Balogun).

PETITIONA is grounded in the relevant parts of the Nigerian Constitution
(especially Section 14 (2) (a) and (c), It also agrees with the spirit and
letters of the Freedom of Information Act which
mainly guarantees unfettered access to public information as well as other International Compacts on Citizens Participation, Open
Government, Equal Opportunity, Government Transparency, Accountability and
Responsiveness and so on. Its main aim is to
enable the participation of people in their government. Sign up at www.petitiona.org – Make your
voice count.

Dayo Akin-Balogun is a
Lawyer, Business Analyst and Founder of iSPEAK FOUNDATION (authors of
petitiona)

@dayo_speaks.

Emmanuel Ohiri – Money Judgment;Unclogging the wheel of Justice

by Legalnaija | Aug 30, 2016 | Uncategorized

Introduction

The
legal mantra, “a winning party has a right to enjoy the fruit of his judgment”
has been greatly abused in Nigeria. Justice delayed is justice denied even
though litigation under the Nigerian judicial system is more often than not
protracted. Once a claimant initiates an action, it is reasonable for him to
expect that the match will result in a penalty shootout after warming up,
playing till full time and extra time. This is largely due to the various
administrative hurdles, professional antics and unscrupulous practices, which
plagues the administration of justice system in Nigeria (a huge topic for another day).

A
tool usually deployed by legal Practitioners to choke the delivery of justice
and ensure the triumphant party merely obtains a Pyrrhic victory is by
obtaining an order for stay of execution. This order prevents the successful
party (Judgment Creditor) from being rewarded by the losing party (Judgment
Debtor). Whilst the rules of court provide for various ways of enforcing
judgments, the defeatist attitude of litigants in Nigeria and sadly as well as
their solicitors, lead to frivolous applications for stay of execution before
the ink is dry on the judgment. [I may have prepared one or more of such applications
in my experience ;-)]. For fear of being chastised by the Court of Appeal (in the case of trial courts),
and under the guise of preserving the “Res”, Nigerian courts have cultivated
the habit of granting applications for stay of execution of judgments it has
toiled over the years to deliver. In my opinion, these courts usually fail to
consider the circumstances of each case and or the weight of evidence adduced
by the Applicants before granting such orders. This is unjust especially in the
case of money judgments.

Stay of Execution of a Money Judgment

A
Judgment Creditor is entitled to reap the benefits of a judgment delivered in
his favour until the same is set aside. Nevertheless, an unsuccessful litigant
may apply for stay of execution but he must show substantial reasons for
wanting to deprive the successful party of the fruits of his judgment. There
are however exceptional and special circumstances that may warrant the
deprivation of a successful party of the fruits of his money judgment. These
circumstances are entirely at the discretion of the court. The court is
required to consider the equal right to justice of both parties. The Supreme
Court’s decision in U.B.N
Ltd v Odusote Bookstore Ltd may shed some light on this point,
as the court held: A
discretion that is based (sic) in favour of an appellant for stay but does not
adequately take into account the respondent’s right to justice is a discretion
that has not been judicially exercised”.[1]

In
considering the parties’ equal right to justice, the law stipulates that one of
the circumstance where a Judgment Debtor should be allowed to retain the
judgment debt pending appeal, is where there is a pending valid appeal before
the superior court and the Judgment Creditor consents to such an arrangement.
See U.B.N Ltd’s case
referred to above. Consequently, where an appeal has not been entered at the
superior court and the Judgment Creditor has not consented to the Applicant
retaining the judgment sum, the court has no power to permit the Applicant to
hold the same.

Responsibility of the Court

As
an application for stay of execution is an exercise of the equitable powers of
the court, an Applicant for a stay of execution of a money judgment must
approach the court with clean hands by exhibiting in its affidavit, its last
audited annual statement of account to provide the court with full and frank
knowledge of its financial position. The court has held that in the case of a
company, the law enjoins it to prepare an audited annual statement of account showing
its assets, which will include its reserve (if any) and liabilities. Where it
fails to do so either through neglect to disclose relevant facts or suppression
of them, it has not shown readiness for fairness and equity[2].

This
means that the equitable powers of the court may only be invoked where the
Applicant had provided the court with detailed proof (in its affidavit) of its
assets and liabilities. This requirement is more critical where the Applicant
has either claimed poverty or opulence as the basis for grant of stay of
execution. The requirement formed the basis of the decision of the Court of
Appeal in Chukwu v.
Onyia[3], where the Court of Appeal per Uwaifo JCA held as
follows: “That is the only
way the court can best exercise its discretion to grant or refuse the stay.
Bare assertions of poverty or opulence by him do not assist, afortiori when the
facts are suppressed or misrepresented by him. Arguments based on them make a
ritual of the principles and in effect invite the court to exercise its
discretion on nothing other than those principles, or indeed on false facts,
instead of upon true and full facts guided by the principles. This does
incalculable harm to the course of justice.”(Underlining ours)

Conclusion

It
is important that the court should refuse to grant applications for stay of
execution of a money judgment where Applicants fail to exhibit their financial
statement or a breakdown of their assets and liabilities towards enabling the
court invoke its equitable powers. A Judgment Creditor should not be denied the
fruit of his judgment on insubstantial grounds or lack thereof in the
Applicant’s affidavit. At the very least, the court should invoke its power to
order the payment of the judgment debt to the Chief Registrar of the court, who
shall in turn deposit the same into an interest yielding deposit account in a
reputable commercial bank pending the determination of the appeal[4].

[1]
(1994) 3 NWLR (Pt 331) 129 at 150 – 151

[2]
Guinea Insurance Plc. v. Monarch Holdings Ltd. (1996) 3 NWLR pt. 436 p.365 @371
G-H

[3]
(1990) 2 NWLR pt.130 p.80 @84-85 H-B

[4]
Kwarapoly vs. Oyebamiji (2008) 3 NWLR (part 1075) page 459, Kopek Construction
Ltd vs. Ekisola (1998) 10 NWLR (part 568) page 120.

Emmanuel Ohiri

TNP

Emmanuel Ohiri is a vibrant and dynamic young lawyer with a high level
of intellectual curiosity, passion for perfection and tactical
proficiency.

Ed’s
Note – This article was originally posted here.

TyLegal – Is life imprisonment suitable for rapists?

by Legalnaija | Aug 30, 2016 | Uncategorized

The Kaduna state government has proposed life imprisonment
for rapists, especially where minors are involved. Try as one might, it is
difficult to comprehend why a man will rape anyone at all, much less a minor.
Short of being mentally deranged, I cannot think of any excuse for such…

While the proposition of life imprisonment is very
commendable, some people are of the opinion that it is a lenient punishment.
They have instead opted for other penalties such as maiming, castration,
various forms of inhumane treatment or the definite price, the death penalty.

Though some may argue that these are extreme measures and are
not in line with the laid down laws, it can also be argued that the victims of
these rape incidents are marred for life. They suffer various levels of
self-blame, depression, anger, shame, intimidation and fear. They are exposed
to sexually transmitted diseases, unwanted pregnancies, uterine fibroid,
amongst many other negative effects and only a few are able to rise above such
horrific incidents to live a fulfilling life. Some who are sexually abused at a
young age may require treatment for the rest of their lives.

Be that as it may, we must also bear in mind that both male
and female are affected by these heinous acts. Lots of young boys and girls
these days suffer different forms of sexual abuse from older ones, especially
those they trust. This makes it difficult for them to trust reliable people who
truly care about them when they grow up.

Victims of sexual assaults are advised to do all or any of
the following:

§ Go
to a safe place, call a family member or trusted friend who can provide the
needed support.

§ Preserve
all physical evidence and report the crime to the police immediately.

§ Get
medical care as soon as possible.

§ Write
down as much as can be remembered including a description of the attacker.

§ Speak
with someone who is trained to assist sexually assaulted victims.

The healing process is usually a long one and some victims of
sexual assault tend to suffer from the effects for the rest of their lives.
Which brings us back to the question, why should the perpetrator of a sexual
assault be allowed to carry on living, even if it is behind bars? Perhaps, the
world would be a safer place without such perpetrator in it?

What do you think?

Photo credit:LiveLeak

Ed’s Note – This article was originally published here

Busayo Adedeji – Corporate and Individual Liability Under The Immigration Act (2015)

by Legalnaija | Aug 29, 2016 | Uncategorized

The immigration act was
recently reviewed/amended and same was signed into law by former president
Goodluck Jonathan before leaving office in 2015. The law (upon signing by the
then president) immediately became effective as the principal law regulating
immigration in Nigeria.

Some of the sections
detailing corporate and individual offences/punishments under the act are
highlighted below:

The act expressly prohibits persons’ order
than citizens of Nigeria from accepting employment anywhere in Nigeria (except
same is offered by the government) without the consent of the Comptroller
General of Immigrations (CGI) being first sought and obtained.[1]

The act
goes further to state “no person other
than a citizen of Nigeria shall on his own account or in partnership with any
other person, practice a profession or establish or take over any trade or
business whatsoever or register or take over any company with limited liability
for any such purpose, with the consent in writing of the Minister”.[2]

The
act states that any person desirous of entering Nigeria shall produce to an
immigration officer consent of the CGI failure of which attracts a fine of One
Million Naira (N1,000,000) or deportation
or both as a prohibited immigrant.[3]

Where a person formerly exempted from the
foregoing provisions of the act ceases to be so exempted, he shall be deemed as
a person seeking entry in to Nigeria for the first time and the foregoing shall
apply to such a person.

The CGI may revoke a permit or reissue it on
such terms and conditions as he deems fit, failure to comply with the
directives of the CGI attracts imprisonment for a term of 5 years or a fine of
Two Million Naira (N2,000, 000) or
both.

Any expatriate
person who fails or neglects to apply for the:

1. Regularization of his stay in Nigeria
within the stipulated period;

2. Renewal of his business visa, transit,
visitors pass, or Temporary Work Permit (TWP); or

3. Renewal of his residence permit after thirty
(30) days of the expiration of same is guilty of an offence and is liable to
imprisonment for a term of three years or a fine of Five Hundred Thousand Naira
or both.[4]

The act expressly prohibits the discharge,
re-designation and change of employment of an expatriate employee without the
consent and approval of the CGI first sought and obtained. The implication of
this is the employer, employee and their dependents (if not Nigerian citizens)
being deported and business wound up.[5]

It is an offence under the act to alter,
produce or reproduce a travel document.

The act also makes provisions for punishments
for offences that have not been captured by the act, the punishment in such
cases are imprisonment for a year or a fine of One Hundred Thousand Naira (N100,000), in the case of the offender
being an agent the punishment shall be imprisonment for ten years or a fine of
Two Million Naira (N2,000,000).

It is pertinent to state
that the new immigration regime under the new CGI has shown zero tolerance for
issues relating non-compliance, has investigations and invitations of erring
corporations are the order of the day. Despite the foregoing corporations and
individuals alike should always seek the assistance of an immigration lawyer
when immigration issues arise.

Busayo Adedeji is an Associate in the
corporate and commercial, corporate immigration, employment and labour, banking
and corporate finance practice group of Bloomfield Law Practice; and advises multinational
and local clients on matters such as regulatory compliance, trade unions,
labour and employment, dispute resolution etc.

Email: busayo_adedeji@outlook.com

Image
credits: https://tarrantgreenparty.wordpress.com

[1]
Section 36(1)(a)

[2]
Section 36(1)(b)

[3]
Section 36(2)

[4]
Section 57 (5)

[5]
Section 58

Chukwudi Ofili – Perfection of Security Documents and the Practice of Upstamping in Nigeria

by Legalnaija | Aug 29, 2016 | Uncategorized

In Nigeria, debts are typically secured
through the use of guarantees, mortgages, fixed and floating charges and
pledges of real, personal, tangible and intangible property belonging to the
debtor or a guarantor of the debtor. Security created in favour of a lender for
providing debt financing is documented using different forms of security
documents.

In order to perfect security documents,
such documents must be stamped at the stamp duties office and registered at the
Corporate Affairs Commission (CAC). For certain assets such as real property
which require the consent of the Executive Governor of the state where the real
property is situate, such consent must be obtained to perfect the security
created under such document. The statutory obligation to stamp documents that
transfer or create a proprietary interest in assets is provided for under the
Stamp Duties Act (SDA) with specific emphasis on sections 3, 23 (1) and (4) of
the SDA. In addition, a charge created by a company to provide security to a
lender is void against a liquidator and such lender (as a creditor of the
company) unless it is registered with the CAC within 90 days of creation.

However, in large financing
transactions, the stamp duty payable in respect of a security document could be
very high (and in certain cases, prohibitively so). It is not uncommon
for lenders to a financing to agree that the borrower may pay stamp duty on
only a portion of the secured amount rather than the whole secured amount, with
a further assurance from the borrower that the full stamp duty will be paid on
a future date or upon the occurrence of certain events. This practice is
known as “upstamping”. Until the security document is upstamped, any such
lender is only protected up to the amount expressed to be secured and a lender
may lose priority to any subsequent security granted on the charged assets
during the period between the initial stamping and the full upstamping of the
security document.

The Implication of Upstamping on
Lenders

Neither the SDA nor the Companies and
Allied Matters Act (CAMA), stipulate that a security document that secures a
credit facility must be stamped and registered for the exact amount extended to
a company or person. However, where a security document is stamped for an
amount lower than the facility amount, the lenders will only be permitted to
prove for and realise the security for the secured amount i.e. the amount
for which that lenders has stamped and registered his security. CAMA
recognises the right of parties to commercially structure their transactions
such that the security documents can be stamped for an initial amount and then
subsequently up stamped for an additional amount.

Pursuant to section 202 of CAMA, any
additional amount for which a security document is up stamped will be valid and
effective to the extent of such increased amount. The lenders would only be
permitted to prove and realize the security for the full facility amount or a
higher amount only upon the security document being up stamped (i.e. payment of
additional stamp duty) to cover the facility amount or the higher amount being
sought to be recovered.

Potential Risk to Lenders in Enforcing
Security

There is a risk that prior to the
lenders up stamping the security document for the full facility amount,
intervening third party interests might have arisen (i.e. under other third
party security), thus raising pertinent priority issues where another creditor
has acquired an intervening proprietary interest. If prior to an up stamping to
secure additional amounts, another creditor advances money to the borrower, and
perfects its security interest over the same assets that form the
subject-matter of the lenders’ security, that creditor will rank ahead of the
lenders’ interest as it relates to the subsequent up stamped additional amount
to be secured but lenders will still have priority in respect of original
amounts for which the security was perfected.

Hardening Period

Another risk lenders face in an
upstamping scenario is that an agreement to upstamp to secure additional
amounts, might be viewed as a fraudulent preference in the event of insolvency
of the borrower. See section 495 of CAMA. This “hardening period” rule,
and the resultant effect is that the additional / up stamped security interest
would be void against the liquidator of the borrower and enable the liquidator
claw-back any such payments or cancel such acts. Arguments can be made whilst
referring to decisions of English courts on the fact that a preference is not
fraudulent by essentially showing that the dominant motive for such preference
is not to prefer certain creditors to the detriment of others. It should
however be noted that such arguments are only persuasive to Nigerian courts as
Nigerian courts are not bound by the decision of English courts; they are only
of persuasive authority.

On the flip side, where the dominant
motive was to carry out a pre-existing obligation, or to keep on good terms
with a creditor, it is likely that Nigerian courts will follow English courts
in holding that in such circumstances the preference is a fraudulent
preference. It is important to note that there are no Nigerian law decisions on
this point, however, Nigerian courts are likely to follow English courts on
this point.

Addressing the Residual Risks of
Upstamping

The risks identified above, while
adopting the upstamping regime, can be mitigated by:

1. Establishing an
upstamping regime in the relevant loan documentation;

2. Using a negative
pledge clause restricting the borrower from creating any additional security
over its assets;

3. Using automatic
crystallization provisions in the security documents for floating charges to
crystalise into a fixed charge when there is an attempt to create security over
the assets in favour of a third party; and

4. Establishing a stamp
duty escrow account to hold the balance of the perfection costs to enable
lenders upstamp at will.

The options highlighted in (1) to (4)
above are by no means exhaustive as other options have not been discussed in
this paper.

Chukwudi Ofili is
a Senior Associate in the corporate and commercial, banking and corporate
finance practice group of Bloomfield Law Practice; and advises on matters such
as local and foreign currency syndicated lending, leases
transaction/structured/project finance, structured trade finance, energy and
natural resources, due diligence issues and advisory services, foreign
investment advisory services, taxation and real estate.

Ed”s Note – This article was originally published by the author here.

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