Doing business in Nigeria has never been effortless, with numerous obstacles impeding the progress of a successful business operation; many businesses have failed due to the crippling factors that influence the free operation of businesses in Nigeria. Access to capital, government regulations, power supply, corruption, and payment of exorbitant taxes are just a few of the factors that affect the affect ease of doing business in Nigeria.
The Business Facilitation (Miscellaneous Provisions) Act (the “Act”) became law when, on February 14, 2023, the President of the Federal Republic of Nigeria, Muhammadu Buhari, signed the bill passed by the Senate in December 2022 to ensure ease of doing business in Nigeria.
The objective of this law is to facilitate doing business in Nigeria by promoting transparency, efficiency, and productivity. It is also expected to economic expansion and institutionalizes all reforms for easier implementation.
This Law/Act amended several business-related laws to wit: the Companies and Allied Matters Act (CAMA), the Immigration Act, the Investment and Securities Act, and the Trademark Act, among others.
HIGHLIGHTS OF THE ACT:
- The Act requires all ministries, departments, and agencies (MDAs) of the Federal Government to publish a full list of requirements to acquire the products and services as part of its transparency requirements. Additionally, MDAs are now required to notify applicants of their approval or rejection of their applications within the timeframe specified in their published list. An application for a product will be considered approved and granted if it is not completed within the allotted time frame. Additionally, the MDA is required to inform the applicant of the rejection along with the reasons for it if an application is denied within the deadline.
- Significant Amendments To Business-Related Laws
- THE COMPANIES AND ALLIED MATTERS ACT 2020
- Increase in share capital
The Act amends section 127 of the CAMA, particularly the Procedure for increasing share capital, so that companies may now increase their share capital in a general meeting or through a resolution passed by the Board of Directors.
This amendment eliminates any constraint or limitation which a company may experience where it seeks to increase its share capital without the requirement of a
general meeting of its shareholders. The shareholders must, however, at the general meeting or in the company’s articles have authorized the board to issue such resolutions. Where it is not already provided in the articles, a company may have to amend its articles to empower the directors to increase its share capital. The company may also, in the alternative, have its members sign a resolution empowering the directors to do so and setting the parameters for the exercise of this authority.
- Pre-emptive Rights of Shareholders:
The Act modified Section 142 of the CAMA 2020 to limit the enforcement of pre-emptive rights to private companies, thus removing the requirement for public companies to first give freshly issued shares to their current shareholders in proportion to their existing shareholdings. Furthermore, the BFA stipulates a limit of 21 days for current shareholders to approve or refuse the offer of shares.
- The new threshold for determining insolvency
According to Section 572(a) of CAMA 2020, a company was deemed to be unable to pay its debt (and thus insolvent) when it is indebted to a creditor for a sum exceeding N200,000 and has neglected to pay the same three (3) weeks after the creditor has issued a demand notice on it.
However, the provision has been amended by the BFA to replace the ₦200,000 requirement with a sum to be determined by a regulation issued by the Corporate Affairs Commission.
- Number of Independent Directors for Public Companies:
Section 275 of the CAMA has been modified by the Act to require that a public company’s independent directors constitute at least one-third of the overall number of directors. Accordingly, anyone nominating candidates for the Board must propose at least one-third of the total number of Independent directors, as opposed to the prior minimum of three. Prior to this change, public companies had to have at least three (3) independent directors.
- CUSTOM AND EXCISE MANAGEMENT ACT LFN 2004
The BFA 2023 modifies the Customs and Excise Management Act by mandating the establishment of a single window platform for trade facilitation in Nigeria. The definition of “single window” in the act is a platform or facility that allows parties involved in trade and transport to lodge trade import, export, or transit data required by governments and MDA.
- INVESTMENTS AND SECURITIES ACT (ISA)
The BFA 2023 amended Section 67 of the ISA by allowing private companies to issue shares to the public, subject to regulations by the Securities and Exchange Commission.
- THE PATENT AND DESIGNS ACT
The Patent and Designs Act (the “PDA”) was modified by the BFA 2023 to incorporate a new paragraph “13A,” which states that the Minister shall establish by regulation the process for the application, grant, use, and revocation of compulsory licenses under this paragraph.
The Minister may make arrangements for the issuance of compulsory licenses for copyrighted goods and processes that have been deemed to be of legitimate significance under the authority of paragraph 13 of the First Schedule to the Patents and Designs Act. This new provision has undoubtedly brought more clarity to the paragraph.
- INDUSTRIAL TRAINING FUND ACT (ITF ACT)
The BAF 2023 modifies Section 6 of the ITF Act by relaxing the eligibility requirements for contributions, thus allowing any company with 25 or more workers in their workplace who are not working in a trade zone to contribute 1% of their yearly salary to the Fund. Similarly, any provider with more than 25 workers must adhere to all legal requirements regarding the payment of training contributions to the fund.
- NIGERIAN EXPORT PROMOTION COUNCIL ACT
Section 2 of the Nigerian Export Promotion Council Act (“NEPC Act”) was amended by the BFA 2023 to specify the membership of the Board, which shall consist of the Chairman appointed by the President and other representatives of the Federal Ministries (including Industry, Trade and Investment, Mines and Steel, etc.) and a representative of agencies such as the Bank of Industry and Central Bank, among others.
In conclusion, the provisions of the BFA, as well as its amendments to extant Nigerian laws, are a praiseworthy and welcome development. The changes are commendable because they seek to address the concerns of businesses. It is anticipated that the regulations governing MDA operations will result in a more streamlined and open commercial environment in the Nigerian economy.
Email us: [email protected]