Monday 5 November 2018

Chijioke Ifeoma Okorie

Intellectual Property (IP) and the proposed re-enactment of the Companies and Allied Matters Act in Nigeria

A few months ago, the Nigerian parliament (the Senate) passed the Bill for an Act to Repeal the Companies and Allied Matters Act 2004 (CAMA) and enact, in its place, the Companies and Allied Matters Act 2018 (the “Bill”). The Bill is now awaiting presidential assent for it to become law. [Afroleopa is happy to provide a copy of the Bill upon request]. This post only addresses some aspects of the Bill that particular affect IP and creative entrepreneurship. 

Some key points of departure from the existing CAMA include:
(1) Provision for the establishment of single member companies and in the case of small companies, provision for single directorship. Small companies are private companies with turnover of N2million or less; net assets of N1million or less; no foreign or government agency membership and whose directors between themselves hold not less than 51% of the company’s share capital. The existing CAMA requires all companies to have at least 2 directors and 2 shareholders.
(2) Exemption of small companies from the requirement to appoint a company secretary. The existing CAMA requires all companies to appoint a company secretary.
(3) Exemption of small companies from the requirement of appointing auditors where it has not carried on business since incorporation or in a particular financial year or where its turnover is not more than N10m and its balance sheet total is not more than N5m.
(4) Requirement of disclosure in the case of individuals who hold shares on behalf of other persons.
(5) Removal of stringent and mandatory timelines for holding Annual General Meetings in the case of small companies.
The Nigerian Senate
(6) Removal of Attorney General’s (AG) Consent for Company Limited by Guarantee and its place, the requirement to publish the application for registration in three national newspapers. The existing CAMA required the consent of the Attorney General for the registration of companies limited by guarantee.
(7) Removal of the requirement for an order of the Federal High court for reduction of share capital in the case of private companies.

A key aspect of IP management is the establishment of business and ownership structures. Business structures are established in accordance with extant company laws. Therefore, the provisions of the CAMA in the case of Nigeria are crucial to IP management in many respects. By extension, many of the proposed changes to the CAMA as reflected in the Bill will have relevance for the IP community. Some IP perspectives on the Bill:
(a)   Single Member Companies: According to the existing CAMA, each company must have at least 2 shareholders and 2 directors and individuals seeking to do business in a name outside their own legal name may only do so as a business enterprise under Part C of CAMA (Section 573 of CAMA). Consequently, creators, designers, artists, authors and other copyright owners are constrained to either register their entrepreneurial bent through a business enterprise or involve another individual (usually managers, family members, legal advisers) as co-shareholder and co-director. The Bill provides individual creators with the opportunity to establish their own incorporated companies as sole shareholders and sole directors. This means that individual creators would now enjoy the benefits of incorporation whilst retaining the powers to solely pilot their affairs as far as their creativity directs. As sole shareholders and directors, individual creators can now provide both entrepreneurial and artistic direction to their companies without interference from other persons who are not part of their creative activities. In addition, the purport of the sole shareholder and director provision is the ability of individual creators to ‘monetise’ their creative outputs in share capital aiding valuations and succession.
(b)  Lifting the veil of incorporation: The significance of incorporation under company law in Nigeria is that such company is recognised as a legal person separate from its shareholders. Accordingly, any claims arising from the company’s activities would be brought against the company itself and not against its shareholders unless circumstances necessitate the lifting of the veil of incorporation. The courts may, upon application “lift the veil of incorporation” and hold the directors of a company liable where the directors have used the corporate shield of the company to commit an illegality or fraud. The single member company proposed in the Bill will also enjoy separate legal personality from its single member despite having one known shareholder (who may be a director as well). However, it may be easier to lift the veil of incorporation of a single member and director company because there is no other person within such company that may be held responsible as the acting mind of the company. IP owners may find themselves personally liable for the actions of their companies in such instance.
British Council Creative Hub
(c)     Monetary thresholds: The Bill provides several monetary thresholds (for example, turnover of N2million or less; net assets of N1million or less) for companies to qualify as small companies, which may enjoy exemptions, such as non-requirement of appointment of auditors and company secretaries and removal of strict timelines for AGMs. From an IP perspective, this raises several questions: Given the various streams of income from song-writing, endorsements, streaming and licensing, will copyright owners such as composers, music artists, publishers etc. (continue) to qualify as small companies? Will the status of a company change each financial year, depending on its turnover and assets? Given the rate of inflation, will the monetary threshold not become obsolete standards for the size and status of companies?
(d)     Companies limited by guarantee: The Bill proposes a deletion of the requirement under the existing CAMA for companies limited by guarantee to obtain the AG’s consent for registration purposes. The Nigerian Copyright Act requires all aspiring collecting societies to be incorporated as companies limited by guarantee. This meant that aspiring collecting societies have needed to procure the AG’s consent in order to even commence the application process to the Nigerian Copyright Commission for approval to operate as collecting societies. This change now obviates this requirement and may open the door for more application for approval to operate as collecting societies.
(e)     Disclosure of beneficial ownership: The Bill requires holders of beneficial interests in shares to disclose such interests to the company. But, what would be the point of disclosing such interests if the company and other shareholders are not able to take any action with the knowledge of such disclosure? For instance, would the holder of beneficial interest be required to transfer such interests to the actual owner or to the company?

No doubt, the Bill has several provisions that would greatly benefit IP owners, especially creative entrepreneurs. But, in making adjustments to enjoy the benefits of the Bill, IP owners and creative entrepreneurs would also do well to be aware of how best to maximize the benefits.

Chijioke Ifeoma Okorie

Chijioke Ifeoma Okorie

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