- Introduction
Nigeria, Africa’s largest economy and second biggest market,
is an important investment destination. One of her greatest
challenges is archaic business laws. Fortunately, the past two
years, has seen remarkable and historic positive developments in
business laws. On Tuesday, the 5th February
2019, President Muhammadu Buhari, signed the Federal
Competition and Consumer Protection Act (the “FCCPA”) as
the first anti-trust and consumer protection law of Nigeria. An
anti-trust regime for Nigeria is expected to influence the wider
West African market as the Economic Community of West African
States (“ECOWAS”) has been working on a regional
anti-trust regulatory framework akin to the Common Market for East
and Southern Africa (“COMESA”). Further on Friday, the
7th of August 2020 the Nigerian
President assented to the Companies and Allied Matters Amendment
Act 2020, effectively repealing Companies and Allied Matters Act of
2004 (“CAMA 2020” of the “new CAMA”). This move
is hailed as the most significant development of Nigerian business
laws within thirty (30) years.
We have provided a brief overview of the key elements of these
changes and our view of the potential impact on our clients’
business. We have focused mostly on anti-trust provisions for the
FCCPA and ease of doing business for CAMA 2020.
- FCCPA
The objectives of the FCCPA fall into three (3) main categories:
competition, consumer protection and economic development. From the
competition perspective, the Act seeks to promote and maintain
competitive markets by eliminating restrictive or unfair business
practices that prevent or distort competition or constitute an
abuse of a dominant position. It also seeks to promote economic
efficiency. In relation to consumer protection, the FCCPA is
expected to protect consumers interests and welfare as well as
facilitate access to a wider variety of quality products.
Sustainable development of the Nigerian economy is the third leg of
the objectives of the Act.1
The scope of the FCCPA appears wide-ranging. Its provisions impact
on:
- All sectors of the economy: all
businesses fall within the scope of the Act. Even sectors that have
specific regulations in relation to competition or consumer
protection fall within the purview of the Act, - All economic and commercial
activities, undertakings and arrangements undertaken within
Nigeria: whether undertaken by individuals or corporates and
includes production and trade in goods as well as provision of
services, - Extra-territorial arrangements and
conduct: all acts, undertakings, arrangements, economic and
commercial activities having an effect within Nigeria, change of
control transactions involving acquisition of shares or other
assets ex Nigeria by individual or corporates as well as conducts
outside Nigeria carried on by a Nigerian citizen or body corporate
registered in Nigeria are within the ambit of the Act, - Commercial activities of government
agencies: at both Federal, State and Local Level.
In summary, all sectors and industries fall under the scope of
the Act. This includes all offshore arrangements which have an
effect in Nigeria, all business transactions occurring in Nigeria
as well as asset acquisition which changes control in a Nigerian
business. It is important to note however, that the FCCPA does not
apply to professional services that are subject to the regulation
of a professional body such as legal and accounting
services.
The FCCPA appears to provide a superior2
and all-encompassing framework as the provisions of all other laws
and subsidiary legislation relating to competition and consumer
protection must be read in conformity with its provisions. This
means that the Federal Government must align the current regulatory
landscape which has sector regulators determining anti-trust and
consumer protection issues, with the new Act. To that end, the
Federal Competition and Consumer Protection Commission (the
“FCCPC”), is expected to enter into agreements with
sector specific regulators within one year of the FCCPA. These
agreements are expected to streamline, harmonise and establish
efficient procedures consistent with the provisions of the Act.
The FCCPC which replaces the Consumer Protection Council, is
responsible for implementation of the Act and all other laws
relating to competition and consumer protection. The Commission is
to be run by an eight-member Governing Board. The Commission
is empowered to conduct investigations, undertake inquiries, enter
and search premises with a warrant issued by the Court, request for
information and documents, summon attendance to take evidence or
produce documents, issue directives, make orders and declarations,
undertake hearings and reach decisions. Regulation-making powers
are conferred on the Commission and these can be exercised in
relation to restrictive agreements, abuse of dominant position,
monopoly investigations, assessment of mergers, market definition,
leniency programmes, consumer protection amongst other matters. The
Commission can also issue guidelines, notices as well as procedural
and enforcement rules.
The Act also establishes a Competition and Consumer Protection
Tribunal (The “Tribunal”) to hear appeals from or review
any decisions of the Commission as well as sector specific
regulators in the area of competition and consumer protection.
However, decisions from sector specific regulators must first be
heard and determined by the Commission before such appeals can be
heard by the Tribunal. The decisions of the Tribunal must be first
registered with the Federal High Court in order to be enforceable.
Appeals from the decisions of the Tribunal lie with the Court of
Appeal.
The anti-trust provisions contained in the new law cover five
(5) elements namely:
- Restrictive agreements,
- Prohibition of “abuse of
dominance”, - Monopoly,
- Price regulation,
- Merger control.
The introduction of the FCCPA repeals all aspects of the
provisions of the Investments and Securities Act of 2007
(“ISA”), which empowered the Securities Exchange
Commission as the principal merger regulating authority. The
Act is now the principal statute for all mergers, acquisitions and
joint ventures, with the assistance of any regulations and
guidelines issued by the Commission from time to time. Sector
specific legislation such as the Nigerian Communications Commission
Act of 2003 and the Electricity Power Sector Reform Act of 2005 are
disempowered where competition regulation is concerned. The Act
maintains the distinction of notifiable and non-notifiable mergers
of ISA. The Act does so by defining “small mergers”, as
those not requiring notification as they fall short of the
threshold whilst “large mergers” are notifiable as they
fall within the threshold. Transacting parties to any large merger,
cannot implement any transaction without first filing a merger
notification and obtaining approval from the Commission. Any
contravention deems the transaction illegal and attracts a penalty
of up to 10% of the business’ turnover.
All merger transaction assessments follow the formal channels
and procedures set out by the Commission, hence there is no room
for an accelerated process, only standard timelines apply.
The Commission publishes its decisions in the government gazette
and any grievances may be taken up to the Tribunal for
determination.
- CAMA 2020
CAMA 2020, tackles Ease of doing business, introduces new
structures of business organisations, company management, company
securities, mergers and acquisitions, and insolvency matters. The
new CAMA introduces four (4) additional parts that include the
following: Limited Liability Partnerships, Limited Partners,
General (Administrative Proceedings Committee), and another part
for Incorporation of Companies and Incidental matters. The
introduction of Limited Liability Partnerships and Limited
Partnership combines the flexibility and tax status of a
partnership with the limited liability status of members of a
Company. There are more options for incorporation in Nigeria with
additional practical business advantages to these set-ups.
Furthermore, businesses domiciled in Nigerian states without a
Limited Partnership Law like Lagos State may now set up limited
liability partnerships and limited partnerships.
CAMA 2020 walks the talk on ease of business. It is now possible
for one person to incorporate a private company and the objects of
a company are now unrestricted. 3Furthermore, such
onerous requirements as a mandatory “declaration of
compliance” by a legal practitioner have been removed. It is
no longer necessary to get a lawyer to certify that
pre-incorporated documents are compliant with the law, hence
applicants can simply file a statement of compliance. 4
It is also particularly important to note that CAMA 2020
deliberately attempts to make business more affordable in Nigeria,
especially using technology. Documents can be signed electronically
and accepted as valid. 5 Private companies
can now hold Annual General Meetings (“AGMs”),
electronically and notices of meetings may be issued via electronic
mail. 6Small companies
(private companies with turnover of not more than
N120million/USD304,000 and net assets not exceeding
N60m/USD152,000)7, need not appoint
a company secretary,8nor are they
subject to audit requirements. 9 Further, filing
fees for registration of security interests at the Corporate
Affairs Commission (“CAC”) has been significantly
reduced. Release of charges used to be 1% (private companies) and
2% (public companies) of the value of the charged assets. The total
fee payable to the CAC shall not exceed 0.35% for both private and
public companies, effectively cutting costs in debt financing by
65% and 82.5% respectively.10
Foreign investors will be encouraged to know that CAMA 2020
attempts to bring transparency and security to doing business in
Nigeria. Disclosures are now required of persons with significant
control (i.e. persons who hold 5% or more of the voting rights) in
private and public companies11 and limited
liability partnerships.12 The CAC will
also maintain a register of such persons which will contain the
information received from companies, thereby increasing
transparency and discouraging such illicit acts as “asset
shielding”. CAMA 2020 entrenches strict corporate governance
principles for public companies with the separation of CEO and
Chairman as well as restricting multiple directorships (a person
cannot be a director in more than five public companies).13 Quite notably,
major transactions in private companies such as restructuring are
subject to a transparent framework, where a special resolution is
required for approval.14 Shares must be
offered to members on a “right of first refusal” before
selling outside to third parties, furthermore, shareholders cannot
sell more than 50% of company shares to a buyer who is unwilling to
buy the remainder on the same terms and conditions. Assets of more
than 50% of the value of the company’s total assets require
unanimous consent of members.15These are key
provisions that foreign investors need to be aware of for financial
planning purposes.
- Conclusion
Both FCCPA and CAMA 2020 are welcome developments in Nigerian
business. FCCPA, brings confidence to investors that there are
concrete efforts to levelling the playing field across sectors.
There is still much work to be done in implementation framework as
there is need for harmony between the FCCPC and sector regulators.
Further, the FCCPA needs to give more teeth to the enforcement
mechanism particularly the Tribunal with criminal sanctions instead
of just administrative penalties. CAMA 2020 has significantly
modernised the process of incorporation and governance of business
structures whilst making it more affordable for stakeholders.
Foreign investors, however, are advised to be more vigilant now as
this shifting landscape means greater scrutiny of businesses across
the entire value chain from set-up, administration and governance
to transacting.
Footnotes
1.
Section 1 FCCPA
2.
Section 104 FCCPA gives supremacy of the FCCPA over other sectoral
laws dealing with competition and consumer protection.
3.
Sections 18 (2) and 35 (1), respectively.
4.
Section 40
5.
Section 101
6.
Sections 240 (2) and 244 (3)
7.
Section 394(3)
8.
Section 330
9.
Section 402
10.
Section 222
11.
Section 119
12.
Section 791
13.
Section 256 (6)
14.
Section 849(1)
15.
Section 22 (2) (a)-(c)
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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