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Introduction

The Companies Income Tax Act recognises that companies will incur expenses/expenditure from which they will earn an income, and the income after expenses will attract taxable profits.

As capital expenditure impacts on a company’s income and the final corporation tax paid, close attention is paid to all verifiable capital expenditure, as it is known that a prudent capital expenditure increases a company’s production capacity and its long-term profitability; in contrast to fictitious or non-related expenditure to a company’s bottom line or net earnings.

With the recession in the economy, and the natural inclination to increase the taxes collected, the requirement for a Certificate of Acceptance of Capital Expenditure or Assets, issued by the Director of the Industrial Inspectorate Division, which Division is in the Federal Ministry of Industries, Trade and Investments, has being resurrected.

Notice of Capital Expenditure

It is the primary function of the Industrial Inspectorate Division (“IID”) in the Federal Ministry of Industries, Trade and Investments to inspect, investigate, verify and certify any capital expenditure incurred on any capital asset or undertaking that is in excess of 500,000 (Five Hundred Thousand Naira) in value. Capital Assets and undertakings contemplated under this regime include land, buildings, industrial plants, equipment or machines and other similar capital assets.

The Industrial Inspectorate Act requires that before or after any capital expenditure that is in excess of 500,000 is incurred by any company, whether or not desirous of claiming an Investment or Capital Allowance, as a tax deductible expense from the tax authorities, against such a capital expenditure, Notice of the nature of the capital expenditure must be served on the IID Director, who is required to investigate, inspect, verify and certify such a capital expenditure.

IID Certificate of Acceptance

The IID Director shall on his or her satisfactory investigation, inspection and verification of the true value of such a capital expenditure, issue the IID Certificate of Acceptance of such a capital expenditure.

No Capital or Investment Allowance can be claimed on a capital expenditure, as a tax deductible expense, where no IID Certificate of Acceptance is furnished to the Tax Authority. Thus, any Certificate of Acceptance of a capital expenditure issued by the IID Director or arising from a final Arbitrator’s Decision or Award on an IID application shall be accepted by the Tax Authority, which is the Federal Inland Revenue Service (“FIRS”), and any other department of any tier of Government.

In addition to the none admittance of a capital expenditure to any tax relief or allowance, the failure by a company and its key management team to apply for a IID Certificate of Acceptance of a Capital Expenditure without a reasonable explanation is an offence which on conviction attracts a fine. More importantly, no Capital or Investment Allowance will be allowed by the Tax Authority as a business deductible expense where no IID Certificate of Allowance is tendered.

IID Arbitration

Where a company disputes the IID valuation of its capital expenditure or asset, such a company has the right to serve a Notice of Objection to such a valuation for it to be re-assessed by an Independent Sole Arbitrator agreed to by the IID Director and the challenging company. The nominated Sole Arbitrator must however be approved by the Minister for the Federal Ministry of Industries, Trade and Investments.

The Investment Valuation Decision by the Sole Arbitrator shall be final and binding on the parties to the Arbitration.

Conclusion

The revival of this regulatory Certificate of Acceptance of Capital Expenditure, at a time when the economy is in recession, will only further increase the number of permits, licenses and certifications, with their adverse impact on the escalating costs of doing business.

The certification timeline, which is a bureaucratic exercise and the acquisition of the asset timeline, may not align thereby delaying the acquisition of the asset or the forfeiture of the tax relief due to the delayed issuance of the IID Certificate of Acceptance. Where the Certificate of Acceptance is later issued, claiming the tax allowance or deduction or relief from such a capital expenditure, from the Tax Authority, can be another herculean exercise.

Multiple Licenses and Certifications have continued to impede legitimate businesses. The reduction and or harmonisation of these certifications and permits, including the IID Certificate of Acceptance, will likely encourage more investments in the country.

Requiring the Federal Minister for the Federal Ministry of Industries, Trade and Investments to approve a jointly nominated Sole Arbitrator could be prejudicial to the Arbitration exercise as the Federal Ministry of Industries, Trade and Investments, on behalf of the tax collecting government authority, is an interested party to any challenged valuation and the outcome of the Arbitrator’s decision.

Until the applicable legislation is amended, early planning for any capital expenditure, and its notification to the IID is highly recommended.

Disclaimer

This is a free educational material, which 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, professional legal counselling to 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 Authorship is explicitly acknowledged, and our Disclaimer Notice is prominently displayed.

Introduction

It is not uncommon for a Board of Director’s Meeting or any other similar meeting, to be unnecessarily unwieldy and lengthy without the objectives for holding such a Board Meeting been achieved. A common reason for this failing is the lack of sufficient information and training regarding the importance of Board Meetings. Another reason is the lack of an appreciation of the role that the Directors of a company play in the success or failure of a company.

The following material is our contribution to the advancement of holding regular, efficient and productive Board Meetings, and the entrenchment of good corporate governance practices in the process.

Who are Directors?

As a company is an artificial creation of the Law, it’s “.. brain and mind …” is traditionally put to use by its appointed Directors. Thus, the Directors of a company direct and manage the business affairs of a company in a faithful, diligent, careful and skillful manner.

Due to the very important role that the Directors of a company play in a company’s success or failure, only Directors with the requisite industry-specific skills and maturity should be appointed as the Directors of a company. Board appointments that are driven by emotional or sentimental reasons will do more harm to a company, than any good. So too must the Directors of a company be rotated or changed every few years to meet the inevitable changes in the market.

As fiduciaries and trustees of a company, the Directors of a company must ensure that at all times, they do what is in the best interest of the company as a whole by among other things preserving the assets of the company, formulating, furthering and promoting the company’s business objectives.

While the Board of Directors of a company directs and manages the business affairs of a company, the day-to-day administration of the company is usually vested in one of the Directors who is called the Managing Director of the company. Where the Managing Director of a company is not also the Chairman of the Board of Directors, an independent outside Director is usually appointed to be the Chairman of the Board of Directors. The Chairman in turn manages the Board Meetings of the company.

Why hold Board Meetings?

The principal function of an effective Board of Directors’ Meeting is the formulation of a profitable Business strategy, which the Board must consistently monitor and realign to meet the demands of the target market whenever the need arises.

It is also a key function of an effective Board of Directors Meeting to monitor the financial performance of a company. This is because it is the financial performance of a company that provides the best indication of the effectiveness of its business strategies.

Where a company’s profitability is in doubt (or irredeemable), the Directors must take a decision on whether the company should remain in that line of business or realign such a business with other businesses or exit entirely from such a business.

A further reason for holding regular Board Meetings is for the Directors to monitor and ensure that all legal and other regulatory compliance issues are met by the company.

Holding Board Meetings

To efficiently perform its role, the Directors of a company are statutorily required to meet as often as they deem fit, to deliberate on the business strategies, and the effectiveness of such strategies to their company. The number of Directors required to constitute a quorum for a Board Meeting to be held is usually stated in the company’s Articles of Association. Where the number is not stated, two (2) Directors present at a Board Meeting can be deemed to constitute a quorum.

It is however not the primary role of the Board of Directors of a company to deliberate on the operational day-to-day activities of their company at their Board Meetings. Such a role is vested in the Managing Director and other senior members of the company’s management team. Where the operational activities of a company take up too much of a Board Meeting’s time, a change in the management team may be necessary.

Barring repetition, it is the role of an effective Board of Directors to at their Meetings deliberate and proffer advice and solutions on core business strategies that will keep the company profitable. Board Meetings should therefore be structured with this primary role in mind.

Checklists for Holding Effective Board Meetings

Early preparation is critical to an efficient Board Meeting. A well-structured Board Meeting should therefore adhere to the following step-by-step protocol:-

Notice – Every Board Meeting should be convened with the circulation of a Notice to the Directors. The Notice usually indicates the name of the company, the Meeting venue, the time, the duration and the agreed Agenda for the Meeting. The Chairman, the Managing Director and the Company Secretary to the company play very important roles in this regard.

Agenda – Embodied in the Notice convening a Board Meeting must be the Agenda for the Meeting. A well prepared and adhered to Agenda is critical to the success of any Board Meeting.

Board Reports – The early preparation, advance circulation, and the review of all Board Reports before any Board Meeting usually saves valuable time for meaningful deliberations at any effective Board Meeting. A clarification of any unclear item in advance of the Board Meeting also helps. Where the opposite occurs, the real purpose of the Board Meeting will not be sufficiently achieved.

Minutes of the Last Board Meeting – A review of the Minutes of the last held Board of Directors’ Meeting, with the matters arising/pending from such a Meeting enables the Directors to be brought up to date regarding the matters deliberated upon at their last Board Meeting, and the resolutions passed at such a Board Meeting. From the updates on the matters arising from the last Board Meeting, the Board is able to make progress on each item head that is outstanding for resolution.

Accounts – Prior to deliberating on business development issues, considerable time should be expended on reviewing the Company’s Management Accounts, its Income Statement, Budget performance and other financial records of the company. This is because it is these financial records that remain the best indicators of how well the existing business strategies of a company are performing.

Management Report – The Management Report is usually presented by the Managing Director of the company. It provides the Board of Directors with information on how well the existing businesses of the company are performing; as well as threats and opportunities; with any other new or prospective business.

Any Other Business – This item allows the Directors to deliberate on any other issue that may not be in the original Agenda for that Board Meeting but which issue can be properly deliberated upon at such a Board Meeting.

Date for Next Board Meeting – It is always important to select a date convenient to most of the Directors present at a Board Meeting, for the next Board of Directors’ Meeting. This enables the Directors not to lose momentum in regularly meeting to consider, review, monitor and advance the business objectives of their company.

The important role of a Chairman

An effective Board of Directors Meeting should always be led by a strong-willed, wise, matured, industry-knowledgeable and patient Chairman who commands the respect of the other members of the Board of Directors, the management team of the company, the industry Regulators in the line of business that such a company is engaged in, and members of the general public.

In addition to moderating concise and courteous deliberation in adherence to the Agenda for each Board of Directors’ Meeting, the Chairman of a Board also ensures that distractions and interruptions are curtailed and excluded during Board Meetings. Examples of such distractions include using electronic gadgets that have no relevance to the Board Meeting; too many side comments or conversation amongst some Directors; unnecessary movements into and outside the Board Room; etc.

Disclaimer

This is a free educational material, which 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, professional legal counselling to 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 Authorship is explicitly acknowledged, and our Disclaimer Notice is prominently displayed.

"Without Prejudice" - When Does it Apply?

Introduction

Transactions marked “Without Prejudice” usually connote a party’s good faith exchange of correspondence, without any admission of liability, or the abandonment of a claim, or counter claim, or a defence, privilege or other rights arising from such transaction correspondence, regarding an existing dispute.

The essence of the above legal rule is to encourage disputing parties to amicably settle their disputes without resort to an expensive and prolonged litigation process.

Changes in the “Without Prejudice” Rule

Section 25 of the repealed Evidence Act, 1945 (as amended) provided that no admission will be allowed in evidence if it was made either under the express condition that such admission will not be used in a judicial proceeding, or in circumstances where a Court can infer that the parties agreed that such admission obtained during a negotiation, will not be used in a judicial proceeding.

The above protection only applied in disputes between the same parties; third parties could not claim or enjoy the protection. See Nwadike v. Ibekwe (1987) 12 S.C. 12 @ 31.

The Evidence Act 2011 however repealed the provisions of the Evidence Act 1945 (as amended), and as stated above. Section 196 of the Evidence Act 2011 provides that “A statement in any document marked “without prejudice” made in the course of negotiation for a settlement of a dispute out of court, shall not be given in evidence in any civil proceeding in proof of the matters stated in it”. Underling ours for emphasis.

Section 196 above cited therefore implies that documents with admissions in them, marked “Without Prejudice”, will only be protected and inadmissible where (a) there is already a dispute in Court as not all disputes go to Court; (b) there is a good faith negotiation to settle such a dispute which is in Court, out-of-Court.

Section 196 of the 2011 Evidence Act has therefore narrowed the protection or inadmissibility of admissions in correspondence marked “Without Prejudice”, in judicial proceedings, to only disputes that are already in Court.

Another likely situation where a “Without Prejudice” rule will not prevent an admission from been received in a judicial proceeding, even if such proceeding is already in Court, is where it is used as a “fishing expedition”, which will be a bad faith use of this equitable provision.

“Without Prejudice” – Admissibility in other Instances

Like in the repealed Evidence Act provisions, correspondence marked ‘”Without Prejudice”, under the 2011 Evidence Act, though containing admissions, could be admitted in evidence regarding other issues that are not admitted in the subject correspondence. For example, in a land dispute, a correspondence though marked “Without Prejudice”, with an admission of liability in it, could have previous acts of trespass or other infraction that is/are not otherwise admissible in evidence regarding such other matters outside of the admitted facts, been admitted in evidence.

Conclusion

Based on the change in the statutory provision of this subject of “Without Prejudice”, businesses will need to exercise more circumspection or caution in their business communication.

Disclaimer

This is a free educational material, which 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, professional legal counselling to 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 Authorship is explicitly acknowledged, and our Disclaimer Notice is prominently displayed.

Introduction

One of the longest held business Quote is from Benjamin Franklin who said; “In this world, nothing can be said to be certain except death and taxes”. Also true is the fact that most people will during their lifetime incur some debt(s) which could become problematic and difficult to manage when the Debtor dies.

The above concern is especially so if the Debtor during his lifetime, and his or her Administrators and the beneficiaries of the Debtor’s estate, are not familiar with the basic applicable Laws and Regulations on the subject of Debts after a Debtor’s demise.

General Principles on Debts after Death

Generally, the beneficiaries of the estate of a deceased Debtor are not personally liable or responsible to settle a deceased Debtor’s personal debts. The exception to this general rule include (i) where the beneficiaries co-owed the asset from which the debt arose during the lifetime of the Debtor; or (ii) a beneficiary or all the beneficiaries guaranteed the debt with the deceased Debtor; or (iii) as in some jurisdictions, especially in some States in the United States of America, where any property acquired by a spouse during marriage are considered community property to which both spouses have joint rights and liabilities irrespective of one spouse’s death.

Once a person passes away, the first step that his or her Administrators and beneficiaries must take is to apply for Probate, whether or not the deceased person prepared and executed a Will. Part of the Probate application process is the notification to members of the public, which includes the Debtor’s creditors, usually via newspaper publications and government gazette, of the application for Probate of the deceased Debtor’s Estate.

Probate, Death and Debts

Probate is the legal and formal transfer of a deceased affairs' to his or her nominated Administrators. Administrators hold the deceased estate assets as Trustees for the beneficiaries of such estate.

The first applicable Law on Probate matters is the Administration of Estate Law. Each State in the Federation of Nigeria has its Administration of Estate Law.

The provisions of the Administration of Estate Law do not however apply to the administration or management of the Estate of a deceased person whose affairs were during his lifetime governed or regulated by Customary Law.

Administrators, Beneficiaries and Creditors must also be aware that in the order of priorities, the real and personal properties of a deceased Debtor are assets for the discharge of (I) the deceased funeral and testamentary expenses; (II) the deceased debts and other liabilities with the secured debtors having first charge or priority in this group; (III) the residue of the estate is to be distributed to the beneficiaries as instructed in a signed Will; and where there is no Will, in accordance with the provisions of the Administration of Estate Law.

Any testamentary instructions that seek to vary the above order of priorities in the discharge of a deceased estate liabilities will by the provisions of the Administration of Estate Law, be held to be null and void.

Where however the Administrators of an Estate, in good faith and without notice of the debts, or of the creditors of the deceased, disposes off the assets of the estate for the benefit of the beneficiaries, the beneficiaries will still be liable to the Creditors to the extent of the benefit that each beneficiary received once notice of the debt is brought to the attention of the Administrators and the Beneficiaries.

Administrators are also allowed to invest any surplus funds of the Estate, not immediately required, provided such investment are in accordance with the applicable statute on the investment of Trust assets. In Nigeria, the latter Law is the Trustee Investments Act.

Deceased Debtors and the Bankruptcy Act

Creditors also have a legal right to resort to the reliefs provided for in the Bankruptcy Act when a Debtor becomes deceased.

Bankruptcy arises when a person cannot pay his or her debts out of his or her liquid, unencumbered assets, to a single or multiple Creditors. By the provisions of the Bankruptcy Act, a Creditor of a deceased Debtor whose debt would have been sufficient to support a Bankruptcy Petition had the deceased Debtor been alive, may present a Bankruptcy Petition to Court praying for the administration of the estate of the deceased Debtor under the Bankruptcy Regulations.

Where a Court grants a Bankruptcy Order, the deceased person’s properties shall become vested in an Official Receiver, who shall serve as a Trustee, to collate, sell and distribute the proceeds of the sale of the deceased Debtor’s assets.

The Official Receiver cum Bankruptcy Trustee shall however, before distributing the proceeds of sale, be mindful of any claim by the deceased personal legal representatives regarding proper funeral and testamentary expenses incurred, as such funeral debts shall be given preferential treatment and settlement. See Section 109 (5) of the Bankruptcy Act.

Any surplus remaining in the hands of the Official Receiver cum Trustee, after the payment of all debts, creditors and testamentary costs included, shall be paid over to the Administrators or Legal Personal Representatives, of the deceased Debtor’s estate, or falling such Administrators, to the appropriate Administrator General of the State where the estate resides.

Retirements and Life Insurance Benefits 

Under the Pension Reform Act 2014, retirement and other benefits arising from the mandatory Group Life Insurance schemes are payable to the deceased named beneficiaries.

In some other jurisdiction outside Nigeria, retirement and life insurance benefits are protected from Creditor’s recovery actions where the deceased assured dies.

Conclusion

Very many people, physiologically and understandably, avoid contemplating, discussing and preparing for death and events after death. Death is however an unavoidable departure from this world. Preparing for death by, among other things, writing a Will, is a fantastic wealth creation behavior as the latter exercise enables the maker of the Will to know his or her exact assets and liabilities; among other things.

Debtors should also ensure that they do not leave for their loved ones an unsettled and financially bankrupt estate as only third party Consultants benefit the most from such a state of affairs.

Creditors on their part should be proactive in managing and monitoring their Debtors. Curing support in the bad times to a Debtor could enable a quicker recovery of the debt. This is especially as the demise of the Debtor could leave the Creditor out-of-pocket during the Probate exercise; there is no modern day online Probate Registry in Nigeria which enables the Creditors and other interested parties to monitor probate applications. Mischievous Administrators and Beneficiaries could publish the Probate Notice in cheap municipal newspapers that many Creditors do not read thereby jeopardising any actual notice of an unsecured debt to the Creditor.

Disclaimer

This is a free educational material, which 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, professional legal counselling to 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 Authorship is explicitly acknowledged, and our Disclaimer Notice is prominently displayed.

 

Introduction

Escalation in criminal activities, especially terrorism, kidnapping and armed robbery, has heightened security concerns and vigilance. This is especially as these criminal activities are carried out in contravention of International Criminal and Money Laundering Laws.

Some States have accordingly instructed all Hotels and other Hospitality Establishments carrying on business in their State to henceforth only admit and render services to Guests and other Customers who present valid National or International Identification Cards, or other forms of publicly verifiable identification documents (“ID”). Unbeknown to many of these States and Federal Authorities, the valid ID Pre-admission requirement is already a legal provision under the Money Laundering (Prohibition) Act (as amended) 2012.

Identification of Customers

Financial Institutions and Designated Non-Financial Institutions, of which Hotels and Casinos are in the latter group, are required by Section 3 of the Money Laundering (Prohibition) Amendment Act 2012, to ensure that they Identify all their Customers, using verifiable public identification documents like a Driver’s License, National Identity Card, International Passport, etc, bearing the Customer’s name and address before rendering any service to the Customer.

Financial Institutions and Designated Non-Financial Institutions are further required to preserve and keep the record of their Customer’s Identification data for a period of at least five (5) years after the closure of the Customer’s accounts, or the cessation or severance of relations with any such customer.

Other Mandatory Disclosures

Every Financial and Designated Non-Financial Institution must submit a Written Report to the Economic and Financial Crimes Commission (“EFCC”), of every single funds transfer, lodgment or payment in excess of 5,000,000 (Five Million Naira), in the case of an individual, or 10,000,000 (Ten Million Naira) in the case of a corporate body. Punitive fines for each day of not reporting such transactions to EFCC apply to this serious infraction.

Personal Liability of Directors and Managers

Where the identity of a customer is not independently verified, and the funds transferred is/are above the stipulated limit, the Directors and other key management personnel of the offending Institution who are culpable, or who conspired in promoting the infraction, shall be personally liable to submit to criminal prosecution and conviction if found guilty.

Conclusion

Recent Bomb Expulsions and other criminal activities in Hotels around the world can only place on the owners of these establishments a higher duty of care to ensure that their Hotel premises are secure and safe. Pre-obtaining and retaining customers’ verifiable data must be one, among many other security measures, that must be applied to achieve this Security Protective objective.

Disclaimer

This is a free educational material, which 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, professional legal counselling to 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 Authorship is explicitly acknowledged, and our Disclaimer Notice is prominently displayed.