by Vernia Legal Practitioners | Feb 8, 2023 | Commercial Law, Tax
Introduction
On the 31st of December, 2021, Nigeria’s President, Muhammadu Buhari, signed the 2021 Finance Bill [which is now Finance Act 2021] into law. The Finance Act 2021 [hereinafter referred to as “the Act”], came with changes to the Nigerian taxation sphere and also touched on regulations. Through the Act, provisions in other legislations such as Capital Gains Tax Act, Personal Income Tax Act, Tertiary Education Trust Fund Act, Companies Income Tax Act, etc. were also amended. These changes consequently have effects on the running of business operations in Nigeria. Some of them include:
1. Companies Income Tax [CIT]
Before the advent of the 2021 Act, organizations which were involved in educational activities enjoyed exemption from taxation. Now, by virtue of Section 7 of the Act, such companies are subject to Capital Income Tax [CIT].
2. Tertiary Education Tax Rate
The previous rate for the Tertiary Education Tax was capped at 2% on the assessable profit of companies registered in Nigeria; But according to Sections 28 & 29 of the Act, this has been increased to 2.5%. However, this tax does not apply to small businesses. Also, within 30 days of receiving a notice of assessment from the FIRS, any company subject to Tertiary Education Tax must pay within 30 instead of the 60 days which was obtainable under the previous dispensation.
3. Sugar Tax
The Act also amended the Customs, Excise Tariffs, Act [CETA] through the introduction of the so-called “Sugar Tax” in Section 21(3), CETA. This new provision imposes an excise duty of N10 per litre on non-alcoholic, carbonated and sweetened beverages. A rationale behind it is to discourage excessive consumption of sugar in beverages and drinks. This definitely, would have a rippling effect on companies manufacturing such beverages as they would be forced to increase the price of selling their products and consumers will bear the resulting brunt.
4. Capital Gains Tax
Previously, the Capital Gains Tax Act [CGTA], provided that capital gains which accrue to a person from the sale of shares or stocks could not be charged. However, as a result of Section 2 of the Act which amends Section 30 of the CGTA, now there is an imposition of Capital Gains Tax on gains earned from disposal of shares. This however has a certain financial threshold of N100 Million and other conditions which must be considered.
Conclusion
The Finance Act of 2021 has amended quite a number of statutes with the aim of making sure new taxes are now imposed on certain kind of transactions and business owners have no choice but to adapt to these modifications. As gleaned from the above, the new legislation may not necessarily be bringing good tidings for some businessmen. This is obviously due to the new taxes and duties levied on transactions which was not the case under the old dispensation.
TEAM VERNIA
52B, Adeyemo Akapo Street,Omole Phase I Estate,
Off Agidingbi Road, Ikeja, Lagos.
+234 813 830 6975
[email protected]
by Vernia Legal Practitioners | Jan 11, 2023 | Commercial Law, Litigation, Society & Law
In preparation for unforeseen or uncontrollable events which may come to light in the course of executing contractual obligations, parties to the contract may insert the Force Majeure clause. The clause entitles parties to a contract to be discharged from carrying out their obligations in the contract as a result of certain specified unforeseen events or events beyond the control of the parties. The consequence of a Force Majeure clause is that any party unable to fulfil its own part of the contract would be excused from performance or the time for execution will be extended to allow the party carry out their obligations.
The Court of Appeal in its decision in Globe Spinning Mills Nigeria Plc. v. Reliance Textile Industries Limited [2017] LPELR – 41433 [CA] reiterated the importance of including a Force Majeure clause in contracts. By virtue of the unexpected global pandemic, the Force Majeure clause has become one of the most essential in Company Contracts. Numerous companies rely on this clause to alleviate the risk of non-performance and take away liability for inevitable and unforeseen occurrences, for example the COVID-19 Pandemic.
Elements of Force Majeure
There are certain indispensable conditions prerequisite to a Force Majeure clause availing the party seeking to leverage on it. These conditions were highlighted by the Court of Appeal in Diamond Bank Ltd V. Ugochukwu (2008) 1 NWLR (Pt. 1067) per Rhodes- Vivour, J.C.A [as he then was]:
“…there must be an event which significantly changes the nature of the contractual rights of the parties that it would be unjust to expect the parties to perform those rights such as: (1) Where the subject matter of the contract has been destroyed, or is no longer available. (2) Death or incapacity of a party to a contract. (3) The contract has become illegal to perform as a result of new legislation. (4) A contract can be frustrated on the outbreak of war. (5) Where the commercial purpose of the contract has failed.”
As rightly stated by Abdu Aboki, J.C.A in Federal Ministry Of Health v. Urashi Pharmaceuticals Ltd [2018)] LPELR 46189 [CA], for an event to be considered as Force Majeure, it has to be unforeseen at the time of entering the contract. The occurrence must be one that could not have been imagined by any reasonable man and inevitable to the parties of the contract. It must also not be as a result of negligence, an act or omission of any of the parties to the contract, the events include both natural and human acts, for example riots, strikes or war.
Essence of Force majeure Clauses
Recently Nigeria Liquefied Natural Gas [NLNG] invoked the Force Majeure clauses in all its Sales and Purchase Agreements (SPA) as a result of its inability to carry out its operations due to the flood in their operational areas, thereby excluding themselves from any liabilities that may arise as a result of the floods causing their inability to operate. Taking into consideration the recent occurrences around the world i.e. the COVID-19 Pandemic, unpredictable weather changes etc., the importance of inserting a Force Majeure clause in contracts cannot be overplayed.
Having a detailed, well-structured and unambiguous Force Majeure clause will save many contractual agreements, while protecting the parties from immense loss and even lawsuits.
Invocation and Limitation
The party relying on Force Majeure has to prove that it is truly incapable of fulfilling its contractual obligations as a result of the occurrence of the event stated in the clause, it must also prove that there was no way it could have foreseen the event.
A Force Majeure claim will not be upheld by the Court simply because the situation is difficult or the circumstances slightly changed; such an event must be one that could possibly not have been envisioned.
These limitations are vital to note because regardless of a Force Majeure clause, the party to a failed contract can still take action against the executor once there is the slightest possibility that such act could have been envisaged. Thus, a Force Majeure Clause can be used as a shield to protect oneself from liability. On the other hand, it can be a sword, to be used against the defaulting party to ensure fulfillment of his obligation.
A Force Majeure is also restricted to the events and the implications of the occurrence of such events covered under the clause.
Conclusion
It is important to note, for parties inserting the clause, it must be couched properly to avoid ambiguity and various interpretations.
Finally, regardless of how well a contract is drafted, the allowance for unforeseeable occurrences should always be created with comprehensive steps to alleviate the effects of such events that could not have been anticipated.
TEAM VERNIA
52B, Adeyemo Akapo Street,Omole Phase I Estate,
Off Agidingbi Road, Ikeja, Lagos.
+234 813 830 6975
[email protected]
by Vernia Legal Practitioners | Dec 20, 2022 | Commercial Law, Society & Law
Introduction
Introduction
It is beyond prevarication or doubt that proper regulations by the government of a state are indispensable for the proper functioning of economies and societies. The main objective for any such regulation is to ensure that the regulation works effectively, and is in public interest. This is why it is quite commendable that on the 19th day of October, 2022, the President of Federal Republic of Nigeria signed the Nigeria Startup Act, 2022 [the Act] into law, thus positioning Nigeria’s startup economy as the leading digital hub in Africa.
Definition of Startup
The Interpretation section of the Act defines Startup as “a company in existence for not more than ten [10] years, with its objective being the creation, innovation, production, development or adoption of a unique digital technology innovative product, service or process” See, Section 47 of the Act.
Basically, Startups are young companies founded to develop a unique product or service, bring it to the market and make it irresistible and irreplaceable for customers. It is a company typically in the early stages of its development.
Objectives Of The Act
Section 1 of the Act provides for the objectives of the Act as follows:
- Provide a legal and institutional framework for the development of startup in Nigeria;
- Provide an enabling environment for the establishment, development and operation of startups in Nigeria;
- Provide for the development and growth of technology-related talents; and
- Positioning Nigeria’s startup ecosystem, as the leading digital technology centre in Africa, having excellent innovators with cutting edge skills and exportable capacity.
Application Of The Act
From Section 2 of the Act, it is clear that the Act only applies to companies incorporated under the Companies and Allied Matters Act and granted the startup label and organization and establishments, whose activities affect the creation, support, and incubation of labelled startups in Nigeria.
Highlights and Benefits of the Act
- Establishment of the National Council for Digital Innovation and Entrepreneurship [the Council]: Section 3 of the Act establishes the Council which is comprised of the President and Vice-President serving respectively as Chairman and Vice-Chairman of the Council, as well as other stakeholders who were commendably carefully curated to draw support of the Executive Government to provide policy and encourage greater collaboration between the State and the private sector. The Council shall be a body corporate with the responsibility to formulate and provide general policy guidelines for the realization of the objectives of the Act together with other functions and powers as clearly stated in Section 7 [1] & [2] of the Act.
- Secretariat of the Council: By the provisions of Section 9 of the Act, the National Information Technology Development Agency [NITDA] is designated to serve as the Secretariat of the Council [the Secretariat] to be headed by the Director General of the NITDA. The secretariat’s role has been designed to help operationalize the function of the Council and its functions are clearly started in Section 9 [2] [a-r] of Act.
- Startup Support and Engagement Portal: Section 10[1] of the Act establishes the Startup Support and Engagement Portal [the Portal] to serve as a flatform through which a startup conducts registration with relevant Ministries, Departments and Agencies [“MDAs]. It also facilitates the issuance of permit or licence to labelled startups amongst other function as contained in Section 10[2] [a-l] of the Act. There shall also be a coordinator of the Portal who is responsible for maintaining a register of labelled startup in Nigeria and keeping relevant documents/record. The office of the Coordinator of the Startup Portal is provided under Section 11 of the Act.
- Startup Labelling Process: Section 13[2] of the Act defines “Labelled Startups” as registered limited liability companies that has been in existence for a period not more than ten years from the date of incorporation involved in innovation, development, production, improvement, and commercialization of a digital technology innovative product or process. One of the eligibility requirements for the grant of a startup label is that it must have at least one-third local shareholding held by one or more Nigerians as founder or co-founder, amongst others. Once a company becomes a labelled startup, it is obligated to comply with the provisions of the Act and all extant laws governing businesses in Nigeria. Other obligations are as provided in Section 16 of the Act.
- General Incentives for Startups:
- Establishment of Startup Investment Seed Fund [the Fund]: Section 19 [1] of the Act establishes the Fund to be managed by the Nigeria Sovereign Investment Authority. The Act provides that there shall be paid into the Fund on an annual basis, as un not less than Ten Billion Naira from sources to be approved by the Council. The Fund may provide financial support and early-stage finance to labelled startup, and also provide relief to technology laboratories, accelerators and hubs as provided by Section 19 [3] of the Act
- Training, Capacity Building and Talent Development: Section 21 and 22 of the Act provides that the Secretariat shall implement a training capacity building programme for Startups and also establish centres for acquisition of technology in the six geopolitical zones of Nigeria for the promotion of digital technology utilization, strengthening of digital technology management capability and information systems. These centres would achieve this through collaboration with relevant agencies, the private sector and supporting the activities of related academic research institution.
- Protection of Intellectual Property Rights: The Act acknowledges the importance of intellectual property rights towards the growth and development of startup. The Secretariat, as part of its objectives, must ensure that holders of intellectual property rights are encouraged to exploit these rights and the Secretariat shall also take steps towards assisting startups in institutionalizing and commercializing their rights. See; Section 31 of the Act.
- Tax and Fiscal Incentives: The Act provides several tax and fiscal relief for labelled startup. By Section 24 of the Act, a labelled startup operating in eligible industries under the Pioneer Status Incentives [PSI] Scheme may apply through the Secretariat to the Nigeria Investment Promotion Commission [NIPC] for grant of tax relief and incentives under the PSI. If granted, this would entitle the labelled startup to a tax holiday for an initial period of three years, which may be extended for an additional two years. Furthermore, by Section 25 [2] of the Act, a startup may also be exempted from payment of income tax or any other tax chargeable on its income or revenue for up to five years, subject to certain qualifications.
While the above listed incentives are not exhaustive, it should be noted that the incentives conceived under the Act apply not just to the startups, but also the wider ecosystem.
6. Regulatory Compliance for Startup: Below are some of the basic regulatory compliances that Startups in Nigeria need to comply with:
- Corporate Affairs Commission: As provided under the Companies and Allied Matters Act, 2020, all companies in Nigeria must be incorporated under CAC before commencing operation and Annual returns must also be filed.
- Tax Remittance: All Startups are required to register for tax and file their audited accounts and tax computations with the Federal Inland Revenue Service [FIRS] within eighteen [18] months of incorporating their company or not later than six [6] months after its accounting period, whichever is earlier. Value Added Tax [VAT] are also to be remitted to FIRS monthly except where tax incentives have been granted to such startup company.
- Special Control Unit Against Money Laundering [SCUML]: This is a unit under the Economic and Financial Crime Commission [EFCC] and some designated non-financial institutions are required to register with the Special Control Unit to obtain the SCUML Certificate.
Conclusion
The Nigeria Start up Act, 2022 is a fundamental step in the development of a legal framework for startups operating in Nigeria as there are adequate provisions and benefits which if effectively and practically implemented will aid the ability of the Act to achieve its objectives and also ensure that Nigeria Technology ecosystem remains in the global market.
TEAM VERNIA
52B, Adeyemo Akapo Street,Omole Phase I Estate,
Off Agidingbi Road, Ikeja, Lagos.
+234 813 830 6975
[email protected]
by Vernia Legal Practitioners | Dec 8, 2022 | Commercial Law, Litigation, Society & Law
Introduction
A Contract is simply an agreement between two or more parties that is legally binding. Simply put, it is an agreement that the law will enforce.
A Memorandum of Understanding on the other hand, is a preliminary to a Contract. It is an agreement that a contract will be entered between parties in future. Perfectly put by the Court of Appeal in Aburime & Anor v. Osunbor [2022] Lpelr-57590 [Ca]:
” Memorandum of Understanding is not the real agreement but a document guiding the future agreement. Its status is something less than a complete contract.……The implication is that its content cannot be enforced. Be that as it may, it remains a document which the parties can refer to for the purpose of reminding them of the content therein.” Per Bola, J.C.A. [PP 11 – 12]
Also, in B.P.S Construction & Engineering Co. Ltd V. Fcda [2017] Lpelr-42516 [Sc], the Supreme Court held per Kekere-Ekun, J.s.c (Pp 20 – 21 Paras B – B):
“…it is clear that a memorandum of understanding or letter of intent, merely sets down in writing what the parties intend will eventually form the basis of a formal contract between them. It speaks to the future happening of a more formal relationship between the parties and the steps each party needs to take to bring that intention to reality.
Therefore, it is clear as crystal that an MOU is not to be enforced. It is a preliminary to a future Agreement to be entered into by contracting parties. An MOU is for the future.
However, for every law, there is an exception. There is a way whereby an MOU can still be deemed an agreement which the Courts would recognize as binding on the parties. Where the parties to an MOU agree to be bound by the terms and conditions, none of them is permitted to later aver that the MOU is not binding. The rules of Estoppel forbid such party. The Court of Appeal in Tower Securities & Investment Co. Ltd. v. Coronation Merchant Bank Ltd (2020) Lpelr -51415 (Ca) per Aliyu, J.c.a (Pp 34 – 36 Paras A – E) explained:
“There is no doubt that an MOU’s status is less than a complete contract. But in the peculiar facts and circumstances of this case under which the MOU was executed, I am confident to hold that the parties intended to be bound by the terms thereof. ……………In the case of B. P. S. Construction Company & Engineering Ltd Vs. FCDA (2017) 10 NWLR (Pt. 1572) 1 or (2017) LPELR-42516 (SC)..………… both this Court and the Supreme Court held in that case, that the parties did not intend to be bound by the MOU, since it only represented a preliminary understanding of the parties’ plan to enter into a contract in the future. But in the case leading to this appeal, the parties did not make the MOU subject to the execution of any further agreement. They intended that it should be binding on them and indeed commenced the execution of the terms therein as noted supra. In this circumstance, the Appellant cannot be allowed to renege from it.”
Also, the Supreme Court held in Adedeji v. Obajimi [2018] 16 Nwlr Part 1644 Page 146 that an MOU was enforceable because the parties intended to be bound, they had intentions to create a legal relationship. The Appellant signed the MOU to pay the sum of N5,000,000 to buy a company [at a particular date] and also a statutory deposit of N500,000 to the Central Bank of Nigeria. It was agreed that in the event of an inconclusive sale, the Appellant would be reimbursed the money incurred for expenses. But the Appellant did not pay the N5,000,000 and he sued for reimbursement. The Apex Court held that he had breached the terms of the MOU as he failed to perform his contractual obligations. There was an intention to be bound and he breached the agreement. Therefore, the MOU was enforceable.
From the above decisions, there is an emphasis to intention to create legal relationships. This element is usually what differentiates contracts from mere agreements. Offer, Acceptance, Consideration and Capacity might all be present but no agreement will receive the force of law if it lacks an intention.
Conclusion
Memorandums of Understanding are generally unenforceable. There are usually preliminaries to future agreements. However, where parties intend to be bound, then they are placed on the same pedestal as Contracts and consequently receive the stamp of enforceability, in which case a Memorandum of Understanding is a binding obligation. Where there is intention, it is no longer a preliminary; it is a debt to be paid. An MOU is thus, an IOU.
TEAM VERNIA
52B, Adeyemo Akapo Street,Omole Phase I Estate,
Off Agidingbi Road, Ikeja, Lagos.
+234 813 830 6975
[email protected]
by Vernia Legal Practitioners | Sep 26, 2022 | Commercial Law, Society & Law, Tax
Tax Appeal Tribunal [hereinafter referred to as the “TAT” or “Tribunal”] is established pursuant to SECTION 59 (1), FEDERAL INLAND REVENUE SERVICE [ESTABLISHMENT] ACT, 2007 [hereinafter referred to as the “FIRS Act”]. The TAT replaces the former Body of Appeal Commissioners [BAC] and Value Added Tax [VAT] Tribunals. The TAT is not a Court, but rather an administrative body saddled with responsibilities of handling disputes on taxation; to be specific, taxes accruable to the Federal Government of Nigeria.
Jurisdiction
The 5th Schedule of the FIRS Act states that the TAT has jurisdiction over all matters contained in the 5th Schedule [to the FIRS Act]. These includes: disputes arising from the Companies Income Tax Act [CITA], Petroleum Profit Tax Act [PPTA], Personal Income Tax Act [PITA], Capital Gains Tax Act [CGT], Stamp Duties Act [SDT], Value Added Tax Act [VAT], Taxes and Levies [Approved list for collection] Act as well as other laws, Regulations, Proclamations, Government notices or Rules related to these Acts. Furthermore, it is instructive to note that the Tribunal also adjudicates tax disputes arising from the actions and decisions of state tax authorities provided the disputes relate to any of the Acts listed in the First Schedule to the FIRS Act. There used to be a debate as to which is the appropriate forum to bring federal taxation matters to, whether it is the TAT or the Federal High Court [hereinafter referred to as “FHC”]. Section 251(a) – (c), 1999 Constitution confers upon the FHC exclusive jurisdiction to entertain and adjudicate upon matters related to taxation of the Federal Government or its agencies. Section 59 (2), Establishment Act saddles the TAT with the responsibility of handling disputes relating to taxes due to the Federal Government through the FIRS. Therefore, it begged the question that when there is a grievance, which of the two judicial bodies is the appropriate point of call? Can a complainant bypass the TAT and go straight to the FHC or he must go through the former first? After series of decisions, the Court of Appeal finally put an end to this. In Federal Inland Revenue Service v. TSKJ [Construcoes Internacional Sociadade Unipersoal], [2017] LCN/10279 CA, the Court held that a party must approach the TAT before escalating a grievance to the Federal High Court where a statute prescribes a line of action in resolution of a dispute, all available remedies must be exhausted first before resorting to the halls of a Courtroom. This however, as properly and firmly noted by the same Court of Appeal in the later decision of Skye Bank Plc v. K.S.I.R.S [2021] 12 Nwlr [Part 1789] Page 27], the TAT is not a Court and does not ousts the jurisdiction of a Court.
The TAT Zones
A Tax Appeal Tribunal is located in the Federal Capital Territory, Lagos State and in each of the six geo-political zones of Nigeria.
Initiation of Action
The Tax Appeal Tribunal as defined by the Court of Appeal in Skye Bank Plc v. K.S.I.R.S [supra] is an administrative tribunal set up to determine the correctness of assessment of tax without fixation of formality. When a tax has been imposed on a party, he is free to object to it and lay a complaint to the imposing authority. Upon failure to reach an amicable resolution, such complainant [aggrieved party] has the right to escalate it further by approaching the TAT. The procedures of filing an action under the TAT, like a usual Court, is regulated by procedure and hence the Tax Appeal Tribunal [Procedure] Rules 2021.
According to the FIRS Act and Order 3 Rule 1, TAT [Procedure] Rules 2021, both the taxpayer and relevant tax authority can initiate the appeal process. Rule 2 provides that such complainant shall file the action within a period of 30 days from the date on which the cause of complaint [action, decision, assessment or demand notice] which is being appealed against, was made by the FIRS. However, the Tribunal may still entertain an appeal after the expiration of the said period of 30 days if it is satisfied that there was a reasonable cause for the delay. Going further, Rule 3 says that if the complainant is the FIRS or any relevant tax authority, aggrieved by non-compliance by any person in respect of any provisions of the tax laws referred to in Paragraph 11 of the 5th Schedule to the Act under its administration, it may as in Rule 2 above, file an appeal at the appropriate zone of the Tribunal.
If a party is still dissatisfied with the decision of the Tribunal, Order 1, Rule 1, Federal High Court [Tax Appeal] Rules, 2022 provides that such party can file a Notice of Appeal to the Federal High Court within 30 days after the decision of the Tribunal was given.
Structure
According to Section 2, 5th Schedule, Establishment Act, the TAT has a total of 50 Tax Appeal Commissioners. A Tribunal consists of 5 members appointed by the Honorable Minister of Finance. The Chairman for each zone must be a legal practitioner who has been so qualified to practice for a period of not less than 15 years with experience in tax legislation and tax matters. The Chairman presides at every sitting of the Tribunal and in his absence the members shall appoint one of them to be the Chairman. The quorum at any sitting of the Tribunal is 3 members. Section 4 provides that a Tax Appeal Commissioner is to hold office for a term of 3 years, which is renewable for another term of three years only, from the date on which he assumes his office or until he attains the age of 70 years whichever is earlier.
Responsibilities of The TAT
The Tribunal is responsible for entertaining, determining and adjudicating on all the cases filed before it. The Tax Appeal Commissioners sit on the tribunals to perform these duties. Also, where the cases also have elements of crime, it can refer them to the office of the Attorney General of the States or Federation [as the case may be]; or other law enforcement agencies so the matters can be prosecuted. The decision of the Tribunal [Award or Judgement] will be registered at the Federal High Court and enforced as if it was a Judgment of the Court.
Bottlenecks of Dispute Resolution
As gleaned earlier, appeals from the TAT lie to the Federal High Court. Order 1, Rule 1 Federal High Court Tax Appeal [Procedural] Rules, 2022 is instructive on this. However, this can only be done on points of law. The Act provides that appeal against the decision of the Tribunal lies to the Federal High Court “on points of law” and further appeal lies to the Court of Appeal. No room for an appeal on points of facts is made here. This may appear unconstitutional and could be challenged. However, it would also seem that the approach as universal appeal in matters of tax appeal. In addition, the Rules require a deposit of Judgement Sum. Order 5 Rule 1 mandates a tax debtor who is challenging the decision of the Tribunal [“the Tribunal”] to deposit the judgement debt in an interest yielding amount maintained by the Chief Registrar of the Court. Otherwise, the appeal will not be heard. This is a precondition that must be satisfied. In our opinion, it seems unfair to a party being asked to deposit the same amount of money which he is appealing against, before he can make that appeal. It is nothing but a representation of the popular phrase associated with the military which is “obey before complain”. The essence of appealing is to overrule the lower court and prevent that “obedience” from taking place. However, on the flip side, it is argued that this payment to the Government is imperative for the funding of developmental projects. Failure of parties to pay hinders the tasks the Government intends to carry out. Besides, Paragraph 17, 5th Schedule of the FIRS Act mandates this payment to be made as a condition precedent to further appeal. It should be noted that this approach is not unique to Nigeria. It could be found in other tax jurisdictions to a varying degree.
Furthermore, at the TAT, the commissioners who adjudicate the disputes are experts who have experience in taxation. However, the Judges at the Federal High Court where appeals from the TAT will lie to, might not be vast in the realm of taxation and this undoubtedly can scupper the Court from reaching a sound and robust decision. There have been calls for the establishment of a proper Revenue Court manned by Judges appointed from legal practitioners with verse knowledge of and wealth of experience in tax matters and tax dispute resolution.
Conclusion
The TAT has always been a proper forum to ventilate taxation related grievances. Parties do not need to go to Court and endure all the stressful procedure required just before they can seek redress. The Tribunal saves them that long and tedious process. The aim, like any other body tasked with judicial and adjudicatory powers is to determine rights and liabilities and ultimately grant redress being sought by parties who come before it.
However, the system is not perfect as it is fraught with its own shortcomings. The restriction on appeals only on points of law is a not in the interests of litigants as the very Justice they seek before the Federal High Court is already limited. We strongly opine that a balance be struck in the payment of the Judgement Sum as a pre-condition for appeal, which would reflect equity and fairness. Yes, it looks harsh on parties but also, the Government needs the money too. The Law needs an amendment. Then, to ensure well-grounded decisions, forged from solid jurisprudence are reached, devoid of all the stressful procedure and legalese of the regular Courts, we suggest that there should be the establishment of Revenue Courts in line with the prescription of the revised National Tax Policy Document. In fact, the TATs can be transformed into these proposed Revenue Courts while the Chairmen be elevated to the position of Judges.
TEAM VERNIA
52B, Adeyemo Akapo Street,Omole Phase I Estate,
Off Agidingbi Road, Ikeja, Lagos.
+234 813 830 6975
[email protected]
by Vernia Legal Practitioners | Sep 8, 2022 | Commercial Law, Litigation, Society & Law
The recent Money Laundering Act [hereinafter referred to as “MLA”] was enacted in May 2022 to repeal the previous Act of 2011. This latest law like its predecessor is to ensure transparency and disclosure by shining the torchlight on financial transactions, combat money laundering and other related crimes. Penalties as usual, have been prescribed to act as deterrent for anyone, whether natural or corporate, who flouts these provisions.
The Law
Section 2(1) provides that no person or body corporate shall except through a financial institution, make or accept a cash transaction exceeding the sum of N5 Million Naira or its equivalent [in the case of an individual] or N10 Million Naira [in the case of a body corporate].
Section 3(1) imposes a duty to report in writing, a transfer to or from a foreign nation, funds or securities by any person including a money service business, of any sum exceeding $10,000, to the Special Control Unit against Money Laundering [hereinafter referred to as “SCUML”], a unit under the Economic and Financial Crimes Commission, Central Bank of Nigeria and Securities and Exchange Commission, within one day from the date of the transaction.
Section 4 (1) – (12) creates a responsibility on financial institutions and designated non-financial business and profession [hereinafter referred to as “DNBP”] to identify the identities of customers, take reasonable measures to verify anyone acting on their behalf, carry out due diligence while establishing business relationships and transactions, scrutinize transactions, gather sufficient information about customer and their business, etc.
Section 6 (1) says that financial institutions and DNBPs whose profession involves cash transactions shall in the case of a new business, before its commencement and an existing business, within 3 months after the enactment of the Act, submit to the SCUML, a declaration of its activities.
Section 7 also imposes a duty to report any suspicious transaction involving a frequency which is unjustifiable or unreasonable, surrounded by conditions of unusual or unjustified complexity, appears to have no economic justification or lawful objective, is inconsistent with the known transaction pattern of the account or business relationship, or is in the opinion of the financial institution or non-financial business and profession involves the proceeds of a criminal activity, unlawful act, money laundering or terrorist financing, and so on.
Section 11 (1) further goes on to say that notwithstanding anything to the contrary in any other law or regulation, a financial institution or DBNPs should report to the Nigerian Financial Intelligence Unite [hereinafter referred to as the “Unit”] in the case of a financial institution and to the SCUML in the case of a designated non-financial business and profession in writing within 7 days, any single transaction, lodgment or transfer of funds in excess of N5 Million Naira or its equivalent [in the case of an individual] or N10 Million Naira [in the case of a body corporate].
In addition, the law has gone a step further to place a burden on society; everyone has a reasonable man’s test to undergo. According to Section 20 (a) and (b), any person who:
“(a) conceals, removes from jurisdiction, transfers to nominees or otherwise retains the proceeds of an unlawful act on behalf of another person, where he knows or reasonably ought to have known or suspected that other person to be engaged in an unlawful act or has benefited from an unlawful act, or
(b) knows or reasonably ought to have known or suspected that any property either in whole or in part directly or indirectly represents another person’s proceeds of an unlawful act, acquires or uses that property or takes possession of it, commits an offence under this Act and is liable on conviction to a fine of at least five times the value of the proceeds of the unlawful act or imprisonment for a term of at least four years but not more than 14 years or both.”
The implication is that no one can feign ignorance about the unlawful nature of a transaction. You are expected to exercise reasonable care when dealing with third parties and a certain level of diligence is expected of you.
The Law and Lawyers
Section 11 (4) expressly states that legal professional privilege and the invocation of client confidentiality shall not apply in connection with:
- the purchase or sale of property;
- the purchase or sale of any business;
- the managing of client money, securities or other assets;
- the opening or management of bank, savings or securities accounts;
- the creation, operation or management of trusts, companies or similar structures.
One of the basic tenets of the legal profession is confidentiality. Like Religious Priests with congregation members, and Medical Practitioners with patients, the law in jurisdictions worldwide regard the relationship of a lawyer and his client as sacred. Such relationship is built and sustained on the concept of trust. According to Rule 19, Rules of Professional Conduct 2007, a Lawyer and Client communication is privileged. Without consent from the latter, it cannot be disclosed. To do so is a disbarrable offence on the part of the lawyer. The communication between both parties is privileged and generally cannot be used in evidence. Section 192 (1), Evidence Act 2011 provides that the communication between a lawyer and client is privileged. Except with the Client’s consent, the lawyer CANNOT disclose such information. The exceptions are:
a. Where such communication is made in furtherance of a crime;
b. Any observation made by the lawyer that since his employment, the Client has committed a crime.
Client-Attorney Privilege is so sacred that in 192 (3), this privilege still exists even if the Lawyer is no longer in the employ of the client. It is important. Thus, a law compelling a lawyer to disclose the transaction of his client is invalid. Therefore, the above provisions of Section 11 (4) MLA 2022 lifting such privilege is an aberration of established rules and principles of law. The Court of Appeal held in Mekwunye v. Carnation Registrars Limited [2021] 15 NWLR Part 1798 Page 1 that even the Court CANNOT compel a lawyer to break confidentiality. Espousing the importance of the concept, Pemu J.C.A @ Pages 40, Paras C – D held:
“The Counsel-Client relationship is fraught and clothed with privilege. Privilege for communication in relation to litigation based on the oath and honour of the lawyer who is duty bound to guard his client’s secrets.”
Privilege is not for fun. It is a duty. Keeping it short yet firm, the words of Daudu, SAN in the proceedings of Nigerian Bar Association v. Moses [2016] 10 NWLR, Page 366 @ 391 Paras F – C:
“The legal practitioner must accept that every privilege comes with a huge baggage of responsibilities.”
When the Old Act was enacted in 2011, the Nigerian Bar Association filed a suit against the Central Bank of Nigeria and the Attorney General, arguing that the provisions compelling disclosure cannot and should not be applied to lawyers because of Client-Attorney privilege. The Court of Appeal in Central Bank of Nigeria v. Registered Trustees of the Nigerian Bar Association & Anor. [2021] 5 Nwlr Part 1769 Page 268 held that although the law did not expressly mention, indeed lawyers were to be exempted from the application of such rule. The National Assembly in its own wisdom then choose to repeal the existing law and enact a new one in its stead and then expressly lift the privilege lawyers enjoy, therefore it would be said to be “what the law now says”. This is a disregard for Rule of Law. The act of the National Assembly in this regard is nothing short of legislative rascality. Client-Attorney Privilege is sacred! It must not be touched. In Agetu v. Commissioner of Police [2020] 13 NWLR Part 1741 Page 245, the Court held that a lawyer CANNOT be compelled to disclose information of his client except where he is a witness and even at that the Court can only permit him to do so if deemed necessary.
The provisions of Section 20 (a) and (b), MLA 2022 in our opinion should definitely not apply to lawyers. A lawyer should not be saddled with the responsibility of investigating the source of his client’s funds or wealth. That is within the remit and responsibility of law enforcement agencies. What he is owed is the perfection of his brief; the payment of his professional fees by the said client. The Court of Appeal, Lagos Judicial Division on May 14th, 2021 dismissed the appeal filed by the Economic and Financial Crimes Commission who froze the accounts of renowned learned silk, Mike Ozekhome S.A.N on the grounds that his professional fees being paid to him by his client were unlawfully acquired. Lawyers enjoy this privilege and it must not be tampered with except in accordance with the due procedure of the law.
Conclusion
Without a shred of doubt, the MLA 2022 is anchored on transparency and disclosure, as the foundations to build the machinery for combating money laundering. The public has a sense of responsibility to be bloodhounds; to sniff around suspicious transactions and persons and then report to the relevant authorities. This would therefore keep everyone on their toes knowing fully well that lack of diligence is now penalized.
On the other side of the coin, it is our considered view that the Act can be deemed unconstitutional. Section 37, 1999 Constitution guarantees the Right to Privacy. The Act seemingly infringes on this. Except a person is subject of an investigation, or where it is extremely important, he should not be forced to disclose details of his financial dealings. Private transactions should be made private. Except if such matters are part of public records [which they are not], law enforcement agencies should not easily have access to them as they like. Court orders should be sought and obtained first.
Furthermore, the sacrosanctity and sacredness of Client-Attorney privilege must also be put into consideration. No matter how desirable it is, lawyers cannot and should not be compelled to disclose details of their Clients’ affairs. It goes against the very ethos of the legal profession. The provisions of the MLA 2022 therefore are nothing but an attack on the legal profession. Lawyers help in drafting the law. Help in interpreting the law. Help in defending the law. But this time, the law is a weapon being brandished against us. The law here in our opinion, is “unlawful”.
It is an attack on lawyers.
TEAM VERNIA
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