DOING BUSINESS IN NIGERIA: UPDATE ON REQUIREMENTS FOR OBTAINING A MONEY LENDER’S LICENSE IN LAGOS STATE

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By Aderonke Alex-Adedipe and Feyijuwa Akinyanmi

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Introduction
Money lending has from time immemorial been a part of the Nigerian economy and was borne as a result of the desire for individuals and businesses to secure access to funding. Currently, companies in Nigeria, interested in carrying on the business of providing credit facilities have the opportunity of considering several licensing options, including the Money Lender’s License. Generally, the Money Lender’s License is preferred by businesses because it is less capital intensive and the procedure for its application is less cumbersome in comparison to other licenses.

In today’s article, we highlight briefly, the  stages as well as the current requirements for obtaining a Money Lender’s License in Lagos State.

Who is a Money Lender?
The Lagos State Money Lenders Law (the “Law”) provides that any person who lends money at interest or who lends a sum of money in consideration of a larger sum being repaid will be regarded as a money lender until proven otherwise. Institutions such as co-operative societies, banks, insurance companies and licensed pawnbrokers are excluded from this classification under the Law.

Procedure and Requirements for Obtaining a Money Lender’s License in Lagos State
A company intending to procure a Money Lender’s License (Applicant) must fulfil the requirements listed below.

1. Application to the Magistrate Court
The Applicant is required to submit an application to any magistrate court of Lagos State for documents (“Magistrate’s Ordinance”) indicating that the Applicant is fit and proper in terms of character and disposition. The application to the magistrate court is to be accompanied by: (i) the incorporation documents of the company; (ii) the Tax Identification Number (TIN) of the company; and (iii) police clearance certificates issued on behalf of all the directors. Upon satisfactory review of the application, the Magistrate’s Ordinance will be issued by the court to the applicant.

2. Application to the Lagos State Ministry of Home Affairs and Tourism (the” Ministry”)
Upon issuance of the Magistrate’s Ordinance, the Applicant is required to apply to the Ministry for the issuance of the Money Lender’s License. The application is to be made in form of a written application on the Company’s Letterhead. The application letter is to be accompanied by:
(i) copies of Tax Clearance Certificates of all directors of the company (for past 3 years);
(ii) the Tax Clearance Certificate of the company;
(iii) incorporation documents of the company
(iv) a reference letter from the company’s bankers;
(v) proof of payment of the Money Lender’s License fee in the sum of N200,000 (Two Hundred Thousand Naira);
(vi) proof of payment of fees for the application form in the sum of N25,000 (Twenty-Five Thousand Naira); and
(vii) evidence of police clearance of all directors of the company.

Requirements for Companies with Foreign Participation
Companies with foreign directors must have at least one Nigerian Director. In addition, the foreign directors must have permits to live and  do  business in Nigeria.

Furthermore, Applicants who have foreign shareholders or ultimate beneficial owners (in the case of a foreign corporate shareholder) are now also required to present proof of residency to the Ministry.

3. Inspection of the Official Address of the Applicant
Upon satisfactory review of the above-listed documents, the officials of the Ministry will conduct a visit to the official address of the Applicant. The visit is conducted to ensure that the Applicant’s business is a potential going concern. Where the officials of the Ministry are satisfied that the Applicant has complied with all statutory requirements, the Money Lender’s License will be issued. The Money Lender’s License is valid for a period of one year and the applicant will be required to renew the license annually to continue to carry on business as a money lender.

Conclusion
The requirements for obtaining a Money Lender’s License varies from state to state and are periodically reviewed by the relevant state ministries. While the above highlights the current requirements for obtaining the license in Lagos state, the Ministry in some cases, applies discretion on a case by case basis and may require additional information when necessary. It is therefore prudent that intending applicants make enquiries to ensure that the above requirements are applicable.

THE REGULATION OF TECHNOLOGY COMPANIES IN NIGERIA – THE PROPOSED NITDA ACT 2021

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By Seun Timi-Koleolu and Eustace Aroh

The National Information Technology Development Agency (NITDA) was created under the NITDA Act 2007 (the “Act”) to implement the Nigerian Information Technology Policy and coordinate general Information Technology development in Nigeria. NITDA, however, recently shared a proposed law with stakeholders titled the National Information Technology Development Agency Act 2021 (the “Bill”) which if enacted would repeal and replace the Act.

In addition to repealing the Act, the bill seeks to establish a framework for mandatory licenses to be obtained by Technology companies from NITDA; expand the regulatory oversight of NITDA; and generally, foster the development of the Nigerian information technology sector and the digital economy. In this article, we have analysed the provisions of the Bill.

  1. Companies to be Regulated

The Bill grants power to NITDA to regulate and license companies involved in digital services, products and platforms. This includes companies that use any digitally enabled system in the provision of service or products; and companies that carry out a business within the information technology space in Nigeria.

  1. Licensing and Registration Requirement

One of the major changes proposed under the Bill is the introduction of mandatory licenses to be obtained by companies regulated by it.  More specifically, it states that operators within the information technology and digital economy sector are to apply and obtain licences and authorisation from NITDA to operate. Furthermore, it provides that companies that fail to obtain the requisite license may be guilty of an offence and subject to a fine of N30,000,000 or imprisonment of its principal officers.

The Bill seeks to create three categories of licenses namely: (i) Product Licence, (ii) Service Provider Licence; and (iii) Platform Provider Licence. The Bill, however, does not clearly state the factors that would be considered by NITDA in determining which of the licenses a company is to obtain.

In addition to issuing licences,  the Bill empowers NITDA to maintain a register of operators within the information technology and digital economy sector and publish the register for the general public’s information.

  1. Tech Companies to be Levied

Similar to the Act, the Bill establishes the National Information Technology Development Fund (NITDF) to be used for advancing the nation’s digital economy objectives and related purposes. The NITDF will be funded by a levy of 1% of the profit before tax of regulated companies, amongst other funding sources set out in the Bill.

It is pertinent to note, that the existing Act already requires certain companies to pay a similar levy to NITDA which was however limited. The Bill now seeks to extend the list of the companies required to pay levies as follows:

i.mobile and fixed telecommunications companies;

ii.information technology, e-commerce companies; (new)

iii.digital platform operators and providers; (new)

iv.foreign digital platforms targeting the Nigerian market; (new)

v.pensions managers and pension-related companies;

vi.banks, financial institutions and companies providing financial services using information technology tools;

vii.insurance companies; and

viii.such other companies and enterprises as determined by regulations from time to time by the Agency. (new)

  1. Other Notable Changes

The Bill seeks to empower the NITDA, with support from the Standard Organisation of Nigeria, to develop standard requirements for operators within the information technology space. The Bill also confers a duty on NITDA to regulate amongst other things, the use of digital signature and digital contracts; and the use of data for business analytics and intelligence.

Conclusion

An Act that seeks to uniformly and fairly regulate the technology sector and startup space in Nigeria would be a welcome development. The Bill appears to be an attempt at achieving this uniformity. This, however, cannot be achieved by NITDA in silos. The effect of a standalone regulation like the Bill is that companies in the tech space in Nigeria would be over-regulated and weighed down with excessive levies and licensing requirements.

To successfully regulate the Tech space, NITDA must work with other regulators such as the Central Bank of Nigeria, the Securities and Exchange Commission, the Nigerian Communications Commission, and the National Insurance Commission to streamline licences, levies and develop regulations that adequately govern the activities of Tech companies without stifling their growth.

In addition to the foregoing, there are certain ambiguous terms in the Bill that should be clarified which includes terms like “operators within the information technology and digital economy”, “foreign digital platforms targeting the Nigerian market” and “digital economy”. Furthermore, the licensing categories to be established by the Bill should be clarified to ensure companies are clear on the licence they are to obtain.

REQUIREMENTS AND PROCEDURE FOR REGISTRATION OF TRADEMARKS IN NIGERIA

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By Aderonke Alex-Adedipe and Feyijuwa Akinyanmi

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Introduction

Over the years, trademarks have gained prominence around the world as one of the most important intangible assets of any business. Trademarks play a crucial role in branding as they provide businesses and their products with a unique identity. Today’s article will discuss the requirements and procedure for registration of trademarks in Nigeria.

What is a Trademark?

A Trademark may be defined as a mark or combination of marks used to individualize the goods or services offered by a business and distinguish them from those offered by other businesses[1]. Trademarks are important in the world of business as they are indicators of the origin and quality of goods and services. They also enable businesses to distinguish their products from those of competitors in the market.

Registration of a trademark gives the owner, the rights to use, sell and/or license the trademark to the exclusion of all others. Trademarks may take the form of a name, signature, logo, word, letter, device, numeral or a combination of these.

Registrable Trademarks in Nigeria
An important criterion for the registration of a trademark in Nigeria is that such trademark must be distinctive. Trademarks which are deceptive, scandalous or identical to an already registered trademark in respect of the same goods or service are not eligible for registration in Nigeria.

It is pertinent to note that trademark registration in Nigeria is done in accordance with the Nice Classification established by the Nice Agreement of 1957, which provides for the classes of goods and services under which business owners may apply for the registration of their trade mark. Business owners are required to register their trade mark under the class which the business description of the trade mark falls. The implication of this is that the trade mark will only be protected under the class in which the trademark is registered by the business owner.

Procedure for the registration of a trademark in Nigeria
Registration of trademarks in Nigeria is done at the Trademarks, Patents and Designs Registry, of the Federal Ministry of Industry, Trade and Investment (“Registry”). An applicant is required to appoint an accredited agent to conduct the registration on his behalf through a power of attorney in the prescribed form. The procedure for registering the trademark is summarized below:

i. Conduct an availability search: The accredited agent is required to conduct an availability search at the Registry, to determine whether the mark is available under the relevant class. Where the trademark is not in conflict with any existing trademark, under the relevant class, the accredited agent can proceed to register the mark;

ii. Application-Acknowledgement: Upon confirmation of the availability of the trademark, the accredited agent will be required to fill the relevant statutory application form detailing the personal information of the owner of the mark as well as the name and/ or specimen of the logo or mark which the applicant intends to register. Upon submission of the application form and payment of the required fees, the Registry will issue an Acknowledgement Form to the accredited agent confirming receipt of the application;

iii. Acceptance: Upon acknowledgement of the application, the trademark will be examined by the Registry to confirm its distinctiveness and to ensure that it is not in conflict with any previously registered trademark. An Acceptance Form will be issued where the trade mark is deemed satisfactory by the Registry;

iv. Publication of the Trademark: After the Acceptance Form has been issued by the Registry, the trademark application will be published in the Trademarks Journal. The publication is a public notification to interested parties who may have any reservations on the registration of the trademark. Any person who may have an objection to the registration of the trademark is required to file same with the Registry within 2 months of the publication; and

v. Issue of a Certificate of Registration: Where no objection is filed against the registration of the trademark or where such objection is withdrawn or overruled, the applicant will be issued a Certificate of Registration by the Registry.

It is important to note that a trademark registration is valid for a period of 7 years at the first instance and subsequently renewable every 14 years after.

Conclusion

Presently, many businesses suffer from counterfeiting, imitation and other forms of infringement. While the registration of trademarks alone is not sufficient to prevent these, businesses are encouraged to register their trademarks, as the registration of the mark confers registered holders with the right to enforce it against others.

[1] Introduction to Trademark Law & Practice, authored by World Intellectual Property Organization.

SETTING UP A FINTECH COMPANY IN NIGERIA

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By Seun Timi-Koleolu and Eustace Aroh

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Introduction

With the rapid growth of technology, Start-ups have continually found ways to improve financial services. This trend has been matched by the growing appetite of consumers globally, for faster and more convenient financial services. The financial sector in Nigeria has witnessed a growth in FinTechs with their revenue expected to reach $543m in 2022.

In this article, we have set out below the process of setting up a fintech company in Nigeria.

1. Licences
For promoters seeking to set up a FinTech, it is generally advised that they understand the existing regulatory space before proceeding to incorporate the business. This will help promoters to understand the acceptable organisational structure, share capital requirements and financial implications attached to any business they seek to engage in.

Fintechs in Nigeria are generally categorized and regulated as follows:

Fintech categories Regulators
i Payment service providers, mobile money operators, digital bank, switch companies Central Bank of Nigeria (CBN)
ii Lending CBN; State Ministry of Home Affairs
iii Savings, investment and funding CBN; Securities and Exchange Commission (SEC)
iv Cryptocurrency CBN; SEC
v Insurtech National Insurance Commission

Notwithstanding the above, some regulators cut across all sectors due to their general regulatory function such as the National Communications Commission (NCC) (for FinTechs providing value added services) and the National Information Technology Development Agency (NITDA) (for users of data, amongst other things).

2. Incorporation
Once there is a clear understanding of the regulatory terrain, the next step is to incorporate the company for the FinTech service. Although the minimum share capital for incorporating a private company in Nigeria is 100,000 naira, the share capital requirement for FinTechs usually exceeds this amount. Promoters must consult the regulators and relevant laws (via their legal advisers) to determine the adequate minimum share capital and shareholding requirement for their FinTech.

There are also capital deposits required by relevant regulators such as CBN for setting up FinTechs, to find out more, click here.

3. Documentation
Upon incorporation, it is pertinent for the founders to ensure that all relevant contracts are in place to properly protect the business. The founders are generally advised to execute the following: a Founders’ Agreement (to regulate the relationship of the founders of the business); a Shareholders’ Agreement (to regulate the relationship between all shareholders including present and future shareholders); Loan Agreements (to evidence and detail all capital injections including investments by founders and friends into the business); and Employee Stock Option (granting an option of share purchase to key employees).

4. Protecting the Intellectual Property

Founders of FinTechs are advised to ensure that intellectual property developed in the cause of the business are protected. It is important that the company’s logos are registered as trademarks at the Trademark Registry; and the software and codes are registered at the National Copyright Commission or Patent Registry (if it qualifies). Although software and codes are automatically copyrighted under Nigerian law, it is useful to carry out the registration of the software at the relevant registry.

It is pertinent to note that intellectual property rights automatically vests in the developer (which could be employees or contractors of the company) under Nigerian law. To ensure that the rights vest in the company/founder, it is advisable that the FinTech enters into an agreement with the developer assigning rights in the software to the company/FinTech either through an employment contract or a Copyright Agreement.

5. Financing

Founders may choose to first source for funds from family and friends, after which they may need to progress to venture capital and other institution.

The CBN and the SEC recently launched programs to aid FinTechs in test running their software under-regulated spaces. Click here to find out more about these programs.

Conclusion
With the population of unbanked Nigerians currently calculated at above 50% of the adult population, there are great growth opportunities in the FinTech ecosystem. It is, however, recommended that professional advice is obtained by emerging and existing FinTech founders from the inception of the FinTech, to properly guide the business.