Wednesday, October 28, 2020 / 01:00PM / By FCMB Business Zone / Header Image Credit: FCMB Business Zone
Setting up a business in Nigeria is one of the roads to financial independence. As most persons who have started a business will know, the task of setting up shop is not an easy one as it is fraught with many false starts and setbacks. Most of the time, businesses do not do well because the business owners failed to take cognisance of key elements incidental to business success. One of the elements that can make or mar a business is legal compliance.
Legal compliance is the way and method through which a business complies with the legal requirements regulating the business environment, sector, and geographical location of a business.
Laws are made to regulate the business environment as a means for the state to ensure a level playing field for all persons who seek to do business within the state. Laws generally help to ensure that there are certain guarantees within a state which makes business possible as there is an element of predictability. These legal requirements help to put business activity in check to ensure that stakeholders will have the required assurances to invest in the state.
Some of these regulations are also in place to ensure that businesses give some of the benefits derived from the use of government provided amenities utilised in the process of service creation and goods manufacture back to the state for redistribution to the people. While some other regulations are in place to ensure that consumers of goods and services can be assured of a certain level of value for their money. In all, the regulations are made as a corollary of government’s duty to the people to ensure the welfare and security of lives and property are catered to.
Within the Nigerian business regulation landscape, several laws and regulations abound to regulate business activities which a business that falls under the scope of application of such regulation or law is duty bound to observe. As a result of the multiplicity of such regulations, it is sometimes very difficult to keep up with them and this usually leads to sanctions such as fines and penalties, forfeiture of licenses, and sometimes even criminal prosecution.
Quite a few institutions are set up by the government to monitor and enforce compliance with the requirements of laws and regulations affecting businesses. These institutions include the Corporate Affairs Commission, the Federal Inland Revenue Service, the Inland Revenue Service of the various states, the National Agency for Food and Drug Administration and Control, Securities and Exchange Commission, the National Information Technology Development Agency and the Standards Organisation of Nigeria among others. There are also regulations monitored and enforced by local governments and their designated task forces. Businesses also have professional bodies that prescribe certain requirements for regulating the activities of their members.
For this article however, our focus will be on the general compliance requirements for businesses that intend to setup within the Nigerian business landscape. Below is a compliance checklist that every business enterprise must consider and ensure compliance within order to enjoy undisturbed business activity in Nigeria.
1. Company Registration
Every business in Nigeria must be registered with the Corporate Affairs Commission (CAC) within 28 days of commencement of business activity by virtue of Section 574(1) CAMA. A business can register as either a business name or a company. Companies can be a limited liability company or an unlimited liability company. Companies can also be either a private limited/unlimited company or public limited/unlimited company. While a business name can be registered with only one person as a sole proprietor, a company must have a minimum of two shareholders.
2. Tax Identification Number (TIN)
Every person that does business has a duty to pay taxes. Consequently, it is required that every business must register as a taxpayer and get a tax identification number either for the proprietor(s) in the case of business names or the company in the case of corporates. The tax identification number is required for the payment of taxes. Paying taxes is a major requirement of law.
Business names are required to pay Personal income tax while corporates must pay Companies Income Tax and Withholding Tax. Both companies and business names must both pay value added tax on vatable goods and services.
3. Business Premises Registration
Business are required to undertake business premises registration by the payment of business premises registration fees/levy in the first year of doing business and a renewal fee for every other year of carrying out business operations. The rate of fees varies on whether the business premises is in a rural or urban area and the state in which it is located.
4. NAFDAC Registration number
This is required for businesses in the packaged food and drugs business. It is a mandatory requirement that producers of these products obtain a NAFDAC registration number for each of their products. The National Agency for Food and Drug Administration and Control is the regulatory body charged in ensuring the quality and standard of packaged foods and drugs. They carry out an inspection of both facility and product before issuing a number. The Agency is responsible for controlling, maintaining the distribution of transportation, advertisement, exportation, importation, manufacture, and the registration of the categories of products such as drugs, chemicals, consumable goods, cosmetics, biological, and medical services.
5. Environmental Impact Assessment
Section 2 (1) of the Environmental Impact Assessment Act requires an assessment of public or private projects likely to have a significant (negative) impact on the environment. Section 2 (4) of the Act also specifies that an application in writing to the National Environmental Standards and Regulation Enforcement Agency (NESREA) before embarking on projects for their environmental assessment to determine if approval will be granted or otherwise. This is mandatory for businesses taking up development activities such as creation of parks, mining, quarries, agro-allied, fisheries, and related industries. This assessment is required to produce a report on the effect of the development activity on the environment.
See More Requirements HERE
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