DOING BUSINESS SIMPLIFIED – CLAIMING FORCE MAJEURE DUE TO BUSINESS DISRUPTIONS FROM COVID-19

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As our leaders, health workers and we all continue to battle the spread of Covid-19 worldwide, we are aware that businesses are also battling the effects of Covid-19 on their operations. A lot of  industries have been hit due to lockdowns, travel bans, closed ports, amongst other government measures put in place.

A major question arising amongst businesses struggling to meet contractual obligations, is whether or not they can rely on the Force majeure clauses in their contracts to gain relief from performance of their existing contractual obligations due to Covid-19 pandemic.

If you are affected in this manner, we have set out below some useful information on Force Majeure to guide your next steps in this regard.

What is a Force Majeure clause?

A  Force Majeure clause is a contractual term which enables a party cancel or suspend or delay performance of an obligation under a contract as a result of an event beyond their control. Force Majeure events include an act of God, war or military operations, outbreak of diseases, acts of government, change of government laws and policies, etc.

What must I do to claim Force Majeure as a result of Covid-19?

  • Confirm existence of Force Majeure Clause– The first step is to confirm that there is a Force Majeure clause in your contract.

 

  • Confirm the event qualifies as a Force Majeure event: It is necessary to review the  Force Majeure clause to confirm that the particular reason for your delay or inability to perform is within the definition of the Force Majeure Event.  For instance, where your failure to perform is directly caused by Covid-19, you may be in a position to claim “Pandemic”  or “Epidemic” as the Force Majeure Event. If it is as a result of measures put in place by government to battle the spread of the virus, it may fit into “Act of Government”.

 

If you are uncertain as to if the reason for the delay falls within the definition of Force Majeure Events in your contract, it is advisable you seek legal assistance.

 

  • Show that the Force Majeure Event is beyond your control:  You must also show that the event was beyond your control (unless your contract does not require you to prove this).

 

  • Show causation: You are also required to show that your inability to perform is directly attributable to the Force Majeure Event i.e.you were prevented, delayed or hindered by reason of the Force Majeure event from performing your duty under the contract.

 

  • Show you took steps to mitigate effect: You must also show that you took steps to avoid the effect of the Force Majeure event but these steps were to no avail; or that there were no reasonable steps that you could have taken to avoid or mitigate the Force Majeure event and its consequences on your ability to perform.

I think I have a case for Force Majeure. What steps should I adopt now?

If you are clear that you have a right to claim Force Majeure, you must follow the requirements of the Force Majeure clause in your contract (as guided by your lawyers) in order to successfully rely on it.

Your contract would typically require you to adopt the following steps:

  1. Notification of the other party: Immediately notify the party of the occurrence of the Force Majeure event and describe, at a reasonable level of detail, the circumstances causing such delay or inability to continue the performance of the contract.

 

  1. Reasonable efforts: Use reasonable efforts to perform (or recommence performing) your obligations including through the use of alternative sources and workarounds, where possible.

 

  1. Notification of Cessation of Force majeure Event. Upon cessation of circumstances leading to the Force Majeure event, notify the other party of such cessation and resume performance as agreed with that party.

When can I terminate the Contract based on Force Majeure?

The terms of your contract would clearly state the period of time the Force Majeure event should have continued for before you are permitted to terminate. For instance, it may state that “where the Force Majeure event continues for a long period e.g. thirty (30) days or more depending on the contract, either of the parties may terminate the contract upon giving notice of such termination to the other party”.

Conclusion

It is important to understand that Force Majeure clauses do not automatically relieve businesses of their obligations under contracts including in the current Covid-19 situation. In order to confirm you can rely on the Force Majeure provisions in your contract, the clause must be carefully reviewed by you or your lawyer to confirm that your reason for your non-performance meets the requirements of the Force Majeure clause.

The Place of Data Protection in Nigeria amidst the Global Pandemic

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The world is faced with one of the most serious global health security threats in decades – COVID-19. As we struggle to seek remedies, companies, organisations and governments have begun to make decisions to restructure their processes to fight against its continuous spread.

Amidst these mitigating measures, the need for compliance with privacy laws have never been more crucial. In Nigeria for instance, many of these measures involve the collecting and processing of personal information of Nigerian Citizens including sensitive information (such as health data). Data Privacy regulations seek to compliment rather than hinder the management of public health for the purpose of fostering openness of affected patients.

Companies, health care givers, journalists and governmental organisations who are concerned with implementing those mitigating steps (“Data Controllers”), should consider the following as they implement their safeguards to curb the spread of COVID-19 within Nigeria:

Collecting and Processing

At the point of collection of personal information, the consent of the individual (‘Data Subject”) should be obtained. However, the Nigeria Data Protection Regulation (NDPR) permits that where consent cannot be obtained, the data may be collected where there is a legal obligation to do so or in the interest of the general public.

In other words, to lawfully process the data obtained from a Data Subject, the Data Subject should have consented to the processing. However, where the Data Subject restricts processing of his data, the NDPR permits that the data be processed for the purpose of “public interest” in Nigeria. In addition, the Data Controller is expected to adopt a transparency policy by disclosing to the Data Subjects, the purpose of obtaining their data  and details of all third parties who will be processing the information. Only data which is necessary for the purpose of achieving   the objective should be collected and processed.

Confidentiality

Information such as name, age and gender collected by the Data Controller are to be protected. The NDPR places an obligation on the Data Controller to maintain the confidentiality of the information acquired and to minimize the access to the data. Thus, hospitals and employers of patients for example, should refrain from disclosing the identities of patients to third parties without their consent.

Accountability

Where any Data Controller is negligent which leads to a data breach, the Data Controller who obtained the information from the Data Subject, shall be accountable to the Data Subject. Where the Data Subject suffers any form of damage, he may bring an action and complaint against the Data Controller both in the court of law and before the National Information Technology Development Agency (NITDA).  Therefore, Hospitals, government agencies and employers in the context of dealing with information of patients, have a duty to be accountable to them, in the event of a data breach.

Erasure

The data obtained by the Data Controller must not be kept longer than required. The information is expected to be properly discarded once processing has been completed and  where it is no longer necessary to continue to store that data.

Conclusion

There is a need to create a balance between public interest and privacy rights of individuals for the effective combat of COVID-19 and other diseases. Amidst health risks, the NDPR remains operational to ensure the protection of the privacy of everyone affected.

 

CONSUMER PROTECTION IN NIGERIA

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On the 28th of February 2020, Social Media was abuzz with reports from a distressed user about the hike in the price of hand sanitizers, at over 300% of the original price, in the wake of the Corona Virus epidemic which a patient was recently diagnosed with in Nigeria. The Federal Competition and Consumer Protection Commission (the “Commission”) is the agency responsible for safeguarding the rights of consumers as empowered by the Federal Competition and Consumer Protection Act, 2019 (“FCCPA”).

The Director General of the Commission, Mr. Babatunde Irukera, through a press statement, condemned the actions of retailers who were accused of price gouging and taking advantage of the desperation of Nigerians in finding measures to curtail the virus. He immediately took steps to put an end to this arbitrary increase in prices, thereby creating awareness in the minds of unknowing consumers about the protection accorded them and the recourses available in the event of an infraction.

SCOPE OF THE FCCPA

Generally, the FCCPA aims to promote and secure a competitive market in Nigeria, endorsing efficiency in the economy and disallowing restrictive and unfair business practices.

HOW ARE CONSUMERS PROTECTED?

Under the FCCPA, rights of consumers are clearly spelt out. A few of these rights are highlighted below;

Due Consideration of consumers’ interests

Where retailers engage in obnoxious practices or the exploitation of consumers, the Commission has the responsibility of ensuring that complaints received from consumers are provided adequate attention and redress. In other words, as in cases of arbitrary price hikes, it is the duty of the Commission to investigate and provide remedies for complainants.

Right to disclosure of price of goods or services

Specifically, the FCCPA requires that the price of goods or products and services must be distinctly and clearly stated (by manufacturers, distributors or retailers) in a position where consumers can easily identify them.  Prices must be displayed in the currency of Nigeria (N) in a conspicuous location close to the product or in a brochure or catalogue available to the consumer.

Product labelling and descriptions

Products must be accurately labelled and described to the consumers ensuring they are not misled. Product labelling refers to any written description about the product which is either placed close to the product, any advertisement made in connection to the product and any label attached to the product.

 

CONCLUSION

Suppliers, Producers and Manufacturers must take note of consumers’ rights under the FCCPA so that they are aware of their compliance requirements under the FCCPA and the possibility of being sanctioned where they are found to be in breach.

 

 

Data Driven Marketing; How far is too far?

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The world is currently in an era termed the “Experience Economy”. Joseph Pine II and James H. Gilmore in their 1998 Harvard article described the world’s economic progress in the following terms:

Agrarian economy –>

i.e. consumers purchased farm products directly

 Industrial economy –>

i.e. consumers purchased processed products. —->

 Service economy –>

i.e.  consumers relied on service providers. —->

 Experience economy

i.e. consumers now seek memorable/personalised experiences.

 

To attract and retain customers in today’s “Experience Economy”, businesses must now consider ways to provide personalised services/memorable experiences to its customers. This can be done by gathering insights from data to better understand the customers’ needs. These insights are then adopted to offer the customers, product tailored to their needs (Data Driven Marketing).

At our Social Media Week session titled: “Eye-spy; how far is too far?,” we discussed Data Driven Marketing within the confines of the law.  Our panellists provided valuable insights on the positive aspects of data driven marketing and the strategy to adopt to successfully carry out this form of marketing. We also discussed how far would be considered as too far in utilising the data of people (particularly in the context of the Nigeria Data Protection Regulation) and agreed that data must be used responsibly to avoid infringing on the privacy of users.

Here are certain points your business should note from the Nigeria Data Protection Regulation (NDPR) as you develop your own Data Driven Strategy:

  1. obtain the consent of the consumers (Data Subjects) before collecting data;
  2. collect only data required by your business whilst ensuring that the data is stored in a safe place;
  3. before data can be transferred to any third party, the Data Subject must consent to the transfer (this can be done with a properly drafted and accepted privacy policy);
  4. display a simple and easy-to-understand privacy policy that states, amongst other things, the remedies available to the Data Subject in the event of a breach;
  5. appoint a Data Protection Officer (DPO) (within your organisation or outsourced) who will ensure that that the company complies with all data protection regulations;
  6. where you process personal data of 1000 data subjects within a period of 6months, you are required to submit to a desktop audit by a Data Protection Compliance Organization licensed by National Information Technology Development Agency (NITDA); and
  7. where you process personal data of over 2000 data subjects in a period of 12 months, you are required to file reports with NITDA by March 15 yearly.

For more information on the foregoing, contact us at info@pavestoneslegal.com

 

 

 

 

 

THE NEW NIGERIAN VISA POLICY: KEY FEATURES TO NOTE

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On February 4, 2020, the Federal Government of Nigeria introduced a new Visa Policy (“VP”) which aims at transforming the visa application and issuance process and providing better access to foreign investors, tourists and other persons visiting Nigeria for legitimate purposes.

The VP also seeks to promote the agenda of the Presidential Enabling Business Environment Council tasked with driving foreign investment into Nigeria and ultimately improving the Nigerian business environment.

Some major highlights of the VP are discussed below.

  1. Expansion of Visa Classes. The VP increases existing classes of visas from 6 to 79 and categorizes them into 3 namely:

(a) Short Visit Visas: This category of visas allows foreigners to visit Nigeria for a period 3 months for tourism, meetings and other business purposes. This category of visas applies to journalists, artistes, clerics and professionals requiring short visits to perform their specific tasks in Nigeria.

(b) Temporary Residence Visas: This category of visas applies to individuals who wish to reside in Nigeria for employment, studies, amongst others.

(c) Permanent Residence Visas: These classes of visas are for foreign investors who are willing to live, work and invest from $250,000 to $100 Million in Nigeria, depending on the class of visa, spouses and dependants of Nigerian citizens,  and individuals who possess skills that are not locally available in Nigeria. Note that this category of visas does not confer an automatic right to work in Nigeria.

  1. Application Channels and Procedure. The policy also provides for the channels through which foreigners and tourists can apply for Nigerian Visas namely:

(a) Visa on Arrival: The new policy mandates the Nigerian Immigration Service to issue visas on arrival to tourists and visitors from African Union countries and Nigerians holding passports of other countries as a result of naturalization, at the port of entry (excluding land borders) upon producing their international passports, evidence of hotel accommodations or letters of invitation and return tickets.

(b) Electronic Visa: This channel allows intending visitors and tourists to apply for visas online and obtain pre-approval permit if they meet the requirements, before entering Nigeria.  This channel is a welcome development for tourists and visitors who reside in countries where Nigeria does not have embassies and missions.

(c) Visas at Nigerian Embassies/Missions or Visa Application Centres: Under this channel, visa applications are processed at the Nigerian embassies or designated centres and issued here upon approval.

  1. Implementation. To aid the implementation of the VP, the Federal Government has also set up the International Civil Aviation Organization Public Key Directory (ICAO-PKD) Global Platform (a central repository for exchanging the information required to authenticate e-Passports) at all International Airports in Nigeria to facilitate the authentication of travel documents. This will enable a seamless and efficient clearance system at the International Airports in the country. Furthermore, this reduces the chances of criminals beating the system.

Conclusion.

The VP is a welcome development as it is expected to improve the Nigerian business environment and if properly implemented, it will attract foreign direct investment and boost tourism without compromising national security.

Wills and Codicils: Key Elements to Consider

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Sometime last month, the world was shocked by the sudden demise of the 41-year-old basketball legend, Kobe Bryant. As the world continues to grieve, many have been awakened to the unexpected nature and inevitability of death. In the wake of death however, lies pressing matters such as succession and inheritance which can be swiftly dealt with by way of adopting the instructions of an existing will, if any.

Wills and Legal Regulations?

A Will is basically a testamentary message of the deceased to his family and friends about the disposition of his real and personal property with the backing of the law subject to minor limitations. In Nigeria, the national law on Wills remain the Wills Act of 1837 and the Wills Amendment Act of 1852. However, States have constantly enacted laws to regulate the creation of wills and the administration of the estates considering modern changes such as the Wills Law of Lagos State Cap W2 2004.
Oral Wills
The act of disposing property dates to old traditions of oral disposition of property on dying bed usually called Oral Will. However, the statutes and even customary law do not validate these dispositions unless they satisfy some conditions:
1. it must be voluntarily made;
2. the testator must have a sound mind;
3. the beneficiary must be named;
4. it must be in the presence of witness and
5. the property must be specifically mentioned

Key Elements to consider

To be protected under the legal regulations, a Will is required to comply with a few requirements.
The testator must have the capacity to make the Will. In Lagos, the testator must be at least 18 years old. This varies according to the state of residence of the testator. In some states, the age minimum is 21 years. However, the requirement of age does not affect soldiers in active military service, seamen and crew of a commercial airline.

The testator must be of sound mind at the time of giving the instruction for the drafting of the Will and at the time he is executing the Will. Furthermore, he must not be under undue influence or fraud.

Finally, the Will must be executed by the testator in the presence of two witnesses. Those two witnesses must also execute the Will in the testator’s presence.

Occasionally, a testator may want to include a few instructions for the family such as burial arrangement. This is usually included in a separate sheet attached to the Will because Wills are usually read after burial rites.

Conclusion
Constantly, the laws are being reformed to make succession a smoother process. Certainly, global standard is yet to be attained however, the mechanisms in place are sufficient for deciding the bequest of property and avoiding the rules of custom, appointing executors and guardians including trustees under the Trustee Investment Act.

Financial Services In Nigeria: Difference Between MMOs, PSBs, and MFBs

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Mobile Money Services (run by Mobile Money Operators [MMOs]), Microfinance Banks (MFBs), and Payment Service Banks (PSBs) are three different financial services under which some companies in the financial sector operate to provide the unbanked and underbanked access to beneficial financial tools. Separate licenses are acquired to provide these services.  However, due to the similarity in the financial services, the differences between them are sometimes unrecognisable. In the table below, we compare the functionalities, capabilities and restrictions of MMOs, MFBs and PSBs.

 

SERVICES  MMOs PSBs MFBs
Minimum Capital N2 Billion N5 Billion N200 Million- Unit

N1Billion – State

N5Billion – National
Service Area No restriction 25% operations in rural areas Physical restriction depending on type (Unit, State, National).
Loans Not Permitted Not Permitted Permitted
Bank

Accounts/Wallets

Bank   Led:   Bank

Account/Wallet

Non-bank   Led:

Wallet only

 Wallet only Bank   Account/

Wallet
Transfers (In/Out) Permitted Permitted [except from public and no forex transaction] Permitted   [no foreign transactions or foreign electronic transfers]
Airtime Purchase Permitted Permitted Permitted
QR Code Payments Permitted Permitted Permitted
USSD Service Permitted (subject to NCC consent) Permitted  (subject to NCC consent) Permitted (provided letter of no objection is issued by the CBN)
NIBSS Connection Required Required Required
Cards Debit Debit Debit & Credit
Agent Banking Permitted Permitted Permitted
Who Can Operate  Banks

Tech Coys

 Telcos

MMOS

Supermarkets

Courier coys

Fintech Companies

 Individuals, companies, or

foreign investors

In conclusion, MMOs, MFBs and PSBs offer services that are similar but not quite the same. It is important that investors and users of services under these platforms are aware of the functions and limitations permitted and imposed by the licenses before investing in or procuring the services of companies using these platforms.

The Finance Act 2019: Impact on Startups and SMEs

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On the 13th of January, President Muhammadu Buhari assented to the Finance Bill 2019, which is now known as the Finance Act 2019 (the “Act”). Following this, the Minister of Finance announced February 1 as the commencement date of the Act. In our previous post, we detailed some of the key changes made to the various tax laws. This week, however, we identity the effects the Act will have on startups and Small and Medium Scale Enterprises (SMES) in Nigeria.

New Basis for Charging Companies Income Tax (CIT)

Startups and SMES may pay 0% CIT due to the new basis of computing CIT. Though, this depends on their annual turnover. The Act exempts small companies (defined as companies with turnovers of less than ₦25,000,000) from paying minimum tax. In addition, medium sized companies (with turnovers between ₦25,000,000 – ₦100,000,000) are now required to pay a lesser rate of 20% as CIT; however, the former CIT rate of 30% is still applicable to large companies (with turnovers above ₦100,000,000).

  Digital Tax Introduced

An interesting amendment to the CIT Act is that its provisions will now apply to companies providing online/digital services or goods and who have significant economic presence in Nigeria. This deviates from the previous provisions of the CIT Act which requires foreign companies to have a physical presence or a fixed base in Nigeria. This expands tax revenue sources by including digital services such as e-commerce businesses, online payment platforms, cloud storage platforms, and online consultancy and management services, provided such companies have a significant economic presence. Although, the Act does not define what “significant economic presence” means, this may see tech companies such as Google and Alibaba who operate some of the digital services mentioned above pay tax on the services they provide to Nigerians.

  Non-Resident Tech Companies Affected

Foreign companies (or Non-Resident Companies) supplying goods or services are also required to include the VAT of 7.5% on their invoices. However, a foreign company is not required to withhold and remit VAT as that burden rests on the Nigerian company receiving the services provided. For example, where a foreign tech company (not incorporated in Nigeria but derives income or profits from Nigeria) provides tech services to a Nigerian startup, the Nigerian startup is required to withhold and remit VAT on behalf of the foreign tech company to the FIRS.

 

  Conclusion

The Act introduces laudable changes to Nigeria’s tax laws and brings it on par with global best standards. It encourages the growth of early stage startups and SMES through the various tax palliatives targeted at them. These companies will be able to redirect revenue saved from these palliatives back to their businesses. Considering that SMES account for 96% of all businesses and 84% of employment, it is likely to impact positively on economic growth.

Pavestones’ Regulatory Update: CBN Revised Guide to Bank Charges

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The Central Bank of Nigeria (“CBN”) recently introduced changes to the fees charged by banks and other financial institutions for electronic banking transactions; account usage and maintenance; and ATM withdrawals.

The fees were reviewed downwards and contained in the revised “Guide to Charges by Banks, Other Financial and Non-Bank Financial Institutions” (the “Guide”) issued in December, 2019.

The Effect of the Charges

The CBN believes the reduced fees will incentivize stakeholders, especially those making micropayments, to further embrace electronic banking channels which will in turn improve financial inclusion.

The revision of these charges is a welcome development to encourage financial inclusion of the under-banked in Nigeria. It is however useful to note that fintech companies in the payments space such as PalmPay and Kuda Bank are already playing an important role in improving access to finance by offering lower fees on electronic transfers and online payments.

With this reduction, it might appear on the face of things that banks are in even more competition with Fintech companies. The reality however, is that there has been a long-standing issue in Nigeria with access to finance and this competition is likely to solve this issue in good time.

We have set out the key changes in the Guide below.

Key Changes Made in the Guide

  • Electronic Transfers: Transfers between bank customers was reduced to ₦10 for transfers below ₦5,000 and ₦25 for transfers between ₦5,000 and ₦50,000 while the previous charge of ₦50 was retained for transfers above ₦50,000.
  • ATM withdrawals: The ₦65 charged after the third withdrawal within a month on other banks ATM was reduced to ₦35 after the third withdrawal within a month.
  • Current Account Charges: The card maintenance fee previously charged on current accounts was removed while the annual card maintenance fee of foreign currency denominated cards was reduced to $10 from $20.
  • Savings Account Charges: The card maintenance fee charged on savings accounts is now to be charged quarterly as opposed to monthly. The ₦50 charge was however retained.
  • Hardware Tokens: The fees charged for hardware token was reduced to a maximum of ₦2,500 from the previous maximum of ₦3,000

Pavestones’ Legislative Update: The Finance Bill 2019

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On November 21, 2019, the Senate passed the Finance Bill (2019). The bill makes extensive changes to the tax laws in Nigeria with the objective of introducing tax incentives for investments in infrastructure and capital markets; supporting Small and Medium Scale Enterprises (SMSEs); and raising revenue for government, amongst others.

Some Key Changes To Existing Tax Laws

  1. Companies Income Tax (CIT) Act

The Amendment:

    • introduces a basis for computation of minimum tax for companies and exempts companies with turnovers of less than ₦25,000,000 from paying minimum tax, while companies with turnovers between ₦25,000,000 – ₦100,000,000 will pay a reduced CIT of 20%;
    • exempts the dividends and rental income received by real estate companies on behalf of their shareholders from tax provided that a minimum of 75% of such dividends or rental incomes are distributed within 12 months of the end of the financial year in which they were earned; and
    • allows insurance companies to carry forward losses indefinitely as opposed to the 4-year restriction previously in place.

  2. Personal Income Tax Act

The Amendment:

  • removes provisions granting personal income tax reliefs but maintains child benefit deduction set at ₦2500 per child with a maximum of 4 children;
  • mandates banks to require Tax Identification Numbers from corporate customers who intend to open or maintain a bank account; and
  • introduces forwarding objections against tax assessments to tax authorities via electronic mail and courier services.

3. Value Added Tax (VAT) Act

The Amendment:

  • increases the VAT rate to 7.5%;
  • exempts companies with annual turnovers of less than ₦25,000,000 from filing VAT returns; and
  • no longer requires foreign entities carrying on business in Nigeria to register for VAT in Nigeria and include VAT charges in their invoices.

4. Stamp Duties Act

The Amendment increases the stamp duty on receipts to N50 on every transaction from N10,000 and above; and expands the definition of receipt to cover electronic transactions.

Some of the key reforms introduced in the Finance Bill are a welcome development and have the capacity to stimulate the growth of SMSEs operating in various sectors of the economy due to the tax reliefs available to them whilst increasing government revenue and encouraging foreign direct investment in Nigeria.