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LEGAL ALERT JANUARY 2006 – STARTING A NEW BUSINESS IN A NEW YEAR IN NIGERIA.
 
In this Issue.
1. Happy New Year!
2. Legal Alert on Basic Requirements for Starting a New Business in a New Year in Nigeria.
Happy New Year.
We wish you a very Happy New Year. We also wish you well always and would continue to partner with you in your enterprise.
Legal Alert on Basis Legal Requirements for New & Existing Businesses in Nigeria.
Introduction.
In consulting for new and existing Clients in the last quarter of last year, 2005 it was disturbing to discover that Corporations, both local and International, did not have the basic rudimentary information on what is required in Law to start a business venture or sustain an existing one in Nigeria. Also, existing Corporations, registered with the Corporate Affairs Commission in Nigeria, are not complying with minimum regulatory compliance requirements thereby exposing their businesses to risk of incurring penalties.
To assist you in appraising your current situation and appreciating the elementary requirements of starting a new business in Nigeria and taking immediate action necessary for success, we share with you, this Month's Legal Alert in celebration of the New Year, 2006.
Types of Business Enterprises In Nigeria.
Sole Proprietorships.
This is usually an enterprise owned and run by one or two people. The primary advantage of a Sole Proprietorship when compared with other kinds of business entities is that it is very simple to register and sometimes, where the Proprietor or Proprietors intend to use their surnames or forenames in carrying on the business, formal registration may not be necessary.
The primary disadvantages of a Sole Proprietorship include the fact that the business liabilities of the Proprietor or Proprietors are unlimited. Also, the rate of tax to be paid on earned income is higher than that required to be paid by a limited liability company.
Partnerships.
A Partnership usually consist of more than two people but not more than twenty (20) persons. The key advantages of Partnerships are that partnerships are more private with the Partners being people of complimentary skills and assets, joining their resources together for their collective economic benefit. Registration with the Corporate Affairs Commission is required especially when the name(s) under which the Partners trade or intend to trade is different from their personal names.
The off-side of a Partnership is that the liabilities of the Partners are unlimited. Also, their tax liability is higher than that paid by the Shareholders of a limited liability company.
Companies.
Companies are the more common vehicle of modern enterprise. However, more time is spent on their formation and more legal compliances are required from their operations by the Companies Law.
There are two main types of companies and they are the Public and Private Companies. A public company must consist of more than fifty (50) persons whilst a private company must not be more than fifty (50) persons.
There are also different modes of public and private companies and they are (1) company limited by shares; (2) company limited by guarantee and (3) unlimited company. As companies limited by shares are more popular, more space would be dedicated to them.
Bullet points you must be aware of when forming a company or if you have already formed one, when operating the company, include: -
 The proposed name of a new company must not conflict with that of another company that is already registered and in existence.
 Every company must have a minimum of two Directors and two Shareholders at every time. The maximum number of Shareholders for a private company is 50 members.
 Every company in Nigeria must have a registered office, an address where its register of members and debenture(s) are kept and a company secretary.
 The minimum authorised share capital of a private company is N10,000 (Ten Thousand Naira). In the case of a public company, the minimum share capital is N500,000 (Five Hundred Thousand Naira).
 Every company in Nigeria is mandatorily required to hold its first Annual General Meeting eighteen (18) months after it is registered save where the Corporate Affairs Commission grants such a company an exemption for special reason.
 At the Annual General Meeting of a company, the company is required to submit its Financial Statements and Audited Accounts for approval of the Shareholders. After the Statements and Accounts are approved, the company must file these documents with its Annual Returns at the Corporate Affairs Commission. This requirement is applicable whether the company has or is carrying on any business for the period in question.
 Every company in Nigeria must pay Companies Income Tax which is assessed at 30% of the company's earned income/profits. To assist you in managing your tax responsibilities, it is strongly recommended that you engage the services of an Accountant or Accounts Clerk or keep the Accounts of the company yourself.
Foreign Investors.
Every foreign company must be registered in Nigeria before it can carry on business in Nigeria. The only exemption to this rule is where such a foreign company is granted exemption from registration by the Federal Government of Nigeria for the particular project that the foreign company is engaged to carry out in Nigeria for the benefit of the people of the Federation of Nigeria.
Except for businesses in the petroleum sector in which the Nigerian Government already has joint venture partners, and also in businesses relating to military and para-military equipment or attire, and also in narcotic drugs, foreign companies can now wholly own the shares of any enterprise in Nigeria; i.e. 100%. It is however usually recommended that in some cases, a local Shareholder with relevant knowledge and skill in the kind of business of such a company may be invited and registered as Shareholder.
There is free repatriation of profits by a foreign owned company in its venture in Nigeria. It is however strongly recommended that when the foreign capital is brought into Nigeria, it should be imported through an Authorised Dealer, e.g. a Nigerian licensed Bank, who should obtain from the Central Bank of Nigeria a certificate of capital importation for the investment.
The assets, investments or profits of foreign companies from a Nigerian owned enterprise are also now protected by Law from government nationalisation or expropriation or seizures and where it is absolutely necessary in the public interest, the Federal Government of Nigeria must pay adequate and sufficient compensation. Nigeria has also signed some treaties with some countries like France and Belgium barring seizure of investments by nationals of such countries in Nigeria.
Registration of foreign investments in Nigeria with the Nigeria Investment Promotion Commission and the Nigeria Export Promotion Commission are essential as only such registration would guarantee the foreign investor entitlement to various incentives and capital allowances. For example, interest on foreign loans granted with repayment periods of more than 2 years to more than 7 years are allowed graduated tax exemptions under Nigerian Law.
Investment Incentives.
More investment incentives are available to companies registered in Nigeria - whether wholly owned by a foreign company or by local Shareholders - who are engaged in oil and gas business, agriculture and manufacturing businesses, especially for exports. Manufacturing and agricultural businesses can claim 100% of their assessable profits as capital allowances.
Also, tax holidays are granted to pioneering industries for periods of up to five (5) years. An application must however be made and granted.
CONCLUSION.
In concluding, we remind you that globally, the need for regulatory compliance is now mandatory and more essential to economic success and survival. You must therefore ensure that you draw up a comprehensive Checklist, with assistance from your professional Advisers – Accountants, Solicitors, Tax Advisor – on all mandatory reporting activities for your company in this New Year. Interestingly, in complying with these reporting requirements, you would discover things that you have or have not done and areas in which you can improve your business.
Need for Reforms of Companies Laws.
A member of the Editorial Board to these Legal Alerts had some key comments on the need to amend our Companies & Allied Matters Act to suit modern demands. We share some of his suggestions with you.
1. The requirement restricting the number of members of a private company to 50 should be removed. The requirement that a private company should not be allowed to publicly invite members of the public to subscribe for its shares should be maintained.
2. The requirement that a company is separate and distinct from its Shareholders has caused a lot of injustice to other parties and should be amended.
3. What is the liability of other stakeholders in the administration of a company?
Fortunately, the Nigerian government some months ago established a Panel to review these Laws. Their recommendations and passage of the amendments into Law are awaited.
DISCLAIMER: This Newsletter is a free educational material, for general information ONLY. By itself, it does not create a Client-Attorney relationship.
Recipients are advised to seek professional legal counselling to their specific situations when they arise. Comments, criticisms, suggestions, ideas, contributions, etc are always welcomed.
This Newsletter is protected by Intellectual Property Laws. It may however be shared with other parties (third parties) provided the Author is acknowledged as the Originator/Creator of the work and this Disclaimer Notice is attached.
Legal Alert December 2007 Award of Damages
 
In this Issue:
1. Legal Alert for December, 2007 – Award of Damages.
2. Subscriber & Unsubscribe to Legal Alerts.
3. Disclaimer Notice.
Legal Alert for December, 2007 – Award of Damages
Damages are the compensation claimed or awarded to an injured party for the breach of a contract or the commission of a tort, e.g. negligence, trespass, etc.
The ability to prove that a contract has been breached or an infraction committed which has in turn resulted in a quantifiable injury and loss is becoming more and more difficult as a result of insufficient gathering and pleading of facts with supporting evidence by the injured party.
In cases where the breach is more glaring and requires minimal proof, the injured party would face the further hurdle of establishing that the breach has actually caused sufficient quantifiable damage that can be compensated for under the Law. This is because the Law tries to ensure harmony by not awarding damages arbitrarily like a benevolent parent or giving a wind fall that would encourage multiple spurious litigation. The Law also does not award damages based on speculative or sentimental claims.
Quantification of Damages
Damages are only awarded as a compensation for a party's pecuniary loss naturally flowing from the breach or proximately associated to the breach - See HARDLY v. BAXENDALE (1854). Damages that are too remote to a breach are never compensated for.
The Law recognises that in some instances, it may be impossible to completely restore the loss suffered by an injured person. The Law tries as much as possible to make some restoration that is as close as possible to the injured person's position before the breach and injury or loss.
Common Law however expects diligence and reasonableness when a breach and an injury occur. An injured party is therefore expected under the law to take all reasonable steps to mitigate his loss. A good example is where an employee's contract is wrongly terminated but the employee is diligent in making his claim for compensation for wrongful termination of contract whilst at the same time seeking and securing, if possible, an alternative employment.
The Law does not however expect an injured person to mitigate his loss to his own peril - See OKONKWO v. N.N.P.C.
Conclusion
It is recommended that parties should try and expand their contractual documents such that in addition to other traditional clauses, new contractual provision(s) are made for instances where a breach would be held to have occurred and the mechanism for computing and qualifying the monetary compensation for each of such breach is agreed to in advance.
The above strategy would save the parties time and expense in addition to the further objective of serving as a disincentive to a breach occurring. Where a breach inevitable does occur, in spite of this provision, settlement can be arrived at in a much quicker way based on the pre-determined mechanism. The work of the Courts is reduced when computing the award where the breach and the injury are established, with the predetermined mechanism in place.
In the event of litigation becoming inevitable, the aggrieved party would do well to exhaustively brief his or her Solicitor on all the facts of the matter, how the breach occurred and the actual loss suffered in as precise as possible a manner with a computation of the actual loss suffered in monetary terms. These are required if any success is to be achieved after a long and hard fought litigation.
Subscribe & Unsubscribe to Legal Alerts
This Alert and others produced by us are provided without any charge to you. You can always subscribe to it, on behalf of other interested persons from whom you have their permission, by sending to us a one line e-mail with the words "Subscribe – Legal Alerts" followed by the desired email address.
You are equally permitted to terminate your subscription by sending to us a one line email with the words "Unsubscribe - Legal Alerts" and your electronic address would be removed from our list. In the future, you can return to our mailing list by visiting our web site www.oseroghoassociates.com to subscribe for the Legal Alerts.
DISCLAIMER NOTICE. This Legal Alert is a free educational material, for your general information and enlightenment purposes ONLY. This Alert, by itself, does not create a Client/Attorney relationship between yourself and our Law Firm.
Recipients are therefore advised to seek professional legal counselling to their specific situations when they do arise. Questions, comments, criticisms, suggestions, new ideas, contributions, etc are always welcomed with many thanks.
This Legal Alert is protected by Intellectual Property Law and Regulations. It may however be shared with other parties provided that our Authorship is always acknowledged and this Disclaimer Notice is attached.
Legal Alert October 2007 Warranties & Sale of Goods
 
In this Issue:
1. Legal Alert for October, 2007 – Warranties & Sale of Goods.
2. Subscriber & Unsubscribe to Legal Alerts.
3. Disclaimer Notice.
Legal Alert for October 2007 - Warranties & Sale of Goods
The representation by a Seller that the goods he sells comes with a warranty is a very strong influencing factor in convincing the Buyer to make the purchase. Unfortunately, the Buyer's attempt to claim the benefits under the warranty when there is a problem with the product is usually not as easy and simple as when the purchase and the payment for the goods is or are made. Some Sellers refute out-rightly all liability or adopt delay measures aimed at either frustrating the Buyer to abandon his or her right to the benefits provided under the warranty or to settle for less of the benefits provided under the warranty.
Insufficient information about what a warranty entails or whether the warranty is actually a condition as opposed to a warranty of the contract, sometime results in the buyer not making a claim at all. The time and cost of prosecuting the claim is another discouraging factor to the purchaser of the product.
What therefore is a Condition & What is a Warranty?
A condition is a substantial term of a contract which is so essential to the contract that a substantial failure of it defeats the contract and entitles the Buyer to the repudiation of the entire contract and to claim for damages.
A warranty on the other hand is an ancillary or collateral term of a contract. Unlike a condition, which is a substantial term and whose breach can lead to cancellation of the entire contract, the breach of a warranty only leads to an award in compensatory damages. See Section 53 of the Sale of Goods Act.
Applicability of Condition and Warranty
It is common for the two legal terms to be used interchangeably by business people even though their legal implications are not the same. Where a dispute arises, it is the intention of the parties at the time they entered into the contract or the intention of a reasonable business person in the same circumstances as the one under consideration that determines whether a term of a contract is a condition of the contract or a warranty under the contract.
It must be mentioned that though a term of a contract is stated in the contract to be a condition, the Courts may not deem the term to be a condition where its breach does not affect the substance of the contract or where the injured party elects to treat the condition as a warranty, i.e. by accepting the goods but demanding damages for an ancillary loss resulting from the breach.
Measure of Damage
The amount of compensation that may be awarded for the breach of a warranty is the estimated loss directly and naturally resulting in the ordinary cause of the event that caused the breach i.e. the law does not permit an injured person to make a profit over and above his or her actual estimated loss.
Compensation for the breach of a contract may however be refused where the injured party has waived the breach or acquiescence to it or is in contributory negligence or wrongfully prevents the performance of the contract or does not mitigate his loss by proactively reducing the damage. For Nigerian Court cases on damages see the Supreme Court decisions in OMONUWA V. WAHABI (1976), SWISS NIGERIA WOOD INDUSTRIES V. BOGO (1995).
Remoteness of Damages
The right to claim for damages is limited by the legal principle of remoteness of damage. This principle provides that a party can only claim for damages that are not too remote to the damage itself. This is because in some cases where a breach has occurred, the damage is neither substantial nor ancillary as to cause the injured party more than some trifling inconvenience.
Conclusion
Buyers would do well to be more vigilant and circumspect when making their purchases. Where a product comes with a warranty, they should demand for a Warranty Certificate to be issued or at the minimum for the receipt of purchase to describe the product and itemise the nature and the tenure of the warranty. Where in doubt, the Buyer should ask questions and if the doubt persists, the Buyer should not make the purchase until sufficient convincing information is provided. Remember that once your money leaves your control, you are at the mercy of others who may be too willingly not to return it to you.
Subscribe & Unsubscribe to Legal Alerts
This Alert and others produced by us are provided without any charge to you. You can always subscribe to it, on behalf of other interested persons from whom you have their permission, by sending to us a one line e-mail with the words "Subscribe – Legal Alerts" followed by the desired email address.
You are equally permitted to terminate your subscription by sending to us a one line email with the words "Unsubscribe - Legal Alerts" and your electronic address would be removed from our list. In the future, you can return to our mailing list by visiting our web site www.oseroghoassociates.com to subscribe for the Legal Alerts.
DISCLAIMER NOTICE. This Legal Alert is a free educational material, for your general information and enlightenment purposes ONLY. This Alert, by itself, does not create a Client/Attorney relationship between yourself and our Law Firm.
Recipients are therefore advised to seek professional legal counselling to their specific situations when they do arise. Questions, comments, criticisms, suggestions, new ideas, contributions, etc are always welcomed with many thanks.
This Legal Alert is protected by Intellectual Property Law and Regulations. It may however be shared with other parties provided that our Authorship is always acknowledged and this Disclaimer Notice is attached.
Legal Alert September 2007 Consumer Rights & Consumer Protective Reliefs'
 
In this Issue:
1. Legal Alert for September, 2007 – Consumer Rights & Consumer Protective Reliefs'.
2. Subscriber & Unsubscribe to Legal Alerts.
3. Disclaimer Notice.
Introduction to Consumer Rights & Consumer Protective Reliefs'
The competition to capture the customer's attention to spend his or her income on a particular product or products, or to purchase a particular service is becoming more fervent with manufacturers and producers daily promoting bonanzas, sales shows and making outlandish product claims which most of the time are spurious and sometimes outrightly fraudulent.
Lip service is paid to the protection of the consumer or of his rights. The few attempts aimed at educating consumers on their rights are restricted to the regulatory powers of the Nigerian Consumer Protection Council (NCPC). NCPC is however mostly perceived as a regulator that has no strong enforcement machinery and mechanism due mainly to lack of sufficient funding on the part of the government and also the lack of enlightenment on the part of the consumer about his or her rights.
The majority of the available literature on consumer rights and consumer protection in Nigeria are also concentrated on the regulatory functions of the Nigerian Consumer Protection Council (NCPC). The consumer however has other protective reliefs in contract and or in tort whenever the consumer's rights are infringed. This Alert is our attempt to provide you with a brief and condensed summary of your rights as a consumer under Nigerian Law, i.e. Law of Contract, Law of Tort and Consumer Protection Council Law.
Consumer Protection Under Contract Law
A consumer who is also a purchaser for value can file a civil claim under the law of contract for breach of the express or implied terms of the contract of purchase of a product that turns out to be defective or incomplete in its value.
The three categories of terms implied by our law of contract are:
(a) Terms of contract implied by custom and usage.
(b) Terms of contract implied by statute.
(c) Terms of contract implied by case law, i.e. formulated by our Courts of Law.
The common legal remedies available to a consumer/buyer for breach of a contract of sale are:
(a) Specific performance of the contract.
(b) Repudiation of the entire contract where the seller is in breach of a fundamental term or condition of the contract.
(c) Damages for breach of warranty. In this situation, the consumer/buyer does not repudiate the contract in its entirety but in its stead files a civil suit for damages for the breach of a non fundamental condition or conditions of the contract.
The amount of damages that can be awarded by our Law Courts in any case of a breach of contract is the estimated amount of the loss directly and naturally resulting to the consumer/buyer as a result of the breach.
Note however that only a consumer/buyer that has privity of contact with a seller can maintain an action under contact for breach and loss. A person who is not a party to a contract has no remedy under the Law of Contract. In stead, the Law of Tort may be available to provide remedy if the neighbourliness nexus between the consumer and manufacturer is established.
Law of Tort and Consumer Protection.
The Law of Tort has as its foundation the principle of negligence. Negligence is in fact the legal fulcrum upon which the essence of human co-existence is concretised. Human co-existence require that we all love our neighbour in the same manner as we love ourselves by ensuring that we do or do not do - as appropriate - what would cause injury and loss to our neighbour. See the decision in Odinaka V. Moghalu. Thus everybody including manufacturers have a legal duty under the doctrine of negligence to all persons who come into contact with their product or services.
A duty of care is only legally recognised where a person is presumed to foresee that his actions or inactions may cause injury to his neighbour. The old legal requirement that there must be a subsisting contract before a claim in tort or negligence can be filed in Court is now abolished by case law.
Established by case law is the principle that a manufacturer of a product or service, for gain or profit, owes a duty to take care in the manufacture of the product or service that it delivers to members of the public. Therefore, a manufacturer as in the case of Osemobor V. Niger Biscuit was held liable for injuries resulting from the presence of a decayed tooth in a biscuit bought by the plaintiff.
Apart from the manufacturer or producer, other entities in the distribution chain of products and services like wholesalers, retailers, distributors, sub-dealers, etc could equally be held liable for negligence in the sale and or distribution of defective products.
Lastly on negligence, a claimant must, in addition to establishing that a producer or manufacturer or any other party owes him a duty of care and that this duty of care was breached by the defendant not exercising reasonable care, provide evidence that the direct result of the breach of the duty of care is what resulted in his loss or injury and damage(s). Where there is no damage however, the court of law would not award compensation even if a duty of care and the breach of that duty of care are established by the claimant.
Consumer Protection Under the Consumer Protection Law
The Consumer Protection Council (CPC) unlike other Government Agencies which make indirect provisions on consumer protection, protects the consumer not only against hazardous products but also against attempts to compromise for profit the rights of the Nigerian Consumer. Some of the statutory functions of CPC include:
a. Providing speedy redress to consumers' complaints through negotiation, meditation and conciliation.
b. Seeking ways of removing from the market hazardous products and causing offenders to replace such products with safer alternatives.
c. Publishing from time to time such products whose consumption and sale have been banned, withdrawn, severally restricted or not approved by the Federal Government of Nigeria or by any foreign Government.
d. Causing an offending Company, Firm, Trade Association or Individual to protect, compensate, provide relief and safeguards to injured consumers and communities from the adverse effect of technologies that are inherent, harmful, injurious, violent or highly hazardous.
e. Organise and undertake campaigns and other forms of activities as will lead to increase public consumer awareness.
f. Issue guidelines to manufacturers, importers, dealers and wholesalers in relation to their obligations under the Consumer Protection Act.
The statutory rights of the consumer under CPC include: -
i. The right of the Consumer to receive products and services that are safe.
ii. The right of the consumer to comprehensive information on the qualities, quantity and value of the product. False or misleading information on products that are likely to create a wrong impression as to quality, character, value, composition, merit or safety of the product are not tolerated under the Law.
iii. The right of the consumer to be heard timeously and obtain redress expeditiously.
iv. The right of the Consumer to receive compensation in spite of a successful criminal prosecution of the offending manufacturer or distributor or retailer or wholesaler of the product.
Conclusion
The down side of globalisation - without proper product quality policing - is the undermining of the rights of the Consumer to risks of fraud and in some case grievous bodily harm. The governments on the one hand, consumers on the other and key industry players must enlighten themselves and the consumers on best product standards and practices, and where this falls, penalties and compensation should be imposed without protracted and or prolonged litigation or prosecution.
Consumer protection laws would need to be re-enforced and amended to cater for consumer exposure to trade on the Internet. The existence of up to date data online legislations in Nigeria would also go a long way in remedying this lacuna.
There is the need for case Law to revisit the current practice of only awarding nominal damages for product liability cases that do not result in the death or fatal permanent injury to the consumer. Exemplary damages are an alternative remedy that may serve as a deterrent and warning to all manufacturers to deliver only the best and safest products to members of the public.
Subscribe & Unsubscribe to Legal Alerts
This Alert and others produced by us are provided without any charge to you. You can always subscribe to it, on behalf of other interested persons from whom you have their permission, by sending to us a one line e-mail with the words "Subscribe – Legal Alerts" followed by the desired email address.
You are equally permitted to terminate your subscription by sending to us a one line email with the words "Unsubscribe - Legal Alerts" and your electronic address would be removed from our list. In the future, you can return to our mailing list by visiting our web site www.oseroghoassociates.com to subscribe for the Legal Alerts.
DISCLAIMER NOTICE. This Legal Alert is a free educational material, for your general information and enlightenment purposes ONLY. This Alert, by itself, does not create a Client/Attorney relationship between yourself and our Law Firm.
Recipients are therefore advised to seek professional legal counselling to their specific situations when they do arise. Questions, comments, criticisms, suggestions, new ideas, contributions, etc are always welcomed with many thanks.
This Legal Alert is protected by Intellectual Property Law and Regulations. It may however be shared with other parties provided that our Authorship is always acknowledged and this Disclaimer Notice is attached.
Legal Alert July 2007 Entertainment Distribution Framework/Regulations
 
In this Issue:-
1. Business Quote for the Month
2. Legal News
3. Legal Alert for July 2007 – Entertainment Distribution Framework/Regulations
4. Subscribe & Unsubscribe to Legal Alerts.
5. Disclaimer Notice.
Business Quote for the Month
Every new vision is a joke until one man accomplishes the vision.
Legal News
Central Bank of Nigeria (Amendment) Act
Continuing economic and regulatory reforms in Nigeria have led to the enactment of the Central Bank of Nigeria (Amendment) Act, 2007. This new CBN Law among other things have re-enforced the role of the Central Bank of Nigeria (CBN) as the Banker to the Federal Government of Nigeria (FGN), the exclusive Manager of the country's external reserves and also as the government's economic and financial Adviser. Other emphasised role for the CBN under this new legislation include the responsibility of independently formulating and implementing monetary and banking policies for the country.
To guarantee the independence of the CBN, this amended legislation provides that the appointment and removal of the Governor and the Deputy Governors of the CBN can only be effected on the recommendation of the President after the ratification of the recommendation by two third majority votes of the members of the Nigerian National Assembly.
All manner of abuse of any Nigerian currency whether in the form of hawking currency notes, spraying currency notes at social occasions and stepping on them, etc is now prohibited with monetary and penitentiary sanctions for violation.
One of the other very exciting provisions of this Law is the statutory power granted to the CBN to license and regulate the activities of credit bureaus in Nigeria. Although there is presently only one licensed credit bureau in Nigeria, the future of these bureaus is very important to the Nigerian Financial Sector.
Technology Tax
The National Information Technology Development Agency Act (NITDA Law) signed into law in May 2007. This Law primarily imposes a one percent technology tax on the gross income of all Nigerian registered Companies that utilise telecommunication machinery to deliver their products and services and have an annual turnover of over One Hundred Million Naira. Companies that would be affected by this tax include Mobile Telephone Operators, other Telecommunication Companies, Internet Service Providers, Cyber Companies, all Financial Institutions including Banks, Pension Managers, etc.
Learned senior Law lecturer and writer on Tax Law, Abiola Sanni, has rightly criticised this tax which he described as a "Quadruple Tax" that would hamper economic growth. This is in the light of the fact that telecommunication companies in Nigeria are already being made to pay 30% of their net profit as companies income tax, 2% of their accessible profit as education tax, 2½% of gross profit as telecommunication regulator NCC levy/fee/tax; these are in addition to Local Government taxes that are too numerous to enumerate and are mostly unknown to law.
Legal Alert July 2007 Distribution Frame Work For Films and Movies In Nigeria
Humanity continues to enjoy tremendous benefits from the intellectual capital of inventors, entertainers and producers of ideas and products. To encourage the production of more intellectual capital, National and International Laws and conventions protect the Inventors of new and existing ideas, in a world that is now based on knowledge and information.
The non-respect for and the non-protection of intellectual capital or intellectual property rights in many countries of the world have unfortunately led to retrogression and non advancement in private capital investments in intellectual property. This abnormality has led to the failure of a functional legal, institutional and distributional frame work to the disadvantage of all stakeholders and citizens of the world at large.
The attempt in Nigeria to change the attitudes and practices by institutionalising a comprehensive distribution frame work for movies and films by the Nigerian Films and Video Censors Board (Distribution Framework) have met with resistance and litigation by the primary Stakeholders of this industry.
It is alleged that Nigeria has the third largest movie industry after Hollywood in the United States and Bollywood in India. Investments in the Nigerian entertainment industry by Banks and Investors have however been hampered by piracy concerns and the lack of auditable data/statistics on the existing and possible future products and services of the entertainment industry. The Distribution Framework is therefore a comprehensive policy on distribution, exhibition and marketing of films and video works in Nigeria.
This Alert is a succinct summary of what the distribution framework provides for and the benefits that would result from its collective and complete implementation.
Objectives of the Distribution Framework
The Distribution Framework seeks to achieve the following things:-
a. Standardise the Nigerian film and video industry.
b. Compel parties to execute written contracts which guarantee property rights and remuneration to all beneficiaries.
c. Provide data/statistics by ensuring that all practitioners are registered and that only registered Distributors, and not Producers or others, are allowed to submit movies for classification after obtaining copyright notification from the Nigerian Copyright Commission (now under Nigerian Intellectual Property Commission).
d. Enhancement of the culture of data collection through the Distributors. This will effectively neutralise piracy and other illegal activities in the entertainment industry.
e. The framework will also lead to specialisation of practitioners and increase in employment and tax revenues to the government.
Categories and Types of Distributors
All Distributors must apply for registration and be licensed by NFVCB after meeting the registration and licensing requirements.
Distributors of movies and videos in Nigeria are categorised by type and by location. Distributors by location are those that are either national distributors, regional distributors, state distributors, local government distributors or community distributors.
Distributors by type are the majors who are called chain distributors; and the minor players who are called independent distributors or stand-alones.
Classified Distribution Rights Under Distribution Framework
There are three primary distribution rights that a Copyright owner can assign to a licensed Distributor. They are rental rights only which permits the rental of products but forbids the sale and purchase of entertainment products; rental and sale rights, and the comprehensive distributors rights which is the all inclusive right to sell, exhibit, hire and broadcast movies including internet/gsm downloads.
All distribution contracts must be in writing with a minimum duration of 6 months and a maximum duration of 5 years. Evidence of the consideration for the distribution agreement with the copyright owner must be shown by the Distributor.
Distribution Procedures Under Framework
The essence of the Distribution Framework is to bring about discipline and auditable statistics. To guarantee this objective, only licensed national distributors, who have registered the copyright to the film with NCC, can submit a film to NFVCB for censoring and classification. According to the Distribution Framework, "The application to distribute and or exhibit shall be accompanied by a valid distribution agreement with a brief marketing plan".
It is mandatory for all licenced Distributors to submit to NFVCB a statutory distribution report which must capture the films and video products within the licenced distributor's distribution chain for the period of the report.
Anti-Piracy & Other Framework Protection
The following securities for the Framework are provided in the distribution framework:
1. All licensed distributors are given a separate security code which must be reflected in all the films and video works within their distribution chain.
2. All licensed distributors must affix the registration seal or classification symbol for each movie, film and video title approved for distribution.
3. All licensed chain distributors are responsible for the actions or inactions of their subsidiary distribution outlets.
Short comings of Framework
a. No provision for review of the distribution framework after an implementation period of two or three years.
b. The tenure of the distribution licenses and the possible grounds under which they may be revoked are not stated in the framework.
c. The procedures for Lender stakeholders to access the data/statistics collated by NFVCB is not stated. It is recommended that there should be a transparent procedure in order for producers to access necessary funding.
Conclusion
There is no perfect document. All stakeholders should in the interest of the entertainment industry collaborate with the NFVCB in the implementation of the new distribution framework for films and video in Nigeria. This cooperation is required especially in the area of fighting piracy by ensuring that all entertainment products have affixed to them the necessary security seals and unlicensed professionals are barred from the entertainment industry.
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