WEEK 3 OVERVIEW OF LEGAL FRAMEWORK &

REGULATORY BODIES ON CORPORATE LAW PRACTICE IN

NIGERIA

Nigerian company law is part of Nigerian heritage from the English

legal system imposed since colonial days. Before 1912, there was no
local companies statute in force in Nigeria but only foreign companies
operated in the country and they were governed by the laws of their
different countries.

The first local companies legislation was promulgated in 1912 as the

Companies Ordinance 1912 which was based on the U. K. Companies
Act 1908 which was then the current statute in England. This Ordinance
applied only to the colony of Lagos, and in 1917, it was amended and
extended to apply to the whole country. In 1922, the two Ordinances
were repealed and replaced with the Companies Ordinance 1922 which
was subsequently amended in 1929, 1941 and 1954. In 1968, the
Companies Act Cap. 37 of the 1958 Laws was repealed and replaced by
the Companies Act 1968. The 1968 Act was a marked improvement on
the previous law. For example, it made mandatory provisions for
accounts and encouraged greater accountability of directors and more
effective participation of shareholders in the affairs of the company. The
most fundamental change made by the Act was the introduction of Part
X, which required foreign companies intending to carry on business in
Nigeria to be incorporated locally. This Act was however replaced by
the Companies and Allied Matters Act, 1990 now redesignated to
Companies and Allied Matters Act, 1990 and now 2004.

PRINCIPAL LAWS ON CORPORATE LAW PRACTICE

The principal laws are: the Companies and Allied Matters Act, 2004;
The Nigerian Investment Promotion Commission Decree, 1995;
Industrial Inspectorate Act; The Nigerian Enterprises Promotion (Issue
of Non-voting Equity Shares) Act 1987; Investment and Securities
Decree; The Immigration Act 1963; The Industrial Development
(Income Tax) Relief Act; and Foreign Exchange (Monitoring and
Miscellaneous Provisions) Decree.

REGULATORY BODIES ON CORPORATE LAW PRACTICE

There are 3 principal institutions or bodies which are statutorily vested

with regulatory, supervisory and controlling authority over companies
and their activities in Nigeria. These are the Corporate Affairs
Commission (CAC), Securities and Exchange Commission (SEC), and
Nigerian Investment Promotion Commission (NIPC).

FEATURES AND FUNCTIONS OF THE REGULATORY

BODIES AND THEIR RELEVANCE ON CORPORATE LAW
PRACTICE

Corporate Affairs Commission

This is the apex of the regulatory bodies for companies in Nigeria, which
was established under section 1 of the CAMA as a body with full legal
capacity like incorporated companies. Thus, it has perpetual succession
and a common seal, capable of suing and being sued in its corporate
name, of acquiring, holding or disposing of any property, movable or
immovable, for the purpose of carrying out its functions.

The establishment of the Corporate Affairs Commission as an

autonomous body was as a result of the perceived inefficiency and
ineffectiveness of the erstwhile Company Registry, a department within
the Federal Ministry of Commerce and Tourism which was then
responsible for the registration and administration of the repealed
Companies Act of 1968.

Features of CAC

The features are that the commission has a membership of 15 persons

representing a wide variety of interests – the business community,
labour, the legal profession, accountancy profession, Manufacturer’s
Association of Nigeria, association of Small Scale Industries, the
Institute of Chartered Secretaries and Administrators, the Securities and
Exchange Commission and the Ministries of Trade and Tourism,
Finance and Economic Development, Justice, Industry, and Internal
Affairs. The chairman who is appointed by the president must be a
person who is experienced in or has acquired specialized knowledge of
corporate, industrial, commercial, financial or economic affairs and is
thus able to make outstanding contributions to the work of the
constitution – section 2 of the commission.

There is a provision for a Registrar-General of the commission who

must be a person who has qualified to practice law in Nigeria for not less
than 10 years and he must have had experience in company law practice
or administration for not less than eight years. He is entitled to represent
the Commission in legal proceedings in court – section 10

Members of the commission other than ex-officio members hold office

for 5 years and are eligible for re-appointment for another 5 years. With
the exception of the Registrar, generally, they are all part-time members
– section 3 of the commission.

A member of the commission ceases to hold office, if he becomes of

unsound mind or is incapable of carrying out his duties, if he becomes
bankrupt or has made arrangement with his creditors, if he is convinced
of felony or any offence involving dishonesty.

Members, other than the representatives of the Ministries, the Securities

and Exchange Commission, the Institute of Chartered Securities and
Administrators and the Registrar-General are entitled to such
remuneration and allowances as the president may direct – section 4.
The quorum for meetings of the Commission is five excluding the
representatives of the Institute of Chartered Secretaries and
Administrators, the Securities and Exchange Commission and the
Ministries – section 5(3).

Functions of CAC

The functions of the Commission as set out in section 7 of the

Companies and Allied Matters Act, includes the following:

 To administer the Act, including the regulation and supervision of

the formation, incorporation, management and winding up of
companies;
 To establish and maintain companies registry and offices in all the
states of the Federation suitably and adequately equipped to
discharge its functions under the Act or any law in respect of
which it is charged with responsibility;
 Arrange and conduct an investigation into the affairs of any
company where the interests of the shareholders and the public so
demand;
 To undertake such other activities as are necessary or expedient for
giving full effect to the provisions of the Act.
The relevance to corporate law is that the Commission also registers
Business Names, and Incorporated Trustees as well as provides a wide
range of ancillary services.

Securities Exchange Commission

The Securities and Exchange Commission (SEC) is the apex regulatory

body for Nigeria's capital market. It however, operates under the
supervision of the Federal Ministry of Finance. The Securities and
Exchange Commission, Nigeria, like other exchange commissions
elsewhere, regulates the operation of capital market transactions,
ensuring that the relevant rules are complied with

The business of capital formation and mobilisation is at the root of

economic development, which is why every economy wants to develop
its capital market. Capital markets drive capital mobilisation and
allocation to businesses, in the push for economic growth. Through the
capital market, companies and governments mobilise capital for
investment, while offering opportunity to investors to seek profitable
outlets for their funds. Because complex financial processes are often
involved, and large numbers of investors participate, the need for
guarding the mechanism for those transactions becomes apparent.
Investors need to be protected, just as the process needs to be kept
viable.
The Securities and Exchange Commission as it is today, is the outcome
of the Investments and Securities Act (ISA) No 45 of 1999. However, its
seed was actually sown in 1962, when the Capital Issues Committee, an
arm of the Central Bank of Nigeria, was set up to evaluate applications
from companies wanting to raise capital from the market and
recommend for approvals. That committee transmuted to the Capital
Market Commission in 1973 and the Securities and Exchange
Commission in 1978, by virtue of Decree No. 7 of 1979. The Investment
and Securities Act No. 45 of 1999 finally sought to broaden the
operation of the Commission and refocus it for more impact on
economic growth.

Features of SEC

The features of the Commission are that it consists of a chairman

appointed by the president and ten other persons including two full-time
Commissioners who must be persons with ability, experience and
specialized knowledge in capital market matters – section 2 of the
Commission. There is a Director-General for the Commission. He is
appointed by the President and he is the Chief Executive of the
Commission.

Functions of SEC
The Securities and Exchange Commission, Nigeria, broadly has a
responsibility to regulate the capital market and ensure that investors are
protected. That means ensuring that processes increasingly get
transparent and that transaction rules are complied with.

 It scrutinises parties that apply to operate in the capital market as

market operators and licenses those considered suitable. Such
operators include: issuing houses, securities dealers/stockbrokers, sub-
brokers, registrars, trustees, capital market consultants, reporting
accountants, solicitors and investment advisers etc.
 Securities for issue to the investing public are also scrutinized and
registered by the Securities and Exchange Commission. A party
intending an issue must apply to SEC for approval. These include:
Equities/shares, debentures/industrial loans, government bonds and
collective investment schemes.
 It is the Security and Exchange Commission's responsibility to license
transaction floors and exchanges, including: Securities Exchanges
(like stock exchanges), Commodities Exchanges and Capital Trade
Points, Futures, Options and Derivatives Exchanges as well as
Depository, Clearing and Settlement agencies like the CSCS.
 Major financial transactions like mergers, acquisitions, takeovers and
other forms of business combinations must also have the blessing of
the Securities and Exchange Commission.
 SEC has a monitoring role over the capital market. That role is to
ensure fair practices that will advance the market and attract more
investment inflow. It extends to ensuring good corporate governance
for the quoted companies which, among other things, have a
responsibility to deliver timely and reliable reporting to the investing
public.
 As investors, it's good to know, too, that the Commission adjudicates
on transaction disputes, in addition to receiving and treating
investor/operator complaints. Parties that are aggrieved over market
transactions and fail to get a fair treatment elsewhere can take their
case to SEC. Often, defaulting parties receive the big stick.

The relevance to corporate law is that The Securities and Exchange

Commission is consequently there to see to the orderly and rapid
development of the capital market. Its basic role is to ensure transparent
conduct, such that parties that take decisions, especially on investments,
do it on the strength of good information and sound processes. By that, it
is to attract more funds into the market and also attract more viable
companies that could expand their operations by tapping funds from the
capital market.

Nigerian Investment Promotion Commission

This was established in 1995 as a body corporate with perpetual
succession under the NIPC Decree, 1995. The commission shall
encourage, promote and coordinate investment in the Nigerian economy.

Functions of NIPC

 To be the agency of the Federal Government to coordinate and

monitor all investment promotion activities to which this Decree
applies;
 Initiate and support measures which shall enhance the investment
climate in Nigeria for both Nigerian and non-Nigerian investors;
 Promote investments in and outside Nigeria through effective
promotional means;
 Provide and disseminate up-to-date information on incentives
available to investors;
 Assist incoming and existing investors by providing support
services;
 Evaluate the impact of the Commission in investments in Nigeria
and recommend appropriate recommendations; and
 Maintain liason between investors and ministries, government
departments and agencies, institutional lenders and other
authorities concerned with investments.

One Stop Investment Commission

In its continuous effort to encourage Foreign Direct Investment (FDI) in
Nigeria, the Federal Government established the One Stop Investment
Centre (OSIC) otherwise known as One Stop Shop (OSS) on 21 st March
2006.

Nigeria like most African nations has set up statutory bodies to regulate
foreign investment in the country. Therefore foreigners interested in
carrying on business in the country are required to obtain investment
approvals after incorporating their companies. The practice has been that
company incorporation and foreign investment approvals are processed
in different authorized government agencies. This process was
characterized by delays usually caused by government bureaucracy
which also stifled the smooth start up of foreign businesses in Nigeria.
In a bid to ensure the timely incorporation of companies and grant of
investment approvals, the government had in the early 1990’s set up the
Industrial Development Commission Committee (IDDC) to serve as a
one stop agency for all pre-investment approvals. The IDDC had the
statutory responsibility to grant Business Permits, Approved Status-in-
Principle, Expatriate Quota, approvals on fiscal concessions, vet
licensing and transfer agreements and generally advise the Federal
Government on policy matters designed to promote the industralisation
of the country.
Although the law establishing the IDDC provided that every valid
application received would be processed within two months, this
expectation was rarely ever met in practice. The IDDC Act was
subsequently repealed by the Nigerian Investment Promotion
Commission (NIPC) Act 1995 which established the NIPC to encourage
and promote investment in Nigeria. Companies with foreign
participation are required to apply to NIPC for registration and the
statute provides that within 14 days from the receipt of completed
registration forms, NIPC shall register such companies or otherwise
advice the applicant accordingly.

Functions of OSIC

This includes simplifying and curtailing the procedures and guidelines

for issuing business approvals, permits and authorizations by eliminating
bottlenecks faced by investors in establishing and running businesses in
Nigeria.
In addition, OSIC is expected to achieve the following functions:
 Reduce the high cost of doing business
 Eliminate dealing with multiple agencies
 Eradicate the use of discretion and lack of transparency in granting
approvals, licenses, permits
 Eliminate over bureaucratization in procedures and processes
 Eradicate poor service delivery
 Ensure Foreign Direct Investment and investor tracking

Features of OSIC

 The participating agencies will maintain their existing mandates

and responsibilities within the structure of OSIC
 Only statutory provisions will be administered at OSIC and not
special applications
 Agencies will establish their presence at OSIC in phases
 Approval time for business entry approvals is 24 hours
 OSIC covers investments into all sectors of the economy
 It is mandatory for all foreign investors to register with OSIC to
facilitate foreign direct investment tracking/investor tracking as
provided in the NIPC Act.

PROCEDURE FOR ACCREDITATION WITH CAC

1. Application fee of N2,500 for individuals and N5,000 for firms

2. Return of completed application form accompanied by:
(a)Two passport photographs
(b) Qualifying certificate (Bar Certificate – photocopy)
 (c) Practicing fee receipt at least for the year of application
(d) NYSC discharge cert.

PROCEDURE FOR ACCREDITATION WITH SEC

COMPLETION OF FORMS REQUIRED FOR

ACCREDITATION

1) Reservation of name Form;

2) The business name;
3) The general nature of the business or proposed activities;
4) The full address of the principal place of business, and every other
subsidiary place of business;
5) Where the registration to be effected is that of a firm; the present
forenames and surnames, nationality, age, sex, occupation and
usual residential address of each of the individuals who are
partners, and the corporate name and registered office of such
corporation, which is partner;
6) The date of commencement of the business or activities;
7) Passport photographs duly certified in the case of sole
proprietorships or firms consisting of individual;
8) Certificates of professional proficiency in cases of sole
proprietorships or partnerships or firms intending to carry on any
professional business.
 It should be noted that additional information and supporting
documents may be required in the case of a firm or an individual
carrying on business on behalf of another individual, firm or
corporation whether as nominee or trustee and in the case of a firm or
individual carrying on business as general agent for another concern or
entity overseas and not having a place of business in Nigeria.

ETHICAL ISSUES INVOLVED

Engagement in business - Rule 7(1) of the RPC states that unless

permitted by the General Council of the Bar (hereinafter referred to as
the “Bar Council”), a lawyer shall not practice as a legal practitioner
at the same time as he practices any other profession.

Rule 7(2) states that a lawyer shall not practice as a legal practitioner
while personally engaged in –

(a) The business of buying and selling commodities;

(b) The business of a commission agent;
(c)Such other trade or business which the Bar Council may from time
to time declare to be incompatible with practice as a lawyer or as
tending to undermine the high standing of the profession

Rule 7(3) states that for the purpose of this law, “trade or business”
includes all forms of participation in any trade or business but does not
include –
 (a) Membership of the Board of Directors of a company which
does not involve either executive, administrative or clerical
functions;
(b) Being Secretary of a company; or
(c)Being a shareholder in a company.

Lawyers in salaried employment – Rule 8(1) states that a lawyer,

whilst a servant or in a salaried employment of any kind, shall not
appear as advocate in a court or judicial tribunal for his employer except
where the lawyer is employed as a legal officer in a Government
department.

Rule 8(2) a lawyer, whilst a servant or in a salaried employment, shall

not prepare, sign, or file pleadings, applications, instruments,
agreements, contracts, deeds, letters, memoranda, reports, legal opinion
or similar instruments or processes or file any such document for his
employer.

Rule 8(3) a director of a registered company shall not appear as an

advocate in court or judicial tribunal for his company.

Rule 8(4) a lawyer in a full-time salaried employment may represent his

employer as an officer or agent in cases where the employer is permitted
by law to appear by an officer or agent, and in such cases, the lawyer
shall not wear robes.
Rule 8(5) an officer in the Armed Forces who is a lawyer may discharge
any duties devolving on him as such officer and may appear as a Court
Martial as long as he does so in his capacity as an officer and not as a
lawyer.