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Legal Alert – February 2014 – Environmental Compliance Requirements for Non-Oil and Gas Companies

Introduction - Environmental Compliance Requirements

Managing and protecting the environment continues to be an enormous task that Governments around the world cannot be expected to bear alone.

Also, public perception that environmental protection and legislations only apply to materials which are toxic and hazardous to the environment has not endeared compliance, even at the least minimum compliance levels required for sustaining a good environment.
In Nigeria, there are Federal and State Legislations which seek to protect the environment; and some of these legislations directly and indirectly apply to many establishments that are not engaged in oil and gas activities. Some of such legislations include:-

1. The National Environmental Standards and Regulations Enforcement Agency (Establishment) Act 2007.
2. The Environmental Impact Assessment Act.
3. The Lagos State Environmental Protection Agency Law.
4. The Edo State Sanitation and Pollution Management Law
5. The Delta State Environmental Protection Agency Law.
6. The Abuja Environmental Protection Board Act.

The National Environmental Standards and Regulations Enforcement Agency (Establishment) Act 2007

The National Environmental Standards and Regulations Enforcement Agency (Establishment) Act, 2007 repealed the Federal Environmental Protection Agency Act.

The National Environmental Standards and Regulations Enforcement Agency (Establishment) Act, 2007 ("the NESREA Act") created the National Environmental Standards and Regulations Enforcement Agency ("NESREA") with the principal responsibility of protecting and developing the environment, its biodiversity, and conservation.

NESREA is further statutorily charged to ensure the sustainable development of Nigeria's natural resources, i.e. its standards, regulations, rules, laws, policies and guidelines on water quality, environmental health and sanitation, which includes pollution abatement, etc.

NESREA is also charged to enforce compliance with environmental regulations on the importation, exportation, production, distribution, storage, sale, use, handling and disposal of hazardous chemicals and waste generated in the none oil and gas industries.

NESREA is not however empowered to regulate most environmental activities in the oil and gas sector.
NESREA REGULATIONS
In furtherance of the objectives of the NESREA Act, various environmental regulations were recently published in the government's official journal known as the Gazette. Some of these regulations provide governance direction in some of these areas of human endeavour:-

1. Wetlands, River Banks, Lake Shores, Mountain, Hills, etc.
2. Sanitation and Waste Control.
3. Mineral Resources.
4. Ozone Layer Protection.
5. Food, Beverages and Tobacco.
6. Textile, Wearing Apparel, Leather and Footwear.
7. Noise Standards and Control.
8. Chemicals, Pharmaceuticals, Soap and Detergent.
9. Telecommunication and Broadcasting.
10. Soil Erosion and Food Control.
11. Protection of the Endangered Species.
12. Coastal and Marine Area Protection.
13. Construction, Decommissioning and Demolition Activities.
14. Control of Vehicular Emissions from Petrol and Diesel Engines.
15. Electrical/Electronic Activities.

As food and other nourishments remain very vital to the subsistence of mankind, the highlights of the NESREA National Environmental (Food, Beverages and Tobacco Sector) Regulations, 2009 ("the Food, Beverages and Tobacco Environmental Regulations") will be reviewed to provide a sampling of what is contained in the other 23 NESREA Environmental Regulations.

FOOD BEVERAGE AND TOBACCO REGULATIONS.
The Food, Beverages and Tobacco Environmental Regulations is intended to prevent and minimise pollution from every operation and ancillary activity in the Food, Beverages and Tobacco Industry.
Every company in the Food, Beverages and Tobacco sectors of the economy must therefore ensure compliance with the following:-

I. Every new industry and major developmental project must obtain an Environmental Impact Statement ("EIS") before it commences operations.
II. All existing companies must undertake and obtain every three years, an Environmental Audit Report ("EAR").
III. All companies must have and maintain an Environmental Management Plan ("EMP").
IV. All companies must have and maintain an Emergency Response Plan and Equipment to combat pollution hazards.
V. All companies must install anti-pollution equipment for the detoxification of effluent and emissions emanating from any of their pollution related activity.

These Regulations further require companies in the Food, Beverages and Tobacco sector to apply up-to-date, cost-effective and efficient cleaner technologies, which will minimise pollution to the highest degree practicable.

THE THREE "RS" – REUSE, RECOVER AND RECYCLE
These Regulations further empower NESREA to strictly enforce the three "Rs" – Reuse, Recover and Recycle. Thus, all recyclable damaged and disused packaging materials like glass, plastics, metals, paper, wood, nylon, etc. must be recycled.

POLLUTER-PAYS PRINCIPLE
The Food, Beverages and Tobacco Environmental Regulations reiterates the Polluter-Pays Principle to every company whose activities pollutes the environment by ensuring that such a company must collect, treat, transport and dispose of the waste that it generates within specified standards and guidelines.
Polluter-Pays Principle further requires that a polluter of the environment will also be responsible for the costs of any damage, the assessment, control, clean-up, remediation, restoration or reclamation, compensation to any affected person or persons, etc. arising from such a polluter's infringing activities.

ENVIRONMENTAL INCENTIVES
NESREA is statutorily required to recognise every company that demonstrates and adopts the best environmental practices. One of the ways that such recognition will be conferred is by NESREA awarding to such a company the NESREA compliance mark flag award, which the compliant company can use to brand itself and its products.
There are five kinds of NESREA compliance flag award; from the highest which is Green, to Blue, Yellow, Red and the lowest for non-compliance, which is red.

The Environmental Impact Assessment Act
The Environmental Impact Assessment Act ("EIA Act") was enacted to set out the general principles, procedures and methods that would enable the prior evaluation of any possible environmental impact, that any project or development, whether private or public sector led, would have on the environment.

Where a development or project is likely to have any impact on the environment, whether such a project or development is among the type of development for which a Mandatory Environmental Impact Assessment ("MEIA") must be undertaken, and an approved environmental impact assessment certification obtained, such assessment or analysis must be commenced at the very early stage of the project or development; and the Environmental Impact Assessment ("EIA") must be approved by NESREA as provided for in Section 35 of the NESREA Act.

The final decisions of NESREA are published after comments and opinions are received from members of the public and other stakeholders to the project or development.

Failure to comply with the provisions of the NESREA Act attracts fines and terms of imprisonment for both corporate bodies and individuals.
Lagos State Environmental Protection Agency Law

In Lagos State, the applicable Law is the Lagos State Environmental Protection Agency Law. This Law has among other things established the Lagos State Environmental Protection Agency ("LASEPA") as the Agency in Lagos State that manages all environmental matters inside Lagos State.

LASEPA is more commonly known for enforcing environmental sanitation regulations, which includes the disposal and control of all kinds of waste and other hazardous materials in Lagos State.

The LASEPA Law also expressly prohibits the discharge of untreated or un-purified waste of any kind into the environment.
To assist LASEPA in the discharge of its statutory functions, private sector enterprises are required to pay an annual Environmental Development Levy; and the amount of the Levy that a private sector enterprise will pay is subject to the nature of its business, with various amounts stated in Schedule 2 to the LASEPA Law.

Officials of LASEPA, who have reasonable grounds to believe that a environmental infringement has occurred are authorised by the LASEPA Law to without a warrant, enter, search, seize and or arrest any person or item that is constituting any environmental hazard or infraction.

Other penalties for infringing the LASEPA Law includes fines for both individuals and corporations, and both fine(s) and or terms of imprisonment for individuals.

Abuja Environmental Protection Board
In the Federal Capital Territory ("FCT") the principal legislation is the Abuja Environmental Protection Board Act, 1997. The subsidiary legislations include the Waste Management Rates/Charges Regulations, 2005, and the Solid Waste Control Environmental Monitoring Regulations 2005.

The FCT Environmental Protection Law and Regulations have in addition to making regulations for the protection of the environment, also provided for private businesses to pay an annual environmental levy or charge. Default with this legislation attracts fines, terms of imprisonment and the sealing of the business premises of the defaulting party.

Edo State Sanitation and Pollution Law
Like Lagos State, Edo State also has a similar Environmental Protection Law that goes by the name the Edo State Sanitation and Pollution Law, 2010. This Law empowers the Edo State Ministry of Environment and Public Utilities to charge and collect an annual Environmental Re-mediation and Pollution Management Levy. The average amount for this Levy is N100,000 (One Hundred Thousand Naira) per annum.
One of the penalties for non-compliance with the provisions of the Edo State Sanitation and Pollution Law is the sealing-up of the business premises from which the environmental infraction arises.

Delta State Environmental Protection Laws
Some of the applicable Environmental Laws in Delta State include the Delta State Waste Management Board Law and the Delta State Ecology Law. These legislations, like the ones of other States above mentioned, seek to protect the environment in Delta State while also providing for an annual environmental development levy or charge.

DISCLAIMER NOTICE
This is a free educational material which does not create a Client/Attorney relationship. Readers are advised to seek professional legal advice to their specific situations from qualified Legal Practitioners. Questions, comments, criticisms, suggestions, new ideas, contributions, etc. are always welcomed. You can also find more materials on our website www.oseroghoassociates.com

INTELLECTUAL PROPERTY PROTECTED.
This material is protected by International Intellectual Property Laws and Regulations. You can only redistribute it on the strict condition that our authorship is acknowledged, with our Disclaimer Notice prominently displayed.
Legal Alert – January 2014 – Invisible Trades and Fees Remittances Regulations

In this Issue:-
1. Legal News - Lagos State No Smoking in public places, and FIRS Request for Transfer Pricing Policy Documentation
2. Legal Alert - Invisible Trades and Fees Remittances Regulations

Legal News

The Income Tax (Transfer Pricing) Regulations No. 1, 2012 ("TPR") took effect with tax returns that have their basis period beginning after August 2012. The Federal Inland Revenue Service of Nigeria ("FIRS") has accordingly requested all connected persons affected by the TPR to submit their company's Group Transfer Pricing Policy on the pricing of transactions between or among members within the group, or of persons connected with members within a group, in order to avoid a breach of the TPR, and the penalties that attach to such breach.
Lagos State No Smoking in Public Places Bill

The Lagos State House of Assembly has passed a Bill into Law prohibiting smoking in public places in Lagos State. There are fines and terms of imprisonment prescribed for any contravention of this Law.
Legal Alert - Invisible Trades - Fees Remittances Regulations

The repeal of the Exchange Control Act, in furtherance of the liberalisation of trade in Nigeria, is not however a free regime for the remittance of fees arising from invisible trades like royalty payments for the use of Trademarks, Patents, other Intellectual Property Rights, or technical advisory services.

One of the Compliance Regulation, on this subject of the remittance of income earned from invisible trades, is the Central Bank of Nigeria Monetary, Credit, Foreign Trade and Exchange Policy Guidelines for fiscal years 2012/2013 ("foreign trade and exchange guidelines") which provides trench-holds for the maximum range of fees that can be remitted under invisible trade transactions. Range of Fees for Invisible Trade Transactions
 
The recommended range of fees that can be remitted for the use of intellectual property rights - like trademarks, patents, know-how, etc must be between 0.50 to 5.00 per cent of the net sales or profit before tax ("PBT") of the licensee company. For Hotel services, the recommended range of remittable fees for incentive fees must not exceed 8.00 per cent of the Gross Operating Profit ("GOP") of the Hotel, while the basic fee shall not exceed 3.00 per cent of the Hotel's net sales. Fees paid for Technical Services must not be tied to the net sales of the Nigerian company. In its stead, such fees can only be settled on a per diem, man-hours, man-day or man-month basis.
 
Annual Technical Support Fees paid to a Information Technology Licensor can only range between 15.00 to 23.00 per cent as Licensee Fees for a period not exceeding three (3) years. Remittable Consultancy Fees are restricted to projects requiring very high technology content which content is not otherwise available locally. The allowable remittable consultancy fees, for these kinds of consultancy services, shall not exceed a maximum amount of 5.00 per cent of the project's costs.

Technology Transfer Agreements
Where there is a Technology Transfer Agreement ("TTA"), such Agreement must be submitted to the National Office for Technology Acquisition and Promotion ("NOTAP"), for registration, within sixty (60) days of its execution. The recommended range of remittable fees that is provided for in the NOTAP 2011 "Revised Guidelines for the Registration and Monitoring of Technology Transfer Agreements ("NOTAP Revised Guidelines") are similar to those in the CBN Foreign Trade and Exchange Guidelines. For example, and depending on the nature and extent of the management services, the management service fees are required to range from 1-5% of the PBT. For Hotels managed by an international chain, the range of fees is 1-2% of net sales for management/marketing/advertising fees.

DISCLAIMER NOTICE
This is a free educational material which does not create a Client/Attorney relationship. Readers are advised to seek professional legal advice to their specific situations from qualified Legal Practitioners. Questions, comments, criticisms, suggestions, new ideas, contributions, etc are always welcomed.

INTELLECTUAL PROPERTY PROTECTED.
This material is protected by International Intellectual Property Laws and Regulations, on the strict condition that our authorship is acknowledged, this material may be shared with other persons with our Disclaimer Notice prominently displayed.
 

 

Legal Alert December 2008 Employees Share Acquisition Schemes In Nigeria
 
In this Issue:
1. Case Law Update on Dishonoured Cheques Law.
2. Legal Alert for December, 2008 – Employees Share Acquisition Schemes In Nigeria.
3. Subscribe & Unsubscribe to Legal Alerts.
4. Disclaimer Notice.
Case Law Update on Dishonoured Cheques Law.
In our Legal Alert for February, 2007 we had drawn attention to the subsisting Dishonoured Cheques (Offences) Act and concluded this Alert by stating that the paucity of reported and concluded Court cases in this area is inhibiting business by encouraging the issuance of dud cheques. Mr. Osen Ohiosimuan has however, most kindly, brought the reported Supreme Court decision in the matter of ABEKE v. THE STATE (2007) 3 S.C. (Pt. 11) 105 to our attention.
In the case of ABEKE v. THE STATE (supra), the accused was charged under Section 1 (1)(b) of the Dishonoured Cheques (Offences) Act No. 44 of 1977 with obtaining a credit of N3,300.00 (Three Thousand Three Hundred Naira) by means of a cheque which when presented on due date was dishonoured on the ground that the accused/appellant had no sufficient funds in her account to cover the face value of the cheque. The Supreme Court held that a cheque issued by a drawer and accepted by the drawee serves the dual purpose of (1) documenting the particular transaction and (2) as a medium of payment. The Supreme Court further held that the accused committed a criminal offence under Section 1 (2)(b) of the Dishonoured Cheques (Offences) Act when she issued a cheque in settlement of an obligation, which cheque, when presented less than 3 (three) months afterwards, was returned unpaid. The conviction and sentence of the accused/appellant person by the lower Court was accordingly affirmed and the appeal dismissed for lack of merit.
Legal Alert for December, 2008 – Employees Share Acquisition Schemes in Nigeria – Law & Practice.
Growing competition in business is continually necessitating the development of new methods to motivate and retain the best employees of any corporation. A recurring long-term method of achieving this retention is for a corporation to make its employees part owners in the equity of the corporation.
It is also instructive that most jurisdictions have recognised the benefits of employees share acquisition schemes by providing tax advantages for government approved long term employees share schemes.
While these schemes encourage employee retention and higher motivation to the benefit of the corporation, the schemes also have some disadvantages, like:-
(a) They provide the employees with less immediate dispensable income.
(b) They restrict the free movement of labour as most employees would not want to leave an employment with such a scheme too soon in order not to loose the shares or tax benefits associated with the employee share scheme.
(c) The investment could become a burden or a loss to the employees if the corporation does not make consistent profits over the long term.
Employees Share Schemes Under Nigerian Company Law
Generally, the Companies and Allied Matters Act prohibits a company from providing direct or indirect financial assistance for the acquisition of the company's own shares. Some of the exceptions to this general rule are:
(i) Where it is ordinarily a part of the business of the company to lend money for all kinds of businesses.
(ii) Where the fully paid shares of the company or its holding company are being purchased by trustees of the employees of the company for the benefit of such employees including any directors holding a salaried employment or office in the company.
(iii) Where bona fide employees of the company are given loans to purchase or subscribe for fully paid up shares in the company.
A company that however infringes the general rule that is not covered by the above stated exceptions would be contravening the provisions of the Companies & Allied Matters Act and such a contract by the company would be void. Also, every officer of the company in default of these provisions above stated shall be liable to a fine not exceeding N500.00 (Five Hundred Naira).
Tax Implications of Employees Shares Schemes
There are no special tax provisions regulating employees share schemes in Nigeria other than the provisions of the Personal Income Tax Act (PITA).
PITA subjects all salaries, payments, gains or benefits–in–kind, by employers to employees, to tax. Employers and employees would therefore do well to seek professional advice from their tax consultants and especially from the Federal Board of Inland Revenue Service (FBIRS) and the Joint Tax Board (JTB), on whether there would be any exception(s) to tax for their employees share acquisition scheme particularly as such schemes encourage savings and investments in the long term.
The benefits from employees share schemes could equally be liable to Capital Gains Tax under the Capital Gains Tax Act. A Capital Gain is the credit excess between the cost of acquiring an asset and the cost of transferring or disposing of such asset to another party.
Conclusion.
Employees share schemes are a welcomed incentive to motivate and retain staff. The tax implications of these schemes should be clearly indicated in relevant legislation to encourage more schemes, increase staff retention and specialisation.
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 December 2008 Employees Share Acquisition Schemes In Nigeria

 

To read this Alert in pdf format, please go to

http://www.oseroghoassociates.com/pdf/2008_12.pdf

 

In this Issue:

 

1.                Case Law Update on Dishonoured Cheques Law.

 

2.                Legal Alert for December, 2008 – Employees Share Acquisition Schemes In Nigeria.

 

3.                Subscribe & Unsubscribe to Legal Alerts.

 

4.                Disclaimer Notice.

 

Case Law Update on Dishonoured Cheques Law.

In our Legal Alert for February, 2007 we had drawn attention to the subsisting Dishonoured Cheques (Offences) Act and concluded this Alert by stating that the paucity of reported and concluded Court cases in this area is inhibiting business by encouraging the issuance of dud cheques. Mr. Osen Ohiosimuan has however, most kindly, brought the reported Supreme Court decision in the matter of ABEKE v. THE STATE (2007) 3 S.C. (Pt. 11) 105 to our attention.

In the case of ABEKE v. THE STATE (supra), the accused was charged under Section 1 (1)(b) of the Dishonoured Cheques (Offences) Act No. 44 of 1977 with obtaining a credit of N3,300.00 (Three Thousand Three Hundred Naira) by means of a cheque which when presented on due date was dishonoured on the ground that the accused/appellant had no sufficient funds in her account to cover the face value of the cheque. The Supreme Court held that a cheque issued by a drawer and accepted by the drawee serves the dual purpose of (1) documenting the particular transaction and (2) as a medium of payment. The Supreme Court further held that the accused committed a criminal offence under Section 1 (2)(b) of the Dishonoured Cheques (Offences) Act when she issued a cheque in settlement of an obligation, which cheque, when presented less than 3 (three) months afterwards, was returned unpaid. The conviction and sentence of the accused/appellant person by the lower Court was accordingly affirmed and the appeal dismissed for lack of merit.

 

Legal Alert for December, 2008 – Employees Share Acquisition Schemes in Nigeria – Law & Practice.

 

Growing competition in business is continually necessitating the development of new methods to motivate and retain the best employees of any corporation. A recurring long-term method of achieving this retention is for a corporation to make its employees part owners in the equity of the corporation.

It is also instructive that most jurisdictions have recognised the benefits of employees share acquisition schemes by providing tax advantages for government approved long term employees share schemes.

While these schemes encourage employee retention and higher motivation to the benefit of the corporation, the schemes also have some disadvantages, like:-

(a)       They provide the employees with less immediate dispensable income.

(b)       They restrict the free movement of labour as most employees would not want to leave an employment with such a scheme too soon in order not to loose the shares or tax benefits associated with the employee share scheme.

(c)        The investment could become a burden or a loss to the employees if the corporation does not make consistent profits over the long term.

Employees Share Schemes Under Nigerian Company Law

Generally, the Companies and Allied Matters Act prohibits a company from providing direct or indirect financial assistance for the acquisition of the company’s own shares. Some of the exceptions to this general rule are:

(i)                      Where it is ordinarily a part of the business of the company to lend money for all kinds of businesses.

(ii)                    Where the fully paid shares of the company or its holding company are being purchased by trustees of the employees of the company for the benefit of such employees including any directors holding a salaried employment or office in the company.

(iii)                  Where bona fide employees of the company are given loans to purchase or subscribe for fully paid up shares in the company.

A company that however infringes the general rule that is not covered by the above stated exceptions would be contravening the provisions of the Companies & Allied Matters Act and such a contract by the company would be void. Also, every officer of the company in default of these provisions above stated shall be liable to a fine not exceeding N500.00 (Five Hundred Naira).

Tax Implications of Employees Shares Schemes

There are no special tax provisions regulating employees share schemes in Nigeria other than the provisions of the Personal Income Tax Act (PITA).

PITA subjects all salaries, payments, gains or benefits–in–kind, by employers to employees, to tax. Employers and employees would therefore do well to seek professional advice from their tax consultants and especially from the Federal Board of Inland Revenue Service (FBIRS) and the Joint Tax Board (JTB), on whether there would be any exception(s) to tax for their employees share acquisition scheme particularly as such schemes encourage savings and investments in the long term.

The benefits from employees share schemes could equally be liable to Capital Gains Tax under the Capital Gains Tax Act. A Capital Gain is the credit excess between the cost of acquiring an asset and the cost of transferring or disposing of such asset to another party.

Conclusion.

Employees share schemes are a welcomed incentive to motivate and retain staff. The tax implications of these schemes should be clearly indicated in relevant legislation to encourage more schemes, increase staff retention and specialisation.

 

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.

November, 2001

 

Employer and Employee Relationship on The Use of The Internet from a Legal Perspective  

Introduction

The Internet is the interconnection of many networks through many gateways traversing many countries and continents of the world. Because of its travesty over many continents and constant changes occurring within it, it has been near impossible for legislatures around the world to make and maintain binding legislations governing and regulating relationships transacted on the Internet.

For an employer of labour and its employees, the inevitability and the necessity of the use of the internet has also come at a price as there have being instances where employees are reported to use an employer's internet system to download copyright protected materials, infringing on others patents and trademarks, compromising the employer's business by spending more valuable time browsing the Internet than in performing their contractual obligations to the employer, utilising employers resources via the internet for personal employee business, expending valuable management time browsing on sites that are not beneficial to the employer or the employee, downloading pornographic materials into an employer's hardware system, passing some of these materials to other employees and exposing the employer to possible sexual harassment claims and other unwarranted litigation, etc.,

Legal issues that continue to arise as a result of the above worldwide include:

  1. To what extent can an employer of labour monitor employee's electronic communication without infringing the employee's common law and constitutional right to privacy of personal communication?
  2. What is the best methodology by an employer in regulating the use and the downloading of materials from its systems by its employees?

The Law

Section 31 of the Constitution of the Federal Republic of Nigeria, 1999 provides that “the privacy of citizens, their homes, correspondence, telephone conversations and telegraphic communications is hereby guaranteed and protected”. This right, like other private right, is not absolute as Section 45 of the referenced Constitution provides that “(1) Nothing in Section 37, 38, 39, 40 & 41 of this constitution shall invalidate any law that is reasonably justifiable in a democratic society --------- (b) for the purpose of protecting the rights and freedoms of other persons”.

It is clear from the above Section that whilst the Constitution of Nigeria recognises an employee's right to privacy, it also recognises an employer's corresponding right to protect, secure and maximise its business environment.

In order for an employer and in some cases, an employee, not to be in contravention of any constitutional rights or tortious infringement of private rights or criminal trespass, it is recommended that internal internet staff audit of the use of the internet be undertaken by the employer at regular intervals with the knowledge of the employees.

Recommendations

The following are further recommended:

  1. Develop employment contracts and policies that regulate access and use of the employer's Internet facilities. There should in addition be clauses that inform the employee of the employer's right to undertake Internet use audit of its employees at regular intervals. The employer should however exercise caution when conducting these audits. The outcome of these audits should also be properly managed as it has been discovered that improper management can impair the productivity of employees and affect them psychological in the work environment.
  2. The employer should in a written memorandum define what constitute proprietary information and state that the employer owns any proprietary work done by the employee with the employer's resources.
  3. Educate and encourage senior managers on the need to handle sensitive company information via the Internet especially whilst outside the company's premises.
  4. Encourage disciplinary action for all infringement of company's policy on Internet use. However, employers are advised to obtain full facts with legal advice before acting especially where the decision is to terminate the employee's contract. This is to avoid unnecessary litigation.
  5. Post a notice on all employees computer system in the form of a warning clearly stating that the system and materials exchanged on it are not private and will be audited.

^ Return to top

 
February, 2002
 

The Rights & Responsibilities of External Auditors Under Nigerian Company Law

 

Introduction

Recent developments in the United States of America respecting the conduct of the management and an audit firm's handling of the books of accounts of ENRON have again brought to light deep rooted concerns, by members of the public and governments world-wide, about the role, rights and responsibilities of external auditors in the auditing of the books of accounts of companies, as statutorily provided and the declaration of "paper" profits by companies. These developments are also a remainder of the collapse of some financial institutions in Nigeria in the early 1990's, in spite of their public declared accounts showing massive profits. Also, the experience of Lever Brothers Nigeria Plc. in 1998 and most recently, that of another Nigerian company quoted on the stock exchange, are reminiscent of these kinds of development and concerns.

Unfortunately, in most of the above incidents, it was the shareholders and employees who invested in the stocks of these companies that were the victims and casualties whereas the parties who were entrusted with these huge investments, smiled to the banks in spite of their mismanagement of the investments.

Interestingly, there are a number of statutory and professional regulatory rules that should have prevented these incidents from occurring and also protected the audit firms and the directors of these companies from either civil or criminal liability or both. Also, as the client is king, the auditing firms and not interestingly, the directors and key managers of the companies, have suffered more public criticism, professional humiliation and loss of required good will whenever the books of accounts of a company are called to question.

Appointment of Auditors

Under Nigerian Law, Auditors are appointed by a special resolution passed at an Annual General Meeting of a company. Persons traditionally entitled to be appointed, as external Auditors of a company are usually Accountants who are licensed by either the Institute of Chartered Accountants of Nigeria ("ICAN") or members of the Association of National Accountants of Nigeria ("ANAN").

Persons disqualified by law, from being appointed as external Auditors of a company include: - (a) officers and servants of the company; (b) person(s) who are partners of officers or servants of the company; (c) a body corporate with the exception been individual members who are qualified for appointment as Auditors.

Function of Auditors

By the Companies & Allied Matters Act, 1990 ("CAMA") the primary functions of an Auditor of a company is to audit the financial statements of the company and form an opinion as to whether (a) proper accounting records have been kept by the company and, (b) the company's balance sheet and profit and loss account are in agreement with the accounting records and returns provided to the Auditor by the company.

Other ancillary functions of an Auditor include: - (a) making a report to the company and its shareholders; (b) qualifying its report where necessary; (c) ensuring its acquaintance with the articles and other statutes of the company so that its audit will be in due compliance; (d) investigation of and request for supply of information omitted from the company's financial statement supplied to the Auditor for the audit by the company.

It is therefore clear from the above that the role of an external Auditor is purely investigatory. He is not a watchdog neither is he detective, a bloodhound or a financial adviser.

Rights of Auditors

It is paramount that an external Auditor is as independent as possible. For this reason, his appointment is usually by special resolution, i.e. two-thirds majority of the voting members of a company, passed at an Annual General Meeting of the company. His removal is also by the same method, i.e. special resolution. In the event of a removal, he is entitled to attend the next Annual General Meeting of the company to present his report and if necessary, to defend himself against any allegations that may have been made against him by the Board of the company. The external Auditor is also entitled, whilst carrying out his audit, to request for all necessary books of accounts kept by the company. In the event of a refusal or failure to furnish these books, he is required to state this fact in his report.

Obligations Of An Auditor

The external Auditor by law, shares a special fiduciary relationship with the company that it audits its books. As a result, the law requires of the Auditor that he does, in the performance of his duties, exercise all due diligence and skills that a reasonably Auditor will deem necessary in the performance of his statutory duties.

The duty of an Auditor is more succinctly stated in the decision of IN RE: LONDON & GENERAL BANK (NO. 2) [1895] CH.D 673 @ 683 where the court said: - "It is the duty of an Auditor to bear on the work he had to perform that skill, care and caution which a reasonably competent, careful, and cautious Auditor would use. What are reasonable skill, care and caution must depend on the particular circumstances of each case. An Auditor … is not bound to do more than exercise reasonable care and skill in making inquiries… He is not an insurer; he does not quarantee that the books do correctly show the true position of the company's affairs; … He must be honest - i.e., he must not certify what he does not believe to be true and he must take reasonable care and skill before he believes that what he certifies is true ……. Where there is nothing to excite suspicion very little inquiring will be reasonably sufficient ……. Where suspicion is aroused, more care is obviously necessary; but still, an Auditor is not bound to exercise more than reasonable care and skill, even in a case of suspicion….."

Liabilities of Auditors

The general principle of negligence under the common law has been made to apply to statutorily appointed Auditors. This is because, as stated above, Auditors share statutory fiduciary relationship with their clients, the companies. Negligence is a breach of legal duty to take care, which breach result is damages undesired by the party in breach, to the other party.

There is also the related civil liability of misfeasance. Misfeasance is the improper performance of some lawful act. Where there exist facts to this effect, a company is entitled in law to file a court action against the Auditor.

An Auditor may also be criminally liable where he, in his report to a company makes a statement, which is false, knowing that the statement is false. Where this established, CAMA provides that the statement is false. Where this is established, CAMA provides that such statement is false. Where this is established, CAMA provides that such an Auditor is liable on conviction, by a High Court of Justice, to Two (2) years imprisonment or, alternatively, on conviction by lower court, i.e. a Magistrate Court, to a fine of =N=1,000 (One Thousand Naira) or Four (4) months imprisonment or both the fine and the imprisonment.

Conclusion

An Auditor is a professional who provides customer related services. His main stock in trade is the trust and goodwill of his client which ought to protect at all times otherwise he will go out of business. Also, with the advent of democracy in Nigeria and globalisation world-wide, professionals, including Auditors, should exercise more care and diligence in the performance of their statutorily responsibility in order to avoid loss of trade or incur civil and criminal liability as a result of a breach of statutory duty.

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