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 | Aug 19, 2022 | Commercial Law, Society & Law
Under the recent CAMA 2020, there have been the several inclusions of innovative provisions that would help in shaping the modern corporate world. Merger and Acquisitions [hereinafter referred to as “M & As”] remain an important aspect of business and the law has introduced new rules which would affect M & As going forward. A few of them are:
1. Disclosure and Transparency
The new CAMA contains new provisions that promote transparency provisions with regards to the ownership in companies. Section 119 says that every person with significant control over a company shall, within seven days of becoming such an owner, inform the company in writing the particulars of such control and must also disclose this in all subsequent annual returns filed with the Corporate Affairs Commission [hereinafter referred to as “CAC”]. CAC is also compelled to maintain a register of persons with significant control. According to Section 120, a person who is a substantial shareholder in a public company must disclose such substantial shareholding to the company within 14 days of becoming aware of such substantial shareholding. He must also disclose whether or not he holds the shares as a beneficial owner or as a nominee of an interested person. After being notified of such disclosure or becoming aware of such substantial shareholding, the company in question has a duty notify the CAC of this. Furthermore, in Section 121 where a person stops being a substantial shareholder in a public company, within 14 days, he must disclose this to the company in writing stating the particulars of the change in his status. Again, upon being notified of or becoming aware of this, the company must notify the CAC within 14 days.
2. Court Sanctioning of Merger Schemes
Section 711 (1) and (2) provide that where under a scheme proposed for a compromise, arrangement or reconstruction between two or more companies or the merger of any two or more companies, the whole or any part of the undertaking or the property of any company concerned in the scheme is to be transferred to another company, the Court may, on the application in summary of any of the companies to be affected, order separate meetings of the companies to be summoned in such manner as the Court may direct. If a majority representing at least ¾ (three –quarter) value of the share of members being present and voting either in person or by proxy at each of the separate meetings, agree to the scheme, an application may be made to the Court by one or more of the companies, and the Court shall sanction the scheme.
3. Financial Assistance to Shareholders
Under the old dispensation, a company was barred from rendering financial assistance to a shareholder or an intended shareholder who sought to acquire shares in the company. However, the new CAMA of 2020 has come to make a way; Section 183(3)(e) and (f) permits companies to render such assistance in the acquisition or proposed acquisition of their shares where:
- It is done pursuant to a court-sanctioned scheme of arrangement, merger, or restructuring of the company; or
- The man reason purpose in giving the assistance is not to reduce or discharge any liability incurred by a person acquiring shares in the company or its holding company but is merely incidental to a larger purpose of the company, and the assistance is given in good faith in the interests of the company.
In addition, Section 183(4) provides that a private company may offer such financial aids for the acquisition of its shares, or that of its holding company if it is a subsidiary, where it is approved by a special resolution, the net assets of the company are not reduced or, if they are reduced, the assistance is provided from distributable profits; and the directors of the company make a statutory declaration in the prescribed form before the financial assistance is provided.
4. Repurchase of Shares
Under the old CAMA, companies were generally prohibited from acquiring their own shares. However, CAMA 2020 has now lifted such restrictions. Sections 184 permits a company may only purchase its own shares:
- if so permitted by its Articles;
- the shareholders shall, by special resolution, approve the acquisition by the company of the shares that it intends to purchase;
- only fully paid up shares of a company may be purchased by the company, and the terms of purchase shall provide for payment for the purchase;
- within seven days after the passing of the special resolution referred to in paragraph(b), the company shall cause to be published in two national newspapers, a notice of the proposed purchase by the company of its own shares;
- within 15 days after the publication in two national newspapers, the directors of the company shall make and file with the Commission, a statutory declaration of solvency, to the effect that the company is solvent and can pay its debts as they fall due, and that after the purchase of its shares, the company shall remain solvent and can pay its debts as they fall due.
However, paragraph (f) say that a company may not purchase its shares if, as a result of the purchase, there would no longer be any issued shares of the company other than redeemable shares or shares held as treasury shares.
5. Restriction of Shares
Under the old CAMA, private companies were compelled to restrict the transfer of their shares. But, under the new Act, it is no longer mandatory; private companies are at liberty to restrict or not. However, Section 22 (2) says they can do so, subject to the provisions of the Articles of Association, and still provide that:
- the company shall not, without consent of all its members, sell assets having a value more than 50% of the total value of the company’s assets;
- a member shall not sell that member’s shares in the company to a non-member, without first offering those shares to existing members; and
- a member, or a group of members acting together, shall not sell or agree to sell more than 50% of the shares in the company to a person who is not then a member, unless that non-member has offered to buy all the existing members’ interests on the same terms.
The underlying benefit of this provision in M & As is that, before private companies were forced to restrict transfer of their shares, therefore limiting M & A transactions. But now, there such shackles have been loosened. Private companies are no longer forced to restrict such transfers and as such M & As can be expanded as much as the contracting parties desire.
Conclusion
The CAMA 2020 has come to offer a new outlook for M & As in Nigeria. The recent provisions help in ensuring transparency, creates avenue for financial assistance to companies, repurchase and transfer of shares, etc. amongst other new innovations. These in general have helped in reducing bottlenecks which under the old dispensation would hinder the smooth operation of different transactions for companies especially for the ones involved in M&As. The new CAMA therefore helps companies who either want to merge or acquire shares in other companies. Thanks to it, M & As look much brighter and a safer form of investments.
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 | Apr 19, 2022 | Commercial Law
Over the past few years, the mainstream of social media has been awashed with news of divorces, sex scandals of married persons, paternity frauds, controversial/shocking court decisions on division of properties and other matters in the sphere of family life. When there is a divorce, properties are automatically meant to be settled and in most scenarios, it is the husband that pays alimony. Alimony refers to the money ordered by a court to be paid by a former spouse to a former wife or husband after divorce. Under SECTION 70 of the MATRIMONIAL CAUSES ACT, 1986, the word alimony is replaced with “maintenance”
It has been a long standing rule at common law that a man has the duty to maintain his wife.[1] However, there is no rule that says a wife cannot maintain her husband. According to the Court of Appeal in Nakanda v. Nakanda[2] on the issue of maintenance, both “man and wife are on the same pedestal”. This duty applies to both of them.[3] Tobi J.C.A in Makanaya v. Makanaya[4] held that the essence of maintenance is to take care of the anticipated needs of a wife. This payment should be based on catering for her necessaries and not be based on the wealth of the husband. Unlike the Western climes, in the Nigerian jurisprudence, there is no rule on how properties are to be shared [especially for marriages contracted under the Marriage Act]. This is left to the Courts to decide that. Section 70(2), MCA provides that the court can make such awards of maintenance as it thinks proper having regards to the means, earnings, conduct of the parties to the marriage and other relevant circumstances. The powers of the courts, which they themselves have recognized and admitted, are wide and discretionary and are to be exercised in such manner in the spirit of equity and justice.[5] In Tabansi v. Tabansi[6], the Supreme Court also affirmed that the Court must consider the means, earning capacity, conduct of the parties in the marriage and other relevant circumstances before making such award. The issue of adultery falls under the ambit of “Conduct”.
Adultery
Adultery is the voluntary sexual relationship engaged in by a married person with another person other than his or her spouse. In the hallowed words of Lord Denning the eminent jurist, in the decision of Watchel v. Watchel[7]:
“It is no longer appropriate to talk about an innocent or guilty spouse, that is the conduct of the parties should not affect award of maintenance except for those which are obvious and gross so much that to order one party to support another whose conduct falls under such category is repugnant to one’s sense of justice.”
Adultery as a misconduct plays a major role as a determining factor in the award of maintenance. A spouse guilty of infidelity can be denied such benefits or even asked to pay more to the other spouse who was injured as a result of such misdeed. In Onyia v. Onyia[8] the court held that a spouse seeking any financial relief in a marriage must show that he or she was not the guilty party responsible for the breakdown of the marriage. The courts have constantly frowned at such an act and condemned it whenever it arose. In Williams v. Oladapo[9], the Supreme Court held that adultery attracted damages because it caused to the injured party, injury to his feelings, loss of partner, hurt to family life and loss of honour. In Lafun v. Lafun,[10] an adulterous wife was denied custody of her child because the court wanted to prevent the shame of the mother’s act from rubbing off on her daughter and also to avoid her being negatively influenced by her mother’s behavior. Even Section 15(2), MCA recognizes adultery as a misconduct such that under this provision, it is listed as one of the grounds for dissolution of marriage so long as it is intolerable to the other spouse. The Common Law Courts earlier had similar views on adultery vis-à-vis maintenance. In the case of Cunningham v. Cunningham[11], a wife committed adultery with a visitor that came to her house for the weekend. The court refused to award her maintenance as she was held to be responsible for the breakup of the marriage. This rationale was also upheld in Dison v. Dison,[12] where a husband slept with his daughter in-law.
It is firmly established that to every general rule, there is an exception. Therefore, there are instances where adultery can be committed and still, it would not affect the award of maintenance.
- Condonation.
The Latin maxim “volenti non fit injuria” i.e. “no injury is done to one who consents”. Thus, a husband that allows or consents to his wife sleeping with another man CANNOT plead adultery as a factor in refusing to maintain his wife. Lord Esher M.R in Wilson v. Glossop[13] stated it with utmost clarity that generally a husband is not supposed to maintain an adulterous wife except he connived with her to do so. Section 31(2), MCA provides that where adultery has been condoned, the injured party cannot be awarded damages.[14] Adultery must be intolerable. Section 15(2), MCA states it expressly that for it to be a ground for the dissolution of marriage, it must be intolerable. The courts have done enough justice to this principle in so many decisions.[15] According to Megwalu v. Megwalu[16] intolerability has to be a consequence of adultery. However, the court seemed to change its tune in Alabi v. Alabi[17]. The wife admitted to condoning her husband’s adulterous acts, yet the court awarded her damages because she had suffered loss of love from her husband, stigma of a failed marriage, death blow to her honour, shattering of her feelings and family life all because of her husband’s infidelity. The court reasoned that even though the Respondent condoned, she still suffered loss and injury on her own part. Therefore, strict application of the law would be harsh and unfair towards her and like the Court in Adeyemi v. Adeyemi[18] held, the award of maintenance should be done in an “equitable and just manner”
2. Contribution
Where an adulterous spouse has contributed to the acquisition of property in the marriage, it has been held fair and just for such party to be awarded maintenance. It is only right that a person who advanced money or any other property in the marriage should at least be entitled to some recovery. In Okala v. Okala[19] the wife committed adultery. However, she has contributed money for a building project carried on by her husband. Agbokoba J. at the High Court of East Central State awarded her maintenance. According to his words, “she has put something in the marriage, she should be entitled to take out of it”.
In submission to the foregoing, both genders can be maintained under the law. The Court will consider several factors before making an award. Adultery being a misconduct is a serious question that would influence the decision of a Court. Litigants who are victims of infidelity can leverage on this fact to prevent a cheating spouse from walking away with huge maintenance or plead it before the Court in order to get proper and adequate compensation for the emotional trauma suffered. However, it is important to note as enunciated in the preceding paragraphs that there are also instances where adultery would not affect the award of maintenance.
TEAM VERNIA
52B, Adeyemo Akapo Street,Omole Phase I Estate,
Off Agidingbi Road, Ikeja, Lagos.
+234 813 830 6975
[email protected]
[1] Erhahon v. Erhahon [1997] 6 Nwlr [Part 510] Pages 667 at 713
[2] Suit No CA/L/99/81, Delivered on 17th June 1988
[3] Calderbank v. Calderbank [1975] 3 Wlr, Page 586
[4] [1996] 9 Nwlr [Part 472] Pages 256 at 302 – 303
[5] Kafi v. Kafi [1986] 3 Nwlr [Part 27] Page 175; Ifeabuchi v. Ifeabuchi [2016] Lpelr – 41268 ca per Abiru J.c.a; Fakayode, j. advocated same in Adeyemi v. Adeyemi Suit No 1/198/70 Delivered on 29th October 1971.
[6] [2018] 18 Nwlr [Part 1651] Page 279 Per Aka’ahs, J.s.c. @Page 299, Para G
[7] [1973] Fam 72.
[8] [1985] Monthly Court Reports of Nigeria [Part 11] Page 15
[9] [1974] Lpelr-3940 Sc
[10] [1967] NWLR 401
[11] [1965] queensland lr 210
[12] [1974] Fam 58
[13] [1888] 2 Qbd Page 354
[14]Lambo, J. in Irinoye v. Irinoye [1972] Suit HD/60/71
[15] Odesanya, J. in Labode v. Labode [1972] 2 Uilr; Anyah, J. in Agu v. Agu [1972] 2 Ecslr Page 452; Odemero v. Odemero Suit No W/62/72 Delivered on 31st day of January 1974;
[16] [1994] 7 Nwlr [Part 359] Page 719
[17][2007] Lpeler-8203 Ca
[18][1971] Suit No 1/998/70 Delivered on 29th day of October, 1971
[19] [1973] Ecslr 67
by Vernia Legal Practitioners | Feb 28, 2022 | Commercial Law, Litigation
After three decades, the Companies and Allied Matters Act of 1990 has finally been repealed and replaced by the new Companies and Allied Matters Act 2020 [“CAMA 2020”]. This latest statute is divided into 7 Parts [A – G] containing 870 Sections in all. The new law contains certain stand-out provisions which seek to make less-challenging, the set up and operation of businesses in Nigeria. The recent changes in this legislation are laced with positives and good tidings for anyone willing to invest in Nigeria’s commercial industry. Some of them include:
- Single Shareholder/Director
It is now possible for companies to have just a single shareholder or director. Unlike the old law that required a minimum of two directors, under the current dispensation, just one director or shareholder is needed. [Section 18(2)].However, this is available to small companies only [Section 271(1)]. The advantage of this is that business owners who currently operate sole proprietorships [whose legal status are at best Business Names] can now upgrade their businesses to limited liability companies without the need for additional directors or shareholders. The beauty of this is that they can still continue to run their businesses as before and now enjoy the additional benefits that come with their new limited liability status; including access to credit from financial institutions of repute. A double plus.
2. Redefinition of Small Companies
Under the old law, a small company was defined as one which had a turnover of not more than N2 Million and a net asset value of not more than N1Million. Under Section 394(3)(b) & (c) of CAMA 2020, there has been a change; a small company is now a company with a turnover of not more than N120 million and a net asset value of not more than N60 Million. The benefit inherent here is that these small companies do not have to hold annual general meetings [Section 237(1)], appoint auditors [Section 402(1)(b)] or a company secretary [Section 330(1)] among other benefits. In the past under the old dispensation, these matters were highly important and business owners had to expend resources in appointing officers and holding these meetings. Now, it is not a requirement to have, which translates to conservation of resources to be deployed.
3. Reduced Costs for Registration of Securities
Under the old CAMA, before you can register security interests with the Corporate Affairs Commission [hereinafter referred to as the “Commission”], the filing fee costs 1% of the secured amount [for private companies] and 2% of the secured amount [for public companies]. Under the CAMA 2020, the maximum amount the Commission can charge is 0.35% of the secured amount [Section 222(12)]. This means that the cost of registering security interests at the Commission has been reduced by 65% for private companies and 82.5% for public companies. Therefore, business owners get to spend less on registration and thus, there is a reduction in their expenditure.
4. New Corporate Entities
There are new corporate entities and structures established by the new CAMA 2020. These are the Limited Partnerships [Section 795] and Limited Liability Partnerships [Section 746]. This is one of the best innovations of the new law; because investors now have alternative ways to carry on businesses in Nigeria without going through the stress of registering a company. Partnerships are registerable, thereby establishing their legal status and entity even better.
5. Proper Framework and Implementation for Corporate Restructuring
Under the CAMA 2020, Section 711 provides for a proper and better structure whereby mergers and other forms of arrangement, compromise or restructuring can be implemented. Under this framework, if the transaction is approved by at least ¾ [75%] in value of the shares held by shareholders present and voting at the meeting, the Court will sanction it [Section 711(2)]. The court sanction will then be filed at the Commission within 7 days [Section 711(6)]. Schemes of arrangement or compromise can also be done by virtue of Section 715. However, such schemes can be referred by the Court to the Securities and Exchange Commission to determine the fairness of the scheme. This requirement of referral is however not required under Section 711. Schemes under Section 715 do not become effective until a court order sanctioning such scheme has been filed at the Commission.
6. Companies Limited by Guarantee
In the old law, before one can register a Company Limited by Guarantee, one must seek and obtain the consent of the Attorney General of the Federation [hereinafter called “AGF”]. This meant that business owners were at the mercy of the AGF. However, by virtue of Section 26(5), if after all necessary documents have been submitted but the AGF does not grant his consent or communicate his refusal within 30 days, the promoters may place an advertisement in 3 national daily newspapers inviting the general public to make any objections to the incorporation of the company which will be considered by the Commission. If the Commission is satisfied that the Memorandum and Articles of Association of the company are in compliance with the CAMA 2020, the Commission will advertise the application in 3 national newspapers, inviting objections from the public to the proposed registration. If there are no objections from the public within 28 days, the Commission can go ahead and approve the application and register the company without the AGF’s consent. The upside of this new provision is that it reduces red-tapeism and bureaucracy. In the past, without consent, intended business owners were stranded; but now the new law has provided a way to scale that hurdle.
7. Increased Transparency
Transparency and disclosure in business naturally creates trust and boosts confidence amongst investors. The new law via Section 119 insists that disclosures are now required of persons with significant control [i.e. persons who hold 5% or more of the voting rights] in private and public companies while Section 791 provides same for limited liability partnerships. The Commission will also maintain a register of such persons in which it will enter the information received from the companies or any change thereto.1
In conclusion, the new CAMA 2020 has no doubt evolved and the developments in it reflect the realities of the modern commercial day. Some of the bottlenecks and hiccups affecting business owners in the past have been resolved and thus, this recent legislation is a welcome development for entrepreneurs. Undisputedly, the CAMA 2020 is a sigh of relief for businesses in Nigeria.
______________________
1 There are still provisions of the new CAMA that concern the subject matter at hand. As time goes on, there would be an update of those in our subsequent articles
By :
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 | Feb 8, 2022 | Commercial Law, Litigation
Generally speaking, when people have disagreements, they rush to the Courts for resolution. This is the common way. After all, the primary role of the Judiciary is to interpret the law and settle disputes. The Courtroom is the proper forum to ventilate these grievances and the Court would reach a decision thereby resolving the dispute. Like the late eminent jurist, OPUTA J.S.C in FEDERAL CIVIL SERVICE COMMISSION V. LAOYE1 famously stated: “the Judiciary is the last hope for the common man“. However, it is NOT the best option available.
Litigation: A Problem
Litigation is not so simple and straight forward as it sounds. Like Heaven, the roads to it are long and narrow. Litigants spend donkey years in even at trial courts before the matters are escalated to the appellate courts. The time frame involved is so long that malicious parties have decided to utilize the strict and stringent procedures of litigation to their advantages. Several applications would be deliberately filed and argued on for years by the parties, while digressing from the main matter at hand, just to frustrate and impede the progress of a suit. Matters have gone all the way up to the Supreme Court after years since they have been filed only for the apex Court to return the matter back to the High Court due to lack of Jurisdiction. Many landlords have wasted years in the courts trying to eject defaulting tenants who have refused to vacate the premises but yet deliberately drag the matter in Court.
For these and other bottlenecks, many people run away from litigation. The amount of time, energy and resources spent on seeing these cases through eventually may not be worth it. Hence, Alternative Dispute Resolution is a better option.
Problems raise questions. Questions demand answers. There has to be a way to hash and trash out disagreements in a faster and less expensive way, and also for the parties to walk away with satisfaction. This is where Consent Judgment comes into play.
Consent Judgement: The Solution
Consent Judgment is a judgement decision or Order given by the Court which arises as a result of the agreement of the parties.2 . In simpler terms, Consent Judgment means the parties have agreed to settle their dispute on their own terms and then take this resolution to the Court who approves it and makes it a judgment that binds the parties. Mr. A and Mr. B disagree on an issue, both of them come to an amicable resolution, after which they go to the Court to inform it of their decision, the Court then “signs and seals” that decision. So, Consent Judgment is determined by the disputing parties not the Court itself. Consent Judgment is very much legal. SECTION 241(2)(C) 1999 CONSTITUTION allows for people to resolve their issues and make such resolutions a consent judgment.3
How to get Consent Judgement?
The Supreme Court in STAR PAPER MILL LIMITED V. ADETUNJI4 laid down the procedure for getting a Consent Judgment:
a. Disputing parties reach an agreement on how to settle their matter.
b. They reduce that agreement into writing which is called Terms of Settlement.
c. They file the Terms of Settlement in the Court.
d. The Court rules on it and enters it as a Consent Judgment.
The beauty of Consent Judgment
- Avoidance of Litigation
The very first benefit of Consent Judgment is that it avoids litigation. Even the Court itself in STAR PAPER MILL LIMITED’S CASE acknowledged that “the essence of Consent Judgment is to put an end to Litigation“. Thus, with consent judgment, there’s no need for trial. Several applications, final written addresses, etc. are unnecessary here. Even if the matter is on trial, Consent Judgment can still be entered by the Court anytime. As stated in the beginning, litigation takes a lot of time. In NTEILE V. IRAWAJI5, the parties spent 27 years at the trial court before they finally agreed to get a Consent Judgment. In fact, one of the Parties died while the matter was still on going
- Less Possibility of Appeals.
In litigation, when a party is dissatisfied with the judgment of a Court, he has the right to go on appeal. The Constitution allows for appeals as of right6. But in Consent Judgment, parties CANNOT appeal that judgment except they can prove that the judgment was obtained in a fraudulent manner. The consent of the parties must be free and voluntarily7. Parties must reach a consensus. There must be ad idem between the parties.8 Hence, after their consensual agreement has been entered as a judgment, it makes no sense to appeal it. The only way to appeal such judgement is to seek and obtain leave from the Court. The party MUST seek leave before appealing and he has to show special reasons why the judgment should be challenged. So, it is very difficult to appeal a consent judgment. To a very large extent, it is final, except if it was obtained by fraud or deceit. This feature is very attractive because as mentioned earlier, Litigation is notorious for appeals; actions can be initiated from the Magistrate Court which would be escalated as far as the Supreme Court. This process consumes a lot of time and energy. Whereas, Consent Judgement is once and for all.
- Bindingness
Consent Judgment binds everyone who agrees to it either directly or by representation. That is, a group of people can choose one individual who will represent them in Court. After they have all agreed, that person is the signatory to the Terms of Settlement which is filed in Court. Once, the Judge enters it as consent judgment, even though the names of the people may not be on the document [the Terms of Settlement], the judgment still affects them because they have been represented.
Consequently, it is important to note that a person who is not a party to a Consent Judgment cannot be affected by it.9 Also, as mentioned in the second benefit, a party to a Consent Judgment cannot later make a U-turn and claim he is dissatisfied with it. The decision is binding. Parties are bound by the terms they consensually agreed to.
When is the best time you can get Consent Judgment?
The Terms of Settlement can be filed and the Consent Judgment can be entered into any time before the conclusion of trial. Even after that, when the matter goes on appeal, the Terms of Settlement can still be filed even before the hearing of the appeal. However, the Consent Judgment cannot be entered after the Supreme Court [being the apex and final Court in the land] has delivered a judgment, because after judgment, a Court becomes “functus officio”10. It is done and dusted with the case, and there’s no higher court to take the matter to or file Terms of Settlement.
In the 2020 matter of ROAD NETWORK GLOBAL RESOURCES & ANOR. V. ALOYSIUS IHEANACHO & 6 ORS11 the High Court gave a judgment which the appellant appealed against, and they filed, served and exchanged Briefs of Arguments. However, the parties reached a resolution and decided to file Terms of Settlement in order to get a Consent Judgment. Initially, the Court was reluctant to concede to the request of the parties because the Court of Appeal is a court clothed with appellate jurisdiction, whose primary duty is to hear matters where a judgement is being challenged. So, it did not look like the appropriate forum to enter Terms of Settlement as consent judgment, that seemed like the purview of a High Court. But, the parties could not go back to the High Court because it has given judgment and automatically became functus officio. Hence, the Court of Appeal was the only and next place to go to. Therefore, after a brilliant and extensive submission by our Counsel, all the Court of Appeal Justices, seised of the case at the Ibadan Judicial Division were fully persuaded to enter the Terms of Settlement as Consent Judgement of the Court. Now, in the most recent decision of NTEILE V. IRAWAJI12, the Supreme Court also held that Consent Judgement can be entered anytime even if the parties have exchanged their Briefs of Arguments, thereby affirming and validating the decision of the Court of Appeal in the ROAD NETWORK CASE. The Supreme Court per OSEJI J.S.C reasoned that “the ultimate consideration is the agreement of the parties“13. So, the stage of the case is immaterial, as long as parties are willing to settle their matter, the Court will enter a Consent Judgment.
Litigation, Alternative Dispute Resolution or Consent Judgement?
The two common ways to resolve a dispute are Litigation and Alternative Dispute Resolution, which consists of Arbitration, Meditation and Reconciliation.
In Litigation, parties bring their matters before a Court and it delivers a judgment in respect of it. In ADR, especially Arbitration, parties bring their dispute before an appointed Arbitrator who listens to the case and delivers a binding decision. While in Mediation, a Mediator is appointed who helps the parties in reaching a settlement; and lastly the Conciliator hears the case and gives an opinion or suggestion in it for the parties to implement.
A common thread running between Litigation and the various ADR mechanisms is that the dispute is resolved by a third party. For litigation, it’s the Judge, in ADR, it’s the Arbitrator, Mediator or Conciliator. But in Consent Judgment, it is the PARTIES THEMSELVES that determine the outcome of the matter. The parties agree to what they want before filing the Terms of Settlement. Hence, before approaching the Court, the parties would already be satisfied because they have reached an agreement. In Arbitration and Litigation, whatever the Arbitrator/Judge says is final. A party loses, another wins. But in Consent Judgment, both parties will come to a decision that is most favorable to them. It is the closest to a win-win situation.
Also, like we said earlier, in litigation, you can appeal up to the Supreme Court, while in Consent Judgment, you cannot do so unless you can show that the judgment was obtained fraudulently and to do so, you must be granted leave of Court. This thus makes Consent Judgement so desirable and effective. It is highly beneficial and a sound business decision to opt for Consent Judgment rather than run to the courtrooms seeking resolution. Time and efforts are conserved over here.
In conclusion, beyond any contestation, Litigation remains the most common method to resolve disputes. People naturally prefer to go to Courts to argue and stake their claims over one issue or another. This is normal. The threat of litigation itself at times forces stubborn people to have a rethink and reach out for a more peaceful and quieter mode of settlement.
However, as explained above, Litigation is a mountain of work. It consumes energy, time and resources. Many times, cases have lingered on for years, the parties would die while the matter is still in the court’s docket. Litigation, as powerful as it is, comes with heavy baggage too. ADR on the other hand is also a veritable means of conflict resolution. Parties have been encouraged to utilize this platform to resolve their disagreements.
However, out of the three, Consent Judgement is the most effective method for achieving the goal. It is the best answer to the question initially asked at the beginning. For anyone on the journey to settlement of any dispute, Consent Judgement is the safest and fastest vehicle. Here, the interests of the parties are well represented and taken care off; it also costs less.
If choosing between Litigation, ADR and Consent Judgement for dispute settlement, is akin to a prince who is eligible for marriage and is being asked to select between three women as a potential wife, Consent Judgement can then be said to be the choicest bride!
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1 [1989] 2 NWLR PART 106 PAGE 652
2 In THE EXECUTORS, THE ESTATE OF EFEJUKU V. AZIZA [2013] 11 NWLR PART 136 PAGE 333, PARAS A-B
3 S.P.D.C LIMITED V. AZUKAENU [2011] 9 NWLR PART 1252 PAGE 360.
4 [2009] LPELR – 3113 SC.
5 [2021] 16 NWLR PART 1803 PAGE 411.
6 SECTION 241 (2)(C) 1999 Constitution.
7 STORMBERG ENGINEERING LIMITED V. AMCON [2019] LPELR – 47334 [CA[
8 “Ad idem” means “the meeting of minds”.
9 OGUNKUNLE V. ETERNAL SACRED ORDER OF THE CHERUBIM AND SERAPHIM [2001] LPELR -2339 [SC]
10 Functus Officio means the Court had discharged its obligations and thus is done and dusted with the matter.
11 [CA/1B/248/2017; Vernia Legal Practitioners represented the Appellants in this matter]
12 [2021]16 NWLR PART 1803 PAGE 411.
13 @Page 454 Para C.
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