“In the sense that he
tackled the stifling role of government in our economy, Bibi was not a reformer
but a revolutionary. A reform happens when you change the policy of government;
a revolution happens when you change the mindset of a country…” Ron Dermer
speaking about the financial-sector reforms implemented by Benjamin “Bibi”
Netahanyu in Israel in 2003.

The decision by the
Corporate Affairs Commission (Commission) to “review and to bring the Companies
and Allied Matters Act (CAMA) in conformity with global trends” is definitely
commendable. The CAMA is our view, the most critical piece of legislation in
the discourse around increasing FDI flows in Nigeria because of its primary
relevance to the ease of doing business and ease of investing in Nigeria. It is
refreshing to note that the Federal Government has also prioritized a possible
review of the operations of the Commission as same forms part of the reasons
for seeking emergency powers from Nigeria’s National Assembly. It certainly
would not be an exaggeration to submit that the revival of our economy can
depend, partly on the ongoing review of the CAMA. 
The approach adopted by the
Commission in welcoming proposals from professional communities is also commendable
and we hope that the collation of the proposals and the debate around the final
amendments to the CAMA will be as robust and intellectually driven. Given the
state of our economy and the need for economic revival, we affirm that ongoing
reforms must go beyond merely scratching the surface. We affirm that in
reviewing certain legislations and policies, government must be open to the
level of innovation necessary to leapfrog economic revival. If that means yanking
all that we have been used to and starting on a new note then so be it.
Government must not shy away from doing what is best in the interest of our
dear country. 
A review of some of the
changes that have already been proposed by the Commission, confirms clearly
that the Commission is positioning itself to be a more efficient regulator. One
of the proposals that we consider very strategic to the growth of
entrepreneurial activity, is our proposal for a separate legal structure
(typically referred to as the ‘One-Man Company’) that comes with the full
complement of a lower tax rate relative to the prevailing income tax rate,
lesser compliance requirements and the benefit of limited liability and
separate legal personality. The One-Man Company essentially combines some of
the benefit of a sole proprietorship and that of a limited liability company
and has been adopted in varying forms in various jurisdictions, from UK, to US
and to India as a strategy for promoting the growth of small and medium scale
enterprises and driving growth in the venture capital/private equity space.
Some of the other proposals which we consider strategic at a time of economic
revival as this include (a) clarification of the rules around ‘doing business’
in Nigeria, a principle which has been subject of litigation in a number of
cases; (b) the denomination of share capital in currencies other than the
Naira; (c) review/abolishment of rules around non-voting/non weighted shares;
(d) review/abolishment of the rules around financial assistance by a company
for the purchase of the company’s own shares; and (e) a creation of a framework
for valuation of sweat equity.
Beyond the substantive
legal issues that are subject of ongoing reforms, what is far more concerning
to us is the administrative machinery/structure for the implementation of the
CAMA, as reviewed. Legal and policy reforms can hardly achieve desired
objectives where there is no corresponding innovation around the administrative
machinery for implementing reforms. A number of proposals have been put forward
by the Commission to its administrative structure. Currently, it is being
proposed that there should be a board for the Commission and also that
nominations to the board should be accepted from the Accounting profession and
from the Institute of Chartered Secretaries and Administrators of Nigeria
(ICSAN). However, the question that we ask is: should there not be a more
elaborate debate around the administrative/implementation structure of the
Commission? We answer this question in the affirmative, especially in the light
of developments in other jurisdictions. Here are some possible legal
Trading Fund Status
A Trading Fund is
essentially a financial and accounting framework established by law to enable a
government ministry, agency or department (MDA), or part of an MDA, to adopt
certain accounting and management practices that are adopted in the private
sector. A number of attributes differentiate a Trading Fund from a typical
MDA. These include (a) A Trading Fund operates on a self-financing basis and
does not thrive on subvention or funding from the legislature to finance its
daily operations. Consequently, staff cost and other expenses are paid out of
the revenues of the Trading Funds (b) A Trading Fund does not normally aim to
make a ‘profit’ and the fees charged by a Trading Fund are usually for the full
cost of services provided or on a cost recovery basis. A Trading Fund will
usually fix its fees and charges in accordance with own financial target, which
is normally to earn an average rate of return on capital employed at a
pre-agreed, often regulated percentage, the primary objective being the need to
achieve a reasonable rate of return based on the fixed assets employed. (c) As
opposed to the practice whereby operating surpluses are remitted to the Government,
surpluses are retained as reserves and can be re-invested to enhance existing
services and explore new business opportunities (d) A Trading Fund has
significant flexibility in human resources and staffing.
It is important to note
that a Trading Fund remains part of the Government in the sense that its assets
would remain government assets and its staff would remain civil servants. The
underlying philosophy of a Trading Fund is that an institutional change would
provide the appropriate flexibility in management of resources and help nurture
a new working culture that will improve services in terms of both quality and
cost-effectiveness. A number of jurisdictions have introduced the concept of
trading funds as part of public service reforms aimed at driving a more
customer-focused service culture and achieving sustainable improvements in
efficiency, cost effectiveness and in developing new services. The trading fund
model has been used with considerable success in a number of jurisdictions and
across a number of traditional government agencies including immigrations, post
offices, and corporate and public registries, The Companies House in UK is
organised as a Trading Fund. Without a doubt, the Trading Fund structure can be
used for other government MDAs as part of ongoing economic reforms. From a
structural standpoint, the implementation of a Trading Fund will require
passing a bill into law and the execution of requisite framework and service
level agreements between the relevant MDA, here the Ministry of Trade and
Investment and the Commission.
Registry Operator
It is also possible to
restructure the Commission in such a way as to decouple the ‘registry’ function
of the Commission from its core regulatory functions. This structure has the
potential of making the Commission a more efficient regulator as it will enable
the Commission to focus more on its core functions of administering the Act and
also strengthening its capabilities to conduct investigations into the affairs
of any company where the interests of the shareholders and the public so
demand. Under this structure, the Commission will grant a Registry Operator’s
License, (either on a regional basis or a unitized basis) to a private
information technology/data company, seeing that the operation of a registry is
increasingly a technology/digitization-based function. This is usually by way
of a long term contract with a negotiated service level functionality based on
predefined/objective criteria. The model shares some of the contracting features
of the standard public-private partnership model but will require a number of
legal innovations to make the model sustainable. Key considerations include
data ownership, data retention and data privacy rights, retention of critical
functions by the government, management of intellectual property rights, and
management of software rights. It is also possible to implement a state-backed
guarantee as a security option in the event of a default in the integrity of
the companies’ register. This model will not only generate significant revenue
for the Commission through royalties and/or sign-on payments, as the case may
be, but also improve the delivery of services to Nigerian businesses, whilst
also ensuring that the Commission is re-engineered to effectively carry out its
core statutory responsibilities.
The argument that
privatisation will lead to unemployment is in our view, mostly, a failure of
contract and negotiation. An Operator’s License will typically be structured in
such a way as to make extensive provisions for employee training and employee
retention based on objective re-certifications, with a clear positioning that
work is available for members of staff who are ready to adapt to changing
circumstances and meet the new demands of their jobs.  In this event, the
Commission can, in the public interest, back-out the cost of such
re-examination out of royalty/sign-on payments. If anything, a modern registry
will minimize capital investment, bring more businesses into the formal economy
and encourage entrepreneurial activity.
Decentralization of
Companies’ Regulation
For some reason, it
appears that this proposition will be dead on arrival. The proposition is quite
simple. Why should companies’ regulation be a matter for the Exclusive
Legislative List? Why should trademarks, copyrights/intellectual property
regulation be a matter for the Exclusive Legislative List? The Federal
Government may need to urgently, revisit the economics of legislative power, as
part of legal and structural reforms in a time of economic revival. The Federal
Government needs to travel light. It is now no longer a question of political
power but that of economic sense. Whilst decentralization of companies’
regulation will not by itself drive efficiency as a number of innovations will
still have to be implanted by state registries, decentralization will engender
competition amongst state registries and can drive efficiency. 
The foregoing propositions
are examples of the trends we see globally in business registration and regulation.
A number of other innovations have also been implemented in corporate
registries around the world as part of public sector reforms to save costs and
drive efficiency. In Belgium, all statutory registers have been merged into a
single database under the auspices of one registrar. In Gibraltar, a private
sector company has been appointed as Assistant Registrar with full authority to
run the country’s companies’ registry. In addition to partnering with local
agencies saddled with responsibility of promoting entrepreneurship to register
new businesses, South Africa has merged the companies’ registry with the
trademarks registry to form the Companies and Intellectual Property
Registration Office. In India, a public partnership under a BOT arrangement
with a private sector operator was used to strategically develop new systems,
set-up and operating additional facilities and introducing online facilities.
The point has to be made
that there is no one-size-fits-all approach. Indeed, a variety of legal
structures can be used to implement far-reaching reforms in business
registration and regulation. However, certain goals must, in our view, be of
priority to the Commission, namely (a) substantive and administrative reforms
must be data-driven and subject to market-testing procedures; (b) the
Commission must seek to attain the highest possible standards of register
integrity; (c) the Commission must aim to reduce the burdens associated with
the provision of filing and search services; (d) the Commission must aim for digital
transformation and to become a 100% digital organisation, it should be possible
to register a business in 5-7 easy steps online; (e) the Commission must
engender an open data approach which should, amongst other things, make the
Companies’ Register, subject to relevant restrictions, accessible online.
By : Olubunmi
Olubunmi Abayomi-Olukunle
is a Managing Partner at Balogun Harold, a law firm focused on private equity
and venture capital transactions and emergig high growth-tech companies.
Olubunmi can be reached on olu@balogunharold.com and on 08060817371
Ed’s Note – This article
was originally published here.