Data Protection Act, 2023

Introduction

The benefits that the internet brings also comes with its own risks. One of such risk is the breach and abuse of private data information usually for dishonest, commercial gain. Data Protection legislation is one of the statutory attempts to curb if not eliminate some of the risks associated with the use of online facilities.

Data Protection can be described as the protection of sensitive information from damage, loss, intrusion of privacy or corruption.

As Data Protection is now a very important aspect of the digital world in the twenty-first century, the Data Protection Act, 2023 was recently passed into Law. This Business Alert is a general summary of some of the highlights of this new Law to guide you on how this subject will have an impact on your online activities

Objectives – Data Protection Act, 2023

The Data Protection Act, 2023 (“DPA 2023”) in its preamble informs the reader that this Law is intended to provide the legal framework for the protection of all sensitive personal information; and established the Data Protection Commission for the regulation of the processing of personal data information.

The above lofty objectives are structured to work in tandem with safeguarding the Fundamental Rights and freedoms of all individuals, who are the Data Subjects, by promoting the best data processing practices which safeguard the security and privacy of all data subjects.

Data Protection Commission

The Data Protection Commission is established by the DPA 2023 as an independent Commission, and regulator for data protection.

The functions of the Data Protection Commission include the development of data protection technologies and techniques, in accordance with International Law and best international practices on data protection.

The Data Protection Commission is authorised, as part of its statutory duties, to accredit, license and register suitable persons as Data Controllers and Data Processors to provide data protection services. This Commission is also empowered to conduct investigations into any violation of any of the provisions of the DPA, 2023; and impose penalties for any data infringement.

Data Processing

A Data Controller is the person who alone or jointly with others determines the purpose and means of processing personal date. A Date Processor on the other hand is a person who processes personal data on behalf of or at the direction of a Data Controller or another data processor.

All Data Controllers and Data Processors are required by the DPA 2023 to ensure that they process all personal data lawfully, in a transparent and confidential manner, for the explicit and legitimate purpose for which the data that is processed is intended.

Generally speaking, Data Processing can only be lawful if the consent of the Data Subject is freely and intentionally obtained; or the processing of the data is essential for the performance of a contract; or is required for compliance with a legal obligation; or the performance of a task that is in the public interest.

Data Protection Officers

Data Controllers and Data Processors are each required to designate a Data Protection Officer (“DPO”) who must be someone with expert knowledge of Data Protection Laws, regulations and best practices. The DPO must also have the ability to carry out the tasks set out for this position in the DPA, 2023.

A DPO may be an employee of the Data Controller or Data Processor; or engaged as a outside contractor.

Data Protection Compliance Services

The Data Protection Commission is authorised to license any person with the requisite expertise in Data Protection Compliances to monitor, audit and report on Data Compliance matters to the Data Controllers who in turn report to the Data Protection Commission.

Data Subject Rights

A Data Subject is the individual whose personal data is collected and processed by a Data Controller and a Data Processor. A Data Subject has the legal right to request from and obtain from a Data Controller, without any constraint or unreasonable delay, information as to whether the Data Controller or a Data Processor operating on behalf of a Data Controller, has any of the Data Subject’s personal data.

Where the Data Controller has possession of a Data Subject’s personal data, the Data Controller is required by Law to inform the Data Subject of the purpose for collecting, retaining and processing the Data Subject’s personal data; with the duration for which the Data Controller has had and will keep such personal data.

The Data Subject also has the statutory right to request the Data Controller to rectify or erase the personal data of the Data Subject from the Data Controller’s systems. This is especially where such personal data is inaccurate, or is out of date, or is incomplete, or is misleading, or is no longer necessary in relation to the purposes for which the Data was collected and processed in the first place.

A Data Subject also has the legal rights to withdraw, at any time, any consent given for the processing of the Data Subject’s personal data.

Exceptions to Data Protection

The protection of the personal data of a Data Subject is a fundamental right under the Constitution One of the exemptions to a Data Subject’s rights to the protection of his or her personal data is where the Data Controller is able to demonstrate that it in in the public interest, or is authorised by a written Law, or has a legitimate ground to collect and process the personal data of a Data Subject without the express consent of the Data Subject.

Data Security

Data Controllers and Data Processors are required to implement appropriate technical and organisational measures which ensures the security, integrity and confidentiality of all personal data that they come across.

Where the data of a Data Subject is found to have been breached, the Data Subject and the Data Protection Commission are required to be informed immediately of the details regarding such data breach and the steps that are been taken to mitigate any risks that could arise from such a data breach.

Cross-Border Data Transfers

As it applies in other jurisdictions, Data Controllers and Data Processors shall not permit the transmission of any personal data of any Data Subject to another country unless the recipient of such personal data is bound by similar legal provisions as those in the Data Protection Act, 2023.

Some of the exceptions to the above cross-border transfer of personal data compliance requirement is where the Data Subject, mindful of the possible risks of such cross-border transfer of his or her personal data, has provided and has not withdrawn his or her consent to the cross-border transfer of such personal data despite the absence of adequate data protection protocols in the jurisdiction where the personal data is been transferred to.

Another exception to the cross-border data transfer legal requirement is where the cross-border transfer is necessary for the performance of a contract of which contract the Data Subject is a party.

Enforcement of Data Protection Rights

A Data Subject who is aggrieved by the action, inaction or conduct of a Data Controller or a Data Processor has the right to lodge a complaint with the Data Protection Commission.

Upon receipt of a data breach compliant, the Data Protection Commission may initiate a data breach investigation and where such investigation is found to establish a violation of any of the provisions of the DPA 2023, the Data Protection Commission may make a appropriate Compliance Order against the Data Controller and or the Data Processor.

A Compliance Order may include a warning; a mandatory compliance with any of the provisions of the DPA 2023 that was breached; a cease-and-desist order; payment of compensation by the Data Controller or the Data Processor to the Data Subject who has suffered injury, loss or harm as a result of a data breach or a data violation.

A Data Controller and a Data Processor have the legal right to challenge any Compliance Order by way of judicial review by a Court of Law.

Data Protection – Remedies, Offences and Penalties

A Data Subject who is dissatisfied with the Compliance Order made by the Data Protection Commission has the further right to within thirty (30) days of the issuance of such Compliance Order, apply to a Court of Law for the Judicial Review of such an order.

A Data Subject who suffers any injury, loss or damage as a result of a data breach also has the right to seek for compensatory damages in a civil judicial proceeding against the Data Controller or Data Processor that is responsible for the data breach.

A Data Controller and a Data Processor shall be vicariously liable for any data infringing acts or omissions of their agents, privies and employees where such infringement was carried out in the course of performing the Data Controller and the Data Processor’s business.

The principal officers of a Data Controller or a Data Processor could be held jointly and vicariously liable for any data breach unless such principal officers are able to establish that they exercised due diligence to prevent the commission of a data breach and or that the data breach occurred without their consent or connivance.

Failure to comply with the Data Commission’s Compliance Order within the timeline given is an offence which on conviction after a judicial trial attracts a fine or imprisonment for a term not exceeding one (1) year or to both the fine and the term of imprisonment.

Conclusion – Comments and Observations

Having the Data Protection Commission as the Regulator for Data Protection is a continuation of the multiplication of regulatory bodies on the same or similar subject matters. Examples of some of such similar regulatory bodies are the Communications Commission and the National Information Technology Development Agency. The Data Protection Commission could have been created as a department under any of the existing regulatory agencies thereby reducing the costs of governance.

Our second soft observation is that it is not only the personal data of individuals that are deserving of statutory protection. Governments public sector data also deserve strengthening and statutory protection.

Disclaimer

This is a free educational material which only serves as a general guide. It is not an exhaustive discussion of this topic. It does not serve as a source of solicitation, advertisement or the offering of legal services or advice of any kind. No Client/Attorney relationship is therefore created. Readers are strongly advised to always seek from qualified Legal Practitioners, competent legal advisory counselling to their specific factual situation or to any questions or concerns arising from their specific factual situation.

Intellectual Property Protected!

This material is protected by International Intellectual Property Laws and Regulations. This material can therefore only be reproduced or re-distributed for non-profit educational purposes under the strict condition that our Oserogho & Associates Authorship of this material is explicitly acknowledged, and our above Disclaimer Notice is prominently displayed.

Finance Act, 2023

Legal Alert – Finance Act, 2023 – July, 2023

Introduction

The practice of annually amending some sections of the various Tax, Customs and other fiscal statutes, meant to promote government’s macro-economic policy reforms, increase revenue collection, etc continued with the passing into Law of the Finance Act, 2023.

The commencement date of the Finance Act, 2023 was recently deferred by an Executive Order from 28^th May 2023 to 1^st September 2023.

Some highlights of the Finance Act 2023, which may have some impact on you and your business, are shared in this Business Law Alert.

Capital Gains Tax Act (as amended)

The gains earned by any person on the disposal of any asset, of which digital assets are now included in the definition of what an asset is under the Capital Gains Tax Act (as amended), are now liable to the deduction of Ten per cent (10%) as capital gains tax.

Also, where the aggregate capital loss on an asset exceeds the aggregate chargeable gains on the same asset during a year of assessment, such aggregate loss can be carried forward to the following accounting year provided that such losses are not carried forward for more than a period of five (5) years immediately following the year in which the aggregate loss arose.

Customs, Excise, Tariff Etc (Consolidation) Act (as amended)

In addition to the existing Customs Duties and other Import Charges, a Levy of 0.5% of the value of the transaction is now imposed on all eligible goods imported from outside the African continent. This Levy is intended to finance capital contributions, subscriptions and other financial obligations to the African Union, the African Development Bank, the Africa Export-Import Bank, the Ecowas Bank for Investment and Development, the Islamic Development Bank, the United Nations, etc.

The Customs Excise Tariff (Variation) Amendment Order 2023 has however deferred the commencement date of the above amendment from 27^th March 2023 to 1^st August 2023.

Also suspended by Executive Order are (a) the 5% Excise Duty on all Telecommunication Services; (b) the newly introduced Green Tax by way of Excise Duty to curb single plastic use; and (c) Excise Duties escalation on locally manufactured products.

Personal Income Tax Act (as amended)

Premiums paid for Life Insurance or the Life Insurance for a spouse; any deferred annuity of an insured person or the deferred annuity for the insured person’s spouse; are now allowed deductions provided any portion of the deferred annuity is not withdrawn before the end of Five (5) years from the date that the insurance premium is paid. Any deduction before the expiration of the five (5) years’ timelines will be subject to a personal income tax liability at the point of the said withdrawal.

Stamp Duties Act (as amended)

The Finance Act, 2020 inserted a Section 89A into the provisions of the Stamp Duties Act (as amended). This new provision imposed the Electronic Money Transfer Levy on electronic money transfers. The Finance Act, 2023 has amended the formular for the distribution of this Levy to now be 15% to the Federal Government and the Federal Capital Territory; 50% to the States Governments; and 35% to the Local Governments.

Value Added Tax Act (as amended)

Section 14 (3) of the Value Added Tax Act (as amended) (“the VAT Act”) is amended such that the Tax Authority can appoint any person to withhold or collect Value Added Tax (“VAT”). Such a person will traditionally be the one paying another person for goods or services.

Goods imported through an online electronic or digital platform operated by a non-resident supplier of such goods or services, are now required to provide proof of compliance with the provisions of the VAT Act before such goods can be cleared at the point of entry into the country.

The definition of “Building” under the VAT Act is expanded to now be “… any structure permanently affixed to land for all or most of the useful life of that structure … but excludes fixtures or structures that can be easily removed from such land such as radio and television masts, transmission lines, cell towers, vehicles, mobile homes, caravans and trailers.”

Tertiary Education Trust Fund (Est., Etc.) Act

The annual Tertiary Education Tax rate has been increased from 2.5% to 3% of the assessable profits of all limited liability companies.

Conclusion – Comments and Observations

Multiple Taxation will continue to serve as a barrier to the growth of the entire economy unless this practice is reined in. The Finance Act, 2023 did not significantly remedy this unfortunate situation.

Legislation to align and resolve the current debilitating and onerous multi-taxation structure is taking too long to the detriment of the entire economy.

Disclaimer

This is a free educational material which only serves as a general guide. It is not an exhaustive discussion of this topic. It does not serve as a source of solicitation, advertisement or the offering of legal services or advice of any kind. No Client/Attorney relationship is therefore created. Readers are strongly advised to always seek from qualified Legal Practitioners, competent legal advisory counselling to their specific factual situation or to any questions or concerns arising from their specific factual situation.

Intellectual Property Protected!

This material is protected by International Intellectual Property Laws and Regulations. This material can therefore only be reproduced or re-distributed for non-profit educational purposes under the strict condition that our Oserogho & Associates Authorship of this material is explicitly acknowledged, and our above Disclaimer Notice is prominently displayed.

Shareholders’ Voluntary Winding-up

Introduction

Businesses are started for various reasons with the making of profit remaining one of the most common reason. Some businesses are started for other reasons; like a business created as a special purpose vehicle (Spv”) for a specific project. Others are started to take advantage of a temporary opportunity in the market place; etc.

Once the primary objective for setting up a business is fulfilled or the business is no longer profitable as a going-concern, it is only natural that the legal process for liquidating or winding-up the business will have to be activated. The most common way for liquidating or winding-up a business is known as Shareholders or Members Voluntary Winding-up. Other kinds of winding-up are winding-up subject to Court supervision and winding-up ordered by a Court of Law.

Knowing when to exit and liquidate a business can sometime be challenging on its own. So too can the legal processes for consummating the liquidation of a business. This Newsletter is our contribution to the literature of understanding the basic steps for the owners of a business to voluntarily winding-up a business.

What is Winding-Up?

Winding-Up is the process of bringing to an end the corporate existence of a Company by liquidating the assets of the Company, settling its debts and taxes, and distributing any surplus income afterwards among the Shareholders of the wound-up Company.

Once the Special Resolution to wind-up a Company is passed, the process for such a Company to cease to carry on any business activity other than completing the winding-up exercise is immediately activated.

Legal Consequences of not Winding-up

Leaving a business dormant without Winding-up such a business has legal consequences. The first and most obvious is the application of the Minimum Corporate Tax rate to such a dormant company; irrespective of whether the Company is doing business or not doing business. Other State and Municipal Taxes will also continue to apply to such a Company.

A second obvious legal consequence of leaving a Company dormant is that such a Company retains its corporate existence and exposure to getting sued.

There are also other minimum corporate and tax filings that every registered Company, whether dormant or not dormant, and whether profitable or not profitable, must continue to file if such a Company is to avoid paying late filing fees in addition to the filing fees themselves.

Voluntary Winding-up

A Company may be voluntarily wound-up by its Shareholders when the duration or the objective for establishing the Company have been met. A Company could also resolve to be wound-up voluntarily when the Company finds that though it can pay its debts, the Company may not on a long-term basis remain a going-concern.

A Voluntary Winding-up of a Company is commenced by the Shareholders of such a Company passing a Special Resolution for the Company to be wound-up. A Voluntary Winding-up is then deemed to have commenced, as mentioned above, once the Special Resolution is passed.

Notice of the Special Resolution for the Voluntary Winding-up of a Company must be published within fourteen (14) days of its execution by the Shareholders in at least two (2) national newspapers or in a Federal Government Gazette. The Special Resolution must also be filed at the Corporate Affairs Commission (“CAC”) within the same fourteen (14) days period.

Effect of Voluntary Winding-up

Once the Special Resolution for the Voluntary Winding-up of a Company is passed, the Company through its appointed Liquidator cannot undertake any further business activity other than such business activities which will promote the liquidation of the Company. So too do the powers and authority of the Directors of the Company cease unless expressly granted in the Special Resolution.

Any dealings in the Shares of a Company going through a winding-up process, or the alteration in the status of the shareholding of such a Company will be deemed null and void unless approved by the appointed Liquidator for the winding-up exercise.

Statutory Declaration of Solvency

Any Company that is Insolvent, i.e., unable to pay its bills or debts, cannot pass any Resolution for such a Company to be voluntarily wound-up. It is for this reason that at the onset of any Voluntary Winding-up exercise the Directors of such a Company must depose under Oath, in the form of a Statutory Declaration of Solvency, that upon making a full inquiry into the business affairs of their Company, the Directors verily believe that the Company will be able to pay its debts in full within a period that will not exceed Twelve (12)  calendar months from the date that the Special Resolution for the Voluntary Winding-up of the Company is passed.

The Statutory Declaration of Solvency must have attached to it a Schedule of the Company’s Assets and Liabilities, at the latest practicable date before the Statutory Declaration of Solvency document is sworn to.

It is a criminal offence to depose to a Statutory Declaration of Solvency knowing that any of the information in the Declaration is false.

Liquidation and Final Meeting

Once a Liquidator is appointed, all the legal authority and powers of the Directors of the Company automatically cease except as the Shareholders of the Company or the Liquidator sanctions otherwise.

The primary role of a Liquidator or Liquidators is/are usually to carry out the exercise of Winding-up the Company and distributing the Company’s surplus assets after the Company’s liabilities and taxes are paid in full.

As soon as the financial affairs of a Company are fully documented and wound-up, the Liquidator is required to prepare the exit accounts of the Company showing how the Winding-up exercise of the Company was carried out, with how the assets of the Company were disposed of, the liabilities and taxes settled, and the surplus income distributed among the Shareholders of the Company, in pari-passu of the number of shares held.

The Liquidator is then required, after the exit accounts are prepared, to call a General Meeting of the Shareholders of the Company at which the Liquidator must submit the Exit Winding-up Reports and Accounts for the Shareholders of the Company to review and ask any questions arising from the Exit Reports and Accounts.

Three (3) months after the Final Meeting is held with the Shareholders of the wound-up Company, and the said Exit Accounts are filed with CAC and CAC registers those Exit Accounts, the wound-up Company will be deemed dissolved/liquidated/wound-up.

Other Post Winding-up Compliances

The Liquidator appointed for a Shareholders or Members Voluntary Winding-up is required to keep all the records regarding the Voluntary Winding-up of a Company for a minimum period of five (5) years before electing to destroy such records. There are penalties for any default when a Liquidator fails to keep the winding-up records for a Company that he or she winds up.

Conclusion – Comments and Observations

Winding-up is not the only option open to a Company that may want to liquidate or restructure itself. Mergers, Acquisitions, Compromise, Arrangement, Reconstruction, Consolidation, among others are Corporate Reconstruction options that a Company can also explore.

Disclaimer

This is a free educational material which only serves as a general guide. It is not an exhaustive discussion of this topic. It does not serve as a source of solicitation, advertisement or the offering of legal services or advice of any kind. No Client/Attorney relationship is therefore created. Readers are strongly advised to always seek from qualified Legal Practitioners, competent legal advisory counselling to their specific factual situation or to any questions or concerns arising from their specific factual situation.

Intellectual Property Protected!

This material is protected by International Intellectual Property Laws and Regulations. This material can therefore only be reproduced or re-distributed for non-profit educational purposes under the strict condition that our Oserogho & Associates Authorship of this material is explicitly acknowledged, and our above Disclaimer Notice is prominently displayed.

Business Facilitation Act (Ease to Doing Business Law)

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Legal Alert – The Law and Start-ups’

Introduction

A Start-up usually refers to a new business which focuses on new innovations, products or service lines that Customers find irresistible not to purchase. Start-ups’ play a very important role in the socio-economic development of any country.

With the significant roles that many Startups now play in the global economy, the Nigerian Startup Act, 2022 (“the Startup Law”) was recently passed into Law.

Startup Law Objectives

One of the key goals of the Startup Law is the provision of a legal and institutional framework which was not in existence previously, for the development of Startups. Another is the provision of an enabling environment for the establishment and growth of Startups, especially in technology-related sectors.

Startup Law Application

The Startup Law applies to all companies incorporated under the Companies and Allied Matters Act (“CAMA”); and granted a Startup Label at the time of incorporation.

The provisions of the Startup Law also apply to organisations and establishments whose activities affect the creation, support to and the incubation of Labelled Startups.

Startups and the National Council

The Startup Law established the National Council for Digital Innovation and Entrepreneurship (“the Startup Council”). The National Information Technology Development Agency (“NITDA”) is required by the Startup Law to serve as the Secretariat for the Startup Council (“the Startup Secretariat”).

A key role of the NITDA, as the Startup Secretariat, is to manage the process of labelling a Startup as prescribed under the Startup Law.

The Startup Council is also enjoined by the Startup Law to promote Startup Platforms, and collaborate with other stakeholders in promoting the establishment and development of Startups. Such stakeholders include Angel Investors, Venture Capitalists, Private Equity Firms, Financial Institutions’, etc.

A Startup Support and Engagement Portal (“the Startup Portal”) is required to be created by the Startup Council to serve as the platform from which Startups can undertake their registration and other statutory compliance processes with various governmental Ministries, Departments and Agencies (“MDAs”).

What is a Startup Label?

A Startup Label under the Startup Law is a certificate issued by the Startup Secretariat to a new Startup who has fulfilled the Startup Labelling Registration requirements under the Startup Law.

Some of the Startup Labelling registration requirements includes the incorporation of the Startup as a limited liability company under CAMA as an Innovative Digital Technology Company. A Startup registrant applicant must not however have been in existence or doing business for a period of more than ten (10) years from the date of its incorporation.

A Startup registrant applicant, applying for a Startup Label Certificate is also statutorily required to have at least one-third of its shareholding held by one or more Nigerians as founders or co-founders of the Startup.

Lastly, any entity that is not registered as a Startup entity, and labelled as a Startup, shall not enjoy the incentives that are provided for Startups under the Startup Law.

Startup Labelling Application and Certificate

Obtaining a Startup Label commences with the Startup ensuring that it meets the registration requirements mentioned above. Once the Startup’s Label registration application is approved, the Startup Secretariat issues to the Startup, a Startup Label Certificate.

A Startup Label is valid for a period of Ten (10) years commencing from the date that the Startup Label Certificate is issued.

Like any other business, the Startup must comply with all other Laws that regulate other kinds of businesses.

Any Startup that defaults in fulfilling its statutory obligations stands the risk of losing its Startup Label certification.

Startups Investment Seed Fund

The Startup Law also established a Startup Investment Seed Fund (“the Startup Fund”) to assist Startups. This Fund is required to be managed by the Nigeria Sovereign Investment Authority (“NSIA”).

There is required to be paid into the Startup Fund, on an annual basis, a sum of not less than Ten Billion Naira (N10,000,000,000) from sources approved by the Startup Council.

Money in the Startup Fund is required to be applied in providing Labelled Startups with early-stage financing, and also providing financial relief to technology laboratories, accelerators, incubators and hubs.

Crowdfunding

Crowdfunding is the practice where many investors contribute small amounts of money to finance a project or business which individually, many Startups cannot fund by themselves.

To encourage Funding for Startups, the Startup Law provides that Startups may raise funds through Crowdfunding intermediaries and Commodities Investment Platforms that are licensed by the Securities and Exchange Commission (“SEC”).

Accelerators & Incubators

Accelerators and Incubators who expedite the growth of Startups through mentorship and educational assistance programmes that promote Innovation, Products or Services Development will also enjoy government incentives provided that they actually aid the operation and growth of Startups.

Innovation Clusters, Hubs and Parks

Some of the important statutory roles that Startup Innovation Clusters, Hubs, Physical and Virtual Innovation Parks are required to play in the existence of a Startup includes fostering collaboration and general business opportunities between Startups and the larger business community. Examples of such collaborative activities includes working with the Export Processing Zones Authority to establish Technology Development Zones, which Zones are required to spur the growth and development of Startups in the export market.

Tax and Other Fiscal Incentives

Pioneer Status Incentives – A Labelled Startup, whose business objectives is also covered under the Pioneer Status Incentive Scheme, may by an application through the Startup Secretariat receive expeditious approval from the Nigeria Investment Promotion Council (“NIPC”) for some tax reliefs and for other fiscal incentives that are provided for under the Pioneer Status Incentive Scheme.

Tax Exemption Periods – Some of the tax reliefs or benefits that a Pioneer Status certification brings to a Startup is the exemption from the payment of taxes on the Startup’s income or revenue for an initial period of three (3) years; and an additional two (2) years afterwards if the Labelled Startup continues to qualify during this period as a Labelled Startup.

R & D Tax Deductible – Costs wholly incurred and expended in Nigeria by Labelled Startups on Research and Development (“R & D”) are tax deductible when filing tax returns. The restrictions on the treatment of deductible expenses under the Companies Income Tax Act (as amended) (“CITA”) do not apply to Labelled Startups.

Startups who conduct their own in-house training are exempted from making contributions to the Industrial Training Fund (“ITF”). An annual return will still be required to be filed by the Startup with the ITF.

Export Incentives – Labelled Startups involved in the export of goods and services, which are deemed to be eligible for export incentives under the Export (Incentives & Miscellaneous Provisions) Act, are also entitled to apply for and enjoy Export Incentives and financial assistance from the Export Development Fund, the Export Grant and the Export Adjustment Scheme Fund.

Credit Guarantee Scheme – The Startup Secretariat is also required by the Startup Law to establish a Credit Guarantee Scheme, which Scheme shall among other things provide accessible financial support, credit guarantees with relevant financial and credit information to Labelled Startups.

Incentives & Reliefs to Investors

Notwithstanding the provisions of the CITA, any Angel Investor, Venture Capitalist, Private Equity Fund Owner, Accelerator or Incubator (“Startup Investor”) in a Labelled Startup is entitled to an Investment Tax Credit equivalent to 30% of the amount invested in a Labelled Startup. This Investment Tax Credit will only be applied to the gains which accrue to such an investment, which gain would have otherwise been liable to suffer a tax charge like a Capital Gains Tax.

Subject to a Startup Investor holding unto its equity in a Labelled Startup for a minimum of twenty-four (24) months, any accrued gains from the subsequent disposal of any portion of such equity are exempted from the application of the Capital Gains Tax Act (“CGT”).

Non-Resident Companies

Foreign Investors in Labelled Startups, who have a Certificate or Certificates of Capital Importation (“CCI”) that were issued at the time that the Foreign Investor imported its capital into a Labelled Startup, are like any other foreign investor in other sectors of the economy guaranteed easy repatriation of the returns on their investments net of applicable taxes, in freely convertible currency through a licensed Central Bank of Nigeria (“CBN”) Authorised Dealer.

Income derived by Non-Resident Companies that provide technical consulting, professional or management services to Labelled Startups are subject to a five per cent (5%) withholding tax on such income. Such withheld tax constitutes the final tax payable in Nigeria by such a non-resident company.

Comments and Observations

The Startup Law is mostly skidded in favour of technology-related businesses. Not all Startups are however engaged in technologically based enterprises as it is perceived generally.

As commendable as the provisions of the Startup Law may be, Startups cannot operate independently as in a bubble, separated from other Government MDAs who currently have substantial infrastructural deficiencies in their primary areas of responsibility.

The subjective collaborative provisions in the Startup Law, between the Startup Secretariat and various other government MDAs like the CBN, SEC, the Corporate Affairs Commission (“CAC”), NCC, NIPC, etc have not been successful under other statutes; and are unlikely to be successful under the Startup Law. This is as in practice, many of these government agencies are not culturally structured to share the benefits of inter-governmental MDAs collaboration.

With only minor improvements, many of the Tax and other Fiscal Incentives in the Startup Law already exist in other statutes that apply to all incorporated or registered companies.

Disclaimer

This is a free educational material which only serves as a general guide. It is not an exhaustive discussion of this topic. It does not serve as a source of solicitation, advertisement or the offering of legal services or advice of any kind. No Client/Attorney relationship is therefore created. Readers are strongly advised to always seek from qualified Legal Practitioners, competent legal advisory counselling to their specific factual situation or to any questions or concerns arising from their specific factual situation.

Intellectual Property Protected!

This material is protected by International Intellectual Property Laws and Regulations. This material can therefore only be reproduced or re-distributed for non-profit educational purposes under the strict condition that our Oserogho & Associates Authorship of this material is explicitly acknowledged, and our above Disclaimer Notice is prominently displayed.

Statistics Regulatory Compliances

Introduction

Economic Recession and the Cost-of-Living Crisis are already negatively impacting on the bottom-line of individuals and governments. Many businesses, especially small and medium sized businesses, are likely going to close shop if these businesses, including governments, do not take preventative measures to avoid bankruptcy for individuals and sovereign debt default for governments.

One of such preventative measure is adherence to the important statutory compliance provisions in the Statistics Act, 2007.

By way of further introduction, Statistics is the practice of collecting, analysing and drawing conclusions from numerical data to assist the user of the data in making informed and verifiable decisions.

Statistics Act, 2007

The Statistic Act, 2007 (“the Statistics Act”) created the National Bureau of Statistics (“NBS”) as the principal co-ordinating Government Agency to collate, process, analyse and disseminate quality, statistical information which will aid evidence-based policy design, formulation and decision making.

NBS is required by the Statistics Act to always exercise professional independence and impartiality in the discharge of all its statutory functions.

Collection of Data

NBS is, in pursuance of its statutory functions, mandated to collect statistics throughout the federation concerning any matter set out in the First Schedule in the Statistics Act. Most of the matters set out in the First Schedule of the Statistics Act relate to Population, Births, Deaths, Migration, Employment, Internal and External Trades; among other matters.

The more common method by which NBS collates statistics is by serving on a person a notice in writing, usually in the form of a questionnaire, requesting for the person to provide the answers to the questions in the Questionnaire.

Confidentiality and Disclosures

Data collected for statistical purposes are to be treated as confidential. The confidentiality caveat includes the restriction of the dissemination of such collected data, where permitted by Law, not to include the identity, directly or indirectly, of persons from whom the data were obtained.

Another restriction to the disclosure of data collected by NBS includes where the person required to disclose such data by NBS would not be under a similar legal obligation to disclose or produce such data if he were to be called as a Witness in a judicial proceeding before a Court of Law.

A further restriction relates to disclosures of any trade information for the purposes of the taxation of any such information.

Offences and Penalties

It is an offence to breach the Confidentiality provisions in the Statistics Act. Any person who infringes any of the confidentiality provisions in the Statistics Act will on conviction be liable to pay a monetary fine or serve a term of imprisonment of One (1) year.

Also, any person who fails to furnish any information, estimate, return or particulars, which such a person is required to furnish under the Statistics Act commits an offence and will be liable on conviction to a fine of N100,000 or to One (1) year term of imprisonment. The same fine and term of imprisonment applies where the information given to NBS is knowingly or recklessly false.

Where any of the above offences is/are committed by a Corporate Entity Director or officer of managerial cadre; or where it is a Firm or Partnership that commits such an offence, every such officer, director or partner will be deemed to have committed the offence in their individual personal capacity; and shall be liable to the same fine or term of imprisonment as an individual would, as enumerated above.

Defences to Statistics Offences

One of the statutory defences to any of the above Statistics offences is where the offender is able to prove to a Court of Law that the offence was committed without his or her knowledge, connivance or consent.

Another defence is that the alleged offender exercised due diligence to prevent the commission of the offence, having regard to all the surrounding circumstances.

Conclusion – Comments and Observations

The National Bureau of Statistics has to improve on one of its important statistical roles which is to “… raise public awareness about the importance of statistical information to society;”.

Business owners and managers must also enhance their Data Analytic processes, internally and externally, for optimal results and benefits.

Disclaimer

This is a free educational material which only serves as a general guide. It is not an exhaustive discussion of this topic. It does not serve as a source of solicitation, advertisement or the offering of legal services or advice of any kind. No Client/Attorney relationship is therefore created. Readers are strongly advised to always seek from qualified Legal Practitioners, competent legal advisory counselling to their specific factual situation or to any questions or concerns arising from their specific factual situation.

Intellectual Property Protected!

This material is protected by International Intellectual Property Laws and Regulations. This material can therefore only be reproduced or re-distributed for non-profit educational purposes under the strict condition that our Oserogho & Associates Authorship of this material is explicitly acknowledged, and our above Disclaimer Notice is prominently displayed.

Pension RSA Residential Mortgage Guidelines 2022

Introduction

Shelter is one of the most basic needs that human beings need to survive and thrive. Owning your own home furthers this basic need; among other financial advantages like property appreciation and you not paying rent on a property that you reside in and own.

Funding the acquisition of one’s own home however remains a challenge for a vast majority of people. Especially with inflation and the rise in the cost of living. To ameliorate some of the funding challenges to Residential Homes Ownership, the National Pension Commission (“NPC”) recently published its Guidelines on how a Pension Fund Contributor can access some of the balance in his or her Retirement Savings Account (“RSA”) as part of an equity contribution towards a Residential Mortgage Facility by the RSA Holder (“RSA Mortgage Guidelines”).

RSA Holders Residential Mortgage Guidelines

Section 89 (2) of the Pension Reform Act, 2014 (“PRA”) provides that NPC, as the Pensions Regulator, may issue Guidelines which enables a Eligible Holder of a RSA with a licensed Pension Fund Administrator (“PFA”) to utilise a percentage of the amount in the Eligible Holder’s RSA as part-payment towards the RSA Holder’s Residential Mortgage Facility.

In furtherance of the above statutory provision, NPC published the RSA Mortgage Guidelines. In addition to enabling Eligible Holders of a RSA to own their own homes, the RSA Mortgage Guidelines will also enable and enhance long-term developments in the Housing Real Estate Market.

Eligible RSA Mortgage Limit

Section 2.1 of the RSA Mortgage Guidelines provides that “the maximum amount to be applied as equity contribution for residential mortgage shall be 25% of the total RSA balance as at the date of the application irrespective of the percentage of the equity required by the Mortgage Lender”. Underlined for emphasis.

Where the value of the 25% in the RSA as at the date of the application is more than the equity contribution required for the Mortgage, the Eligible RSA Holder will only be allowed access to the equivalent of the exact equity contribution required by the Mortgage Lender. The opposite will apply where the 25% of the balance in the RSA is less than the equity contribution required by the Mortgage Lender. The RSA Holder will in the latter circumstance be required to deposit from his or her other financial resources the difference in the amount required to make up the initial equity contribution for the Mortgage Facility before the Eligible Holder will be granted access to the 25% balance in his or her RSA.

RSA Mortgage Pre-Conditions

To qualify to apply under the RSA Mortgage Guidelines, a RSA Eligible Holder must either be in active employment as a salaried employee, or is self-employed.

Also, a Eligible RSA Holder can only access his or her RSA for this mortgage equity contribution purpose only once.

All RSA related mortgage equity contribution applications must be submitted by the Eligible RSA Holder in person as no proxy or third-party applications are allowed under the RSA Mortgage Guidelines.

All Eligible RSA Holders must also have updated their records through the RSA Data Recapture process.

Lastly, the RSA and the Mortgage Lender must Indemnify the PFA to the Eligible RSA Holder as to the exclusive use of the 25% equity mortgage contribution for the RSA Holder’s Residential Mortgage.

RSA Holders Eligibility Criteria

Another key qualifying criteria to the use of the 25% balance in a RSA by the RSA Holder for a Residential Mortgage Facility is the requirement that both the employer and the employee must have made their mandatory contributions to the RSA concerned for a continuous cumulative period of Five (5) years prior to the application to access 25% of the balance in the RSA for the exclusive purpose of the RSA Holder making a equity contribution for a residential mortgage facility.

RSA Holders who utilise 25% of their RSA balance as equity contributions to their residential mortgage facilities are also eligible to withdraw another 25% from their RSA in the event of any loss of employment. RSA Holders who however have less than Three (3) years to retirement are not eligible to use a portion of their RSA balances as equity contribution to a Residential Mortgage Facility. The same exclusion applies to retirees and exempted persons under the PRA.

Eligibility Criteria for Mortgage Lenders

There are also eligibility qualification requirements for Mortgage Lenders who want to provide their services under the RSA Mortgage Guidelines. One of such eligibility requirements for a Mortgage Lender is the requirement that the Mortgage Lender must be licensed by both the Central Bank of Nigeria (“CBN”) and NPC to provide residential mortgage services.

The Mortgage Lender is also required post regulatory operating license to meet all regulatory compliance instructions, one of which is remaining in good financial standing at all times with the regulatory authorities.

The names of the Mortgage Lenders who meet the Eligibility Criteria of the RSA Mortgage Guidelines are required to be published on the NPC website.

Administrative Sanctions

Pension Fund Custodians (“PFCs”) are the ones who ultimately and independently disburse the 25% equity contribution from the RSA to the Mortgage Lender on behalf of the RSA Holder. PFAs and PFCs are liable to administrative sanctions for any violation of any of the RSA Mortgage Guidelines that applies to them. A good example of such a violation is negligence by the PFA or the PFC or both of them in the approval process of a Residential Mortgage Application which results in fraud or a loss to the RSA Holder.

Conclusion – Comments and Observations

Eight (8) years after the Pension Reform Act 2004 (“PRA”) came into effect, public enlightenment as to the benefits that the PRA have to its contributors and the general economy remains arguably miniscule when compared to the very large potential that the contributory pension scheme holds. The Pension Regulator and other related stakeholders in the retirement pension sphere need to do more in enlightening the general public so that the laudable objectives and benefits of the PRA can be optimally achieved over time.

Also, there are concerns regarding some aspects of the RSA Mortgage Guidelines. One of such concern is the requirement that a RSA Holder and his or her employer must have consistently made their contributions to the RSA for an uninterrupted period of Five (5) years. This will be an uphill task for many RSA Holders who do not receive their wages regularly as a result of the severe economic conditions in the last few years.

Despite the above concerns, if properly implemented, the RSA Mortgage Guidelines have far-reaching positive developments for the Residential Housing Real Estate, with the associated mortgage and construction markets.

Disclaimer

This is a free educational material which only serves as a general guide. It is not an exhaustive discussion of this topic. It does not serve as a source of solicitation, advertisement or the offering of legal services or advice of any kind. No Client/Attorney relationship is therefore created. Readers are strongly advised to always seek from qualified Legal Practitioners, competent legal advisory counselling to their specific factual situation or to any questions or concerns arising from their specific factual situation.

Intellectual Property Protected!

This material is protected by International Intellectual Property Laws and Regulations. This material can therefore only be reproduced or re-distributed for non-profit educational purposes under the strict condition that our Oserogho & Associates Authorship of this material is explicitly acknowledged, and our above Disclaimer Notice is prominently displayed.

Money Laundering (Prevention and Prohibition) Act, 2022

Introduction

Money Laundering is traditionally described as the concealment of the sources or the origins of illegally obtained financial assets using legitimate businesses as fronts.

The prevention and prohibition of Money Laundering activities has continued to be a herculean task for many governments. This is especially as some of the ills that Money Laundering brings includes the evasion of the payment of taxes, the undermining of legitimate businesses through unrealistic and uncompetitive lower prices, etc.

The Money Laundering (Prevention and Prohibition) Act 2022 (“MLA 2022”), which was recently passed into Law, with a commencement date of 12^th May 2022 is a continuing attempt by government to enhance legislation to prevent and prohibit Money Laundering practices.

The MLA 2022 terminated or repealed the Money Laundering (Prohibition) Act, 2011 (“MLA 2011”). This means that individuals and institutions, especially those in the private sector, will do well to familiarise themselves with the key provisions of the MLA 2022. This is in order for them not to fall foil of any of the statutory compliance provisions in the MLA 2022. Any breach of the latter attracts very punitive penalties.

Some of the key provisions of the MLA 2022 are highlighted below.

Objectives of MLA 2022

One of the key objectives of the MLA 2022 is its provision for an effective and comprehensive legal and institutional framework that is in line with best international practices on Money Laundering; from its prevention, prohibition, detection, prosecution and punishment of Money Laundering and other related offences.

Another key objective of the MLA 2022 is the creation of the Special Control Unit Against Money Laundering (“SCUML”) as a department in the Economic and Financial Crimes Commission (“EFCC”).

Prohibition of Money Laundering

One of the statutory measures meant to curtail and ultimately prevent Money Laundering practices are the restriction limits placed on cash payments.

The restricted cash payment limit allowed for individuals, for each transaction, through a licensed financial institution, is N5,000,000 (Five Million Naira) or its equivalent. The cash payment limit for a corporate entity is N10,000,000 (Ten Million Naira) or its equivalent.

It is unlawful to make or receive multiple cash payments in excess of the above cash limit restrictions where the intention is to bypass or circumvent the reporting obligations for cash payments that exceeds the above cash limits.

International Transactions

There are also Money Laundering Reporting Disclosures to be made to Financial Regulators regarding any international financial transfer, to or from a foreign country, of any monetary transaction that is in excess of US$10,000 (Ten Thousand US Dollars) or its equivalent.

Any Money Laundering Disclosure Report or filing must indicate the nature and the amount of the transaction, the names and addresses of the Sender and the Receiver of the transferred financial instrument.

The transportation of cash or other monetary negotiable instruments in excess of US$10,000 (Ten Thousand US Dollars) or its equivalent are still required to be declared to the Nigerian Customs Service. A failure to declare, or the making of a false declaration is an offence which on conviction attracts the forfeiture of the undeclared financial instrument, or a term of imprisonment of at least two (2) years; or both the forfeiture and the term of imprisonment.

KYC – Know your Customers

The Law remains that all Financial Institutions (“FI”), Designated Non-Financial Institutions (“DNFI”), and professional persons must obtain from their clients and other persons with whom they do business, government issued identification documents for such clients and other persons. This international best practice is commonly referred to as “Know your Customer” (“KYC”).

The above-mentioned institutions and persons are further required by the MLA 2022 to verify the identification documents, including who the Ultimate Beneficial Owners of the clients and other persons is or are using the most independent and reliable sources to scrutinise on a continuous basis these persons’ KYC, and the transactions that they undertake.

For politically exposed persons, whether domestic or foreign, the FI, or DNFI or professional person is further required to ensure that the approval of its most senior management is obtained before the establishment or continuance of a financial relationship with any politically exposed person.

Casinos

Casinos, other Hospitality and Entertainment Establishments are also required to request from each of their Customers an original copy of each Customer’s valid and original government issued identity card before rendering any service to such a Customer.

Mandatory Compliance Officers

Every FI, DNFI and professional services firms are required to develop programmes that will combat Money Laundering practices within their establishment. The Money Laundering Programmes are also required to be controlled by the Establishment’s Compliance Officer who must be of senior management cadre.

The Money Laundering Regulatory Authorities, some of whom are the Central Bank of Nigeria (“CBN”), the Securities and Exchange Commission (“SEC”), the National Insurance Commission (“NIC”) and SCUML are empowered to impose fines and suspend any regulated business operating license where such a business does not comply with any of the mandatory statutory Money Laundering Prevention and Prohibition provisions in the MLA 2022.

Mandatory Disclosure Participants

An abridged description of the key participants that are required to comply with the provisions of the MLA 2022 is necessary. The first are Financial Institutions (“FI”) which consist mostly of corporate bodies registered and licensed by the CBN, the NIC, SEC, etc to render regulated financial services to members of the public.

The second are Designated Non-financial Institutions (“DNFI”) who are mostly providers of commercial services to members of the public. Examples of DNFI are service providers in the Hospitality Industry, Dealers in goods and services, etc.

The next are businesses categorised by the MLA 2022 as “Profession”. Examples of professions are Consultancy businesses, Accounting, Real Estate, Trust Companies, Pools Betting, Automotive Sealers, etc.

MLA 2022 Mandatory Disclosures

All the above-mentioned participants in the Money Laundering sphere are required to report in writing to the Nigeria Financial Intelligence Unit (“NFIU”) in the case of FIs, and to SCUML in the case of DNFI and Professions, within seven (7) days of any Money Laundering related reporting compliance transaction, any single transaction, lodgement or transfer of funds in excess of Five Million Naira (N5,000,000) or its equivalent in the case of an individual; and Ten Million Naira (N10,000,000) or its equivalent in the case of a corporate body.

Any FI or DNFI or Profession that contravenes the above statutory reporting provision commits an offence and is liable on conviction to a fine of at least N250,000 (Two Hundred and Fifty Thousand Naira) and not more than N1,000,000 (One Million Naira) for each day that the contravention continues.

Banking Secrecy and Customer Confidentiality

Banking Secrecy or the preservation of a Customer’s confidentiality can no longer be given as a defence when a Regulator seeks information and data regarding a Money Laundering Investigation or Enquiry.

Solicitors and Clients Confidentiality

In spite of the existence of Court Judgments including the decision in Central Bank of Nigeria (“CBN”) v. Nigeria Bar Association (“NBA”) and the Attorney General of the Federation (“A.G.”) (2014) (C.A.) as to whether the provisions of the now repealed MLA 2011 applied to Legal Practitioners when such Legal Practitioners are rendering legal services to their Clients, Section 11(4) of the MLA 2022 provides that a Legal Practitioner’s privilege and the invocation of a Client’s right to confidentiality shall not apply to commercial transactions like the sale of any property or business, managing a Client’s money, securities or other assets.

In CBN v. NBA & Anor cited above, the Court of Appeal held that the provisions of the MLA 2011 as they relate to Legal Practitioners in the practice of their legal profession are null and void as such provisions are contrary to the provisions of the Legal Practitioners Act (“LPA”), the Legal Practitioners Rules of Professional Practice and Section 192 of the Evidence Act 2011 which have extensive provisions regulating Money Laundering practices in the legal profession.

The Court of Appeal in reaching the decision above cited, was of the opinion that Law Makers will have expressly repealed the related provisions of the LPA had it been their intention that the provisions of the MLA 2011 will now apply to Legal Practitioners when such Legal Practitioners are conducting their law practice.

Shell, Numbered or Anonymous Bank Accounts

The opening and operating of numbered and or anonymous accounts are expressly prohibited by the MLA 2022.

Also expressly prohibited is the establishment and operation of Shell Banking activities in Nigeria. A Shell Bank is described by the MLA 2022 to be any bank that is not physically located in the country where it is incorporated, licensed and subject to effective regulatory supervision.

Any person, financial institution or body corporate that contravenes any of the above regulations regarding transaction with a Shell Bank commits an offence and is liable on conviction, in the case of any individual to a term of two (2) years imprisonment at the minimum, and five (5) years imprisonment at the maximum.

For a financial institution or other corporate bodies, the penalties is a fine of at least N10,000,000 (Ten Million Naira) with the maximum fine not exceeding N50,000,000 (Fifty Million Naira) for any infraction of the no shell banking rule. Depending also on the severity of this money laundering infringement, the corporate body could also be wound-up with its operating license revoked. The principal officers of the corporate entity could also be prosecuted in their individual capacity.

SCUML

The Special Control Unit Against Money Laundering (“SCUML”) is created by the MLA 2022 as a department in the Economic and Financial Crimes Commission (“EFCC”).

SCUML is statutorily charged to supervise all DNFIS and professional persons or firms in their compliance with the provisions of the MLA 2022 and other Money Laundering related Laws and Regulations. SCUML starts this supervisory regulatory role by registering and certifying all DNFIs and professional persons or firms.

Offences and Penalties

In addition to some of the compliance infringements and penalties already mentioned above, the MLA 2022 has a dedicated Part IV for offences and penalties which expressly prohibits any kind or form of Money Laundering activity or practice.

As an example, it is an offence to aid, abet, counsel, conceal, disguise the origin of, convert, transfer, remove from jurisdiction, etc any asset knowing or reasonably ought to have known that such asset is or forms part of the proceeds from an unlawful activity. The penalty on conviction, for any of the mentioned offences in this paragraph, is a term of imprisonment for a period that is not less than Four (4) years and not more than fourteen (14) years; or a fine of not less than five times the value of the proceeds of the crime; or to both the term of imprisonment and the fine.

Jurisdiction of the Courts

Any Federal High Court (“FHCt”), irrespective of where this Court is located, and whether the Money Laundering offence was initiated or committed in the division where the FHCt division is located, have exclusive jurisdiction to try Money Laundering offences.

The FHCt can during the trial of a Money Laundering charge take into consideration the fact that the accused offender is in possession of pecuniary resources for which he cannot provide satisfactory explanations as to how he acquired such resources. This is more so where the resources are disproportionate when compared with the accused offender’s known sources of income.

Conclusion – Comments and Observations

As laudable as these Money Laundering Laws and Regulations are, weak political will and institutions to enforce these laws and regulations has jeopardised the efficacy of Money Laundering laws and regulations in the past, and also presently. It is hoped that there will be some improvement sooner rather than later.

Disclaimer

This is a free educational material which only serves as a general guide. It is not an exhaustive discussion of this topic. It does not serve as a source of solicitation, advertisement or the offering of legal services or advice of any kind. No Client/Attorney relationship is therefore created. Readers are strongly advised to always seek from qualified Legal Practitioners, competent legal counselling to their specific factual situation or to any questions or concerns arising from their specific factual situation.

Intellectual Property Protected!

This material is protected by International Intellectual Property Laws and Regulations. This material can therefore only be reproduced or re-distributed for non-profit educational purposes under the strict condition that our Oserogho & Associates Authorship of this material is explicitly acknowledged, and our above Disclaimer Notice is prominently displayed.

New National Health Insurance Authority Act

Introduction

Funding and implementing a National Health Insurance Scheme has remained a challenge for many countries for many years. After about two (2) decades, the National Health Insurance Authority Act 2022 (“NHIA Act”) was passed into Law to replace/repeal the National Health Insurance Scheme Act 2004.

The Preamble to the NHIA Act, whose commencement date is 9^th May 2022, discloses that the NHIA Act was passed into Law to provide for the promotion, the regulation and the integration of Health Insurance Schemes and other matters related to Health Insurance Schemes.

National Health Insurance Authority

The NHIA Act established the National Health Insurance Authority (“NHIA”) as a body corporate, to among other things promote, integrate and regulate all Health Insurance Schemes operated in Nigeria by State Governments and Private Sector Operators.

NHIA is also empowered to ensure that Universal Health Insurance coverage is now mandatory for every Nigerian and for all legal residents in Nigeria.

NHIA is further empowered to accredit and re-accredit all Health Insurance Scheme participants like the Health Maintenance Organisations commonly referred to as “HMOs”, Health Care Facilities Operators, and financial institutions’ who participate in Health Insurance Schemes.

The NHIA is also required to keep a Register of all the Operators in the Health Insurance Schemes delivery industry.

Types of Health Insurance Schemes

Every State in the Federal Republic of Nigeria and the Federal Capital Territory (“FCT”) may establish and implement a State Health Insurance and Contributory Scheme for all the Residents of such a State or the FCT.

Section 13(8) of the NHIA Act provides that every State that establishes a State Health Insurance Contributory Scheme, and which State complies with the requirements of the NHIA Act shall be eligible to participate in the Basic Health Care Provision Fund established under the National Health Act.

Health Insurance Mandatory

As Health Insurance is now mandatory, every person resident in Nigeria is required to have Health Insurance.

Accordingly, employers in the public and the private sectors of the economy, who have five (5) and more employees are required mandatorily to register their employees and contribute on their employees’ behalf to a NHIA approved Health Insurance Scheme.

HMO Qualifications and Licensing

With the exemption of Health Insurance Schemes established by State Governments, all other Health Insurance Schemes are required to be registered as either a Limited Liability Company, or as a Company Limited by Guarantee.

Other registration and qualification requirements for a Private Health Insurance Scheme (“PHIS”) includes the deposit of a monetary amount as may be determined by the NHIA, with a Bank that is accredited for that purpose by the NHIA, in an interest yielding bank account, as security for the registered members of the PHIS.

The security deposit serves as an insurance or collateral against any substantial loss that the PHIS operator may suffer, where such loss cannot be met from the PHIS operator’s available financial resources.

HMO Functions

The key role of all licensed HMOs is to perform such functions as may be assigned to a HMO by a State Health Insurance Scheme. Another key function of a HMO is to collect Health Insurance Contributions and ensure their prompt remittance to a State Health Insurance Scheme pool.

HMOs are also required to pay for the services rendered to their registered clients by licensed/accredited Health Care Providers.

Lastly, one other function that HMOs are required to perform is the establishment and the implementation of a Quality Assurance System for the Health Care Providers, regarding the health care services that they render to registered Health Care clients.

HMOs are however prohibited from delivering direct health care services to registered Health Care clients.

PHIS Regulations

All Private Health Insurance Schemes (“PHIS”) are mandatorily regulated by the NHIA. No corporate or group or person is allowed to operate any kind of Health Insurance Scheme or Plan unless such a corporate or group or person is registered and issued a operating license by the NHIA.

Any breach of the prior NHIA operating License requirement is an offence which on conviction attracts a fine of at least N2,000,000 (Two Million Naira) or imprisonment for a term of at least Five (5) years, or to both the fine and the term of imprisonment.

Health Insurance Schemes Contributions

In the formal sector, Employers and Employees are expected to pay for Health Insurance at rates approved by the State Health Insurance Scheme where they reside. For individuals and the members of their families who operate in the informal sector of the economy, the rate at which Health Insurance is obtained is determined also by the Council of the State Health Insurance Scheme where such individuals reside.

Health Insurance Contributions for Vulnerable Persons, who are not covered under other Health Insurance Scheme arrangements, are to be made on behalf of these persons by one or a combination of the three (3) levels of government, non-governmental organisations or developmental partners.

Health Care Providers

The functions of Health Care Providers, who must be accredited/licensed by NHIA, includes rendering to health insured registered persons qualitative healthcare services as contracted.

The NHIA is required by the NHIA Act to provide operational guidelines as to what constitutes Qualitative Assurance in Health Care delivery services.

Basic Health Care and Vulnerable Groups Funds

NHIA is required to publish the general guidelines for the operation of the Basic Healthcare Provisions Funds. State Health Care Schemes will however remain responsible for funding and managing their Health Care Schemes.

A Vulnerable Health Care Fund is also established by the NHIA Act with the sources for funding this Group provided to include (a) funding from the Basic Health Care Provisions Funds; (b) the Health Insurance Levy; (c) Special Intervention Funds from the Government; (d) dividends received from investments made by the Fund; and (e) voluntary contributions in the form of grants, donations, gifts, etc.

The objective of the above-mentioned Funds is to provide finances to subsidise the costs of the provision of health care services to vulnerable and indigent people resident in Nigeria.

Other Benefits of Health Insurance Schemes

In addition to Contributions to a Health Insurance Scheme providing Health Care Services to registered members of such a Health Insurance Scheme, such Contributions form a part of the tax-deductible expenses of the Contributors when their tax obligations are been computed.

Also, Health Insurance Schemes contributions made to NHIA are protected from Creditors in the event of a bankruptcy or insolvency proceedings of a Contributor or an organisation that makes such a contribution.

Arbitration

Whenever there is a dispute between the parties regarding the provisions of the NHIA, such a Dispute must be referred first for resolution by Mediation and Conciliation in accordance with the Dispute Resolution Operational Guidelines issued by NHIA.

Where Mediation and Conciliation fails, the parties to such a Dispute shall refer such a Dispute to Arbitration in accordance with the provisions of the Arbitration and Conciliation Act.

Where such a Dispute is with the NHIA itself, a one (1) month pre-action notice is required to be served on NHIA.

Offences and Penalties

Any of the stakeholders in the Health Insurance Schemes structure – HMO, Health Care Providers and other Health Care Operators – who deducts, receives, fails to pay over any Health Insurance Contribution within the period specified in the NHIA Act or the NHIA Operational Guidelines, commits an offence and will be liable to criminal prosecution.

It is also an offence not to provide Health Care to a person duly registered under a Health Insurance Scheme.

Conclusion – Comments and Observations

The dismal conditions which existed under the repealed/terminated National Health Insurance Scheme Act 2004 are still present today. From poor funding to poor infrastructure, and also poor renumeration of Health Care Practitioners. Repealing and enacting a new Law will not by itself alone revolutionise Health Care Delivery Services.

It would have been more beneficial for the National Health Insurance Authority (“NHIA”) to only act as the Regulator for all Health Insurance Schemes.

The condition that every PHIS must have a security deposit with a Bank approved by NHIA is one good example of NHIA taking on ancillary regulatory responsibilities that it could do without. This security deposit function may better be served by the PHIS securing a Insurance Policy from a very reputable insurance company.

The Constitutionality of the Federal Government legislating for itself and for State Governments on Health Care Insurance Scheme matters which is more on the Concurrent List of the 1999 Constitution (as amended) is likely going to result in some States mostly ignoring this new Law on constitutional grounds whilst practically, many of the States do not have the financial wherewithal to fund their share of a Contributory Health Insurance Scheme.

Lastly, the rate of contributions to each Health Insurance Scheme should be guided by the forces of demand and supply if the Health Insurance Schemes are to be self-sustaining, on a long-term basis.

Disclaimer

This is a free educational material which only serves as a general guide. It is not an exhaustive discussion of this topic. It does not serve as a source of solicitation, advertisement or the offering of legal services or advice of any kind. No Client/Attorney relationship is therefore created. Readers are strongly advised to always seek from qualified Legal Practitioners, competent legal counselling to their specific factual situation or to any questions or concerns arising from their specific factual situation.

Intellectual Property Protected!

This material is protected by International Intellectual Property Laws and Regulations. This material can therefore only be reproduced or re-distributed for non-profit educational purposes under the strict condition that our Oserogho & Associates Authorship of this material is explicitly acknowledged, and our above Disclaimer Notice is prominently displayed.

Real Estate Regulatory Authority Law

Introduction

In an effort to consolidate in one legislation, the Laws that regulate Real Estate transactions, which legislation conforms with the best global practices in Real Estate undertakings, the Lagos State Real Estate Regulatory Authority Law, 2021 (“the Real Estate Law”) was enacted. This Law repealed the 2015 Law on this same subject.

The provisions of the Real Estate Law, some of which provisions are highlighted below, seeks to among other things professionalise Real Estate practices, and in the process prevent fraudulent and other unwholesome practices in the Real Estate industry.

Lagos State Real Estate Regulatory Authority

The Lagos State Real Estate Regulatory Authority (“the Real Estate Regulator”) is established by the Real Estate Law to among other things regulate, monitor, and sanitise Real Estate transactions in Lagos State to adhere to global best practices.

The Real Estate Regulator is expected, as part of its statutory functions, to maintain a comprehensive and updated Register of Permits issued to Real Estate service professionals and other persons involved in Real Estate transactions. The annual Permits issued after registration are renewable upon the Applicant’s satisfactory performance of the conditions attached to the Real Estate Permit.

Register of Transactions and Practitioners

One of the very important roles that the Real Estate Regulator plays in the Real Estate market is the registering of and the maintenance of a Register of Real Estate transactions in Lagos State.

A second important function that the Real Estate Regulator performs is the registration of and the keeping of a Register of all persons, whether corporate or individual, engaged in any form of real estate business in Lagos State.

The registration requirements for small and big players in the real estate market can be found in the Real Estate Law.

Foreigners and Real Estate Practice

The Real Estate Law reiterates the provisions in the Acquisition of Lands by Aliens Law which provides that a foreigner or a foreign legal entity who wishes to invest in the Real Estate market must first seek through the Real Estate Regulator, and obtain the prior consent of the Governor of the State where the landed property is located, before making such investment. This rule also applies to foreigners desirous of engaging in Real Estate practices.

Section 28(2) of the Real Estate Law goes further to provide that “Subject to the provisions of the Acquisition of Land by Aliens Law and all other Laws in respect of real estate in the State, investment in land by a foreigner shall not exceed twenty-five (25) years including any option to renew.”

Legal Practitioners Mandatory Functions

All Real Estate Agreements are now required to be prepared by a licensed Legal Practitioner who must affix his or her Nigerian Bar Association Seal to such Agreements.

A Legal Practitioner who drafts a Real Estate Agreement is also required by the Real Estate Law to charge his or her professional fees, for such services, using the Legal Practitioner’s Scale of Professional Fees.

Dispute Resolution

The Real Estate Law provides for various Dispute Resolution methods in the Real Estate Law. One of the Dispute Resolution methods that an aggrieved person can explore is to report his or her grievance, which usually bothers on professional misconduct, to the Real Estate Committee created to resolve such disputes. After hearing all sides to a dispute, the Real Estate Committee is required to give its decision resolving the dispute. Any person aggrieved with the decision of the Real Estate Committee has a right to appeal against such a decision to a Court of competent jurisdiction.

Another Dispute Resolution method that an aggrieved person can explore in the real estate market is the use of Mediation facilitated by the Real Estate Regulator.

The parties may also be counselled by the Real Estate Regulator to amicably settle their dispute. Once an agreement is reached regarding such a settlement, a Memorandum of Understanding is required to be drafted and signed by the parties to such a dispute. Such a signed Memorandum of Understanding, endorsed by a Magistrate or a Judge as may be designated by the Chief Judge of the State, is enforceable by judicial process in the same manner as a judgment or an Order of a competent Court of Law.

Where a prima facie allegation of fraud, or obtaining under false pretenses, or any other crime is made, such a allegation shall be referred to the Police for investigation and further action.

Pre-Action Notice

A One (1) Month Pre-Action Notice of Intention to commence legal proceedings against the Real Estate Regulator is required to be issued and served on this Regulator before any legal proceedings can be commenced.

Offences and Penalties

It is an offence for an Individual or an Organisation to engage in any form of Real Estate Transaction without registration with the Real Estate Regulatory Authority. The penalty on conviction for a non-registration infraction is a fine of N250,000 (Two Hundred and Fifty Thousand Naira) for an Individual and N1,000,000 (One Million Naira) for a corporate organisation.

There are also fines, which in some cases are fines for each day that the non-compliance persists, and the revocation of the Real Estate Permit where one was issued, with any non-compliance of the other provisions of the Real Estate Law.

Conclusion

The registration requirements for Real Estate Practitioners, especially for small business owners many of whom are in the forefront of most real estate transactions, are onerous. Especially the three (3) years Tax Clearance Certificate requirement.

Also, difficult to decipher is the commercial benefit or the loss to a small real estate practitioner who does not register his or her real estate transactions with the Real Estate Regulator.

The question of what role will the Real Estate Regulator and the Land Registry now play concerning the registration of real estate title documentation needs to be addressed. This is in order to ensure that there is no duplication of functions by these two government establishments in the Real Estate market.

The restrictions on foreigners practising in the Real Estate Market, and applying for statutory rights of occupancy to landed property under the Land Use Act and the Acquisition of Land by Aliens Law is a disincentive to foreign investments in the Real Estate market.

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