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DOING BUSINESS IN NIGERIA- IMPACT OF THE COMPANIES AND ALLIED MATTERS ACT 2020 ON REGISTRATION OF BUSINESS IN NIGERIA -Part 2

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1. Introduction

When President Muhammadu Buhari signed the Companies and Allied Matters Act 2020(“the Act”) into law on the 7th of August 2020, the business community was abuzz excitement in anticipation of the numerous reforms it would introduce. In our previous article, we highlighted several key provisions of the Act and their general impact on doing business in Nigeria. In today’s newsletter, we address specifically, certain newly introduced provisions which impact how businesses may be registered in the nearest future and how these new provisions will affect the ease of doing business in Nigeria.

2. What is a Small Company?

Under the Act, a small company is described as a private company which has a turnover of not more than N120,000,000, (One Hundred and Twenty Million Naira) net assets not exceeding N60,000,000 (Sixty Million Naira)  at least 51% of its shares held by its directors and which does not have any foreigner, government or government corporation as a shareholder. Such companies enjoy certain exemptions and benefits, one of which is that they can now have a single director and shareholder. This significantly reduces the bottleneck of the previous requirement to have a minimum of 2 (two) directors, thereby making business registration easier and faster for qualified businesses.

3.What are the newly introduced shareholding disclosure requirements?

To increase transparency and tackle asset shielding, the Act requires holders of significant control in a company to disclose same to the company and the Corporate Affairs Commission (“CAC”) within 7 days and 1 month of such acquisition, respectively. In addition, the Act also goes on to require disclosure of interests by a substantial shareholder in a public company. A substantial shareholder is defined under the Act as any person who directly by himself or through a nominee, holds at least 5% of shares  in a public company. While this implies that holding of shares by way of trust is now given recognition under the Act, the requirement of disclosure of nominee interest defeats the purpose of anonymity which individuals seek when nominating third parties to hold shares in trust for them.

4. Can you commence business prior to registration?

The Act imposes a penalty on any person or organisation that carries on business as a company, limited liability partnership, limited partnership or business name without being registered under the Act. This provision does not mandate individuals to register a business as Nigeria has a vast informal sector. The provision however seeks to penalise individuals who fraudulently carry on business as if they were registered. The penalty is a fine of N200 for every day during which the default continues.

5. Which data privacy concerns are addressed under the Act?

In line with current day realities of data processing and the need for protection of personal data by law, the Act now classifies Directors information, particularly their residential addresses as protected information.

Both the company and CAC are prevented from using such information unless it is required to communicate with the director or in compliance with the provisions of the Act.

6. CONCLUSION

It is clear that the provisions highlighted above were specifically introduced to facilitate the ease of forming and structuring a business entity in Nigeria. The Act took into account the complexities of business arrangements between individuals and the current trajectory of the business economy which calls for a more MSME inclusive landscape. We believe proper implementation and guidance by the Corporate Affairs Commission (CAC) as the regulatory body empowered by the Act will bring about positive changes and reforms to the commercial terrain in Nigeria.

Doing Business Simplified: Regulatory Requirements For Operating A Restaurant in Nigeria.

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With a growing population of over 200 million, food production is one of the most lucrative businesses in Nigeria. In 2016, the Association of Fast Food and Confectioners of Nigeria (AFFCON) estimated the food industry to be worth over a trillion naira. In April 2020, Euromonitor International reported that demand for restaurants in Nigeria will continue to grow due to expansion of the mid-income group, growing urbanization and busy lifestyle of Nigerians. To operate a restaurant business in Nigeria, there are a number of regulatory requirements which Restaurant Operators (ROs) must comply with, some of which are discussed below.

Environmental Regulations

The Minister of Environment is empowered under the Environmental Health Officers (Registration, Etc) Act of 2002, to issue regulations and directions for Health Officers Registration Council of Nigeria (EHORECON). In several states, the state Ministry of Environment issues guidelines to relevant regulatory agencies to ensure compliance with environmental laws. Consequently, by law, all food outlets, including ROs, must apply and obtain a permit to ensure compliance with basic health and safety guidelines within their immediate environment. The premises of the restaurant will be inspected to ensure that the facilities are well ventilated, with regular disinfection, accessible water supply, disposable towels, rest room facilities, self-closing doors, medical certificate of fitness and training of the food handlers, amongst others.

Local Government licenses

In Lagos State for instance, ROs are required to apply for a food permit within the Local Government where the restaurant is located prior to commencement of operations. In addition, where the alcohol will be sold by an RO, a liquor permit is a requirement. Other relevant licenses issued by the local government are Television License (to use a television or radio), Private Entertainment and Merriment Permit (to run loud entertainment ventures) and Private Car Park Permit (to own a car park). The applicable fees for obtaining these licenses are subject to assessment of the local government officials.

National Agency for Food and Drug Administration and Control (NAFDAC)

NAFDAC, a federal government agency which regulates the production, manufacturing of food and drugs in Nigeria created under National Agency for Food and Drug Administration and Control Act of 1993. Generally, restaurants which process and sell food products in commercial quantity may be required to obtain a Good Hygiene Practice (GHP) license from NAFDAC prior to commencement of operations. A GHP license is usually issued upon satisfaction that the equipment of the food processor meets certain standards and that the food handlers possess the required certification.

Signage/Advertising

In operating a restaurant, it is typical to place a signage outside the premises for the purpose of advertising. To achieve this, Lagos State signage laws require all businesses, including ROs, with outdoor advertising to obtain a signage permit with the Lagos State Signage and Advertisement Agency.

Conclusion

There are other regulators such as the Federal Competition and Consumer Protection Commission, states’ ministry of health and the relevant federal and state tax regulatory bodies, who are in charge of ensuring compliance with applicable laws and regulation. Whilst there may be an overlap in their functions, the common goal of the regulators is to ensure the general welfare and safety of consumers.