Meeting the Law with our Businesses

This is another height. It is however higher than the mountain we had to dwell in the last two weeks. It is our first attempt at the second course of this table that was set before the public four weeks ago. It is heartening that we are making good progress into the mainstay of the vision of this column, which was clearly stated in our maiden edition.

Today, we want to consider the first contact (s) our businesses should have with the law. It is a contact, if properly facilitated under the right atmosphere will lead to a harmonious marriage between our businesses and the law.  The implication of this is that our businesses and the law will become one flesh to multiply and replenish our personal finances and national economy.

It is contracted in two ways:

  • Incorporation of Company
  • Registration of Business Name

For purpose of brevity, I choose to speak the rest of this piece in points:

Incorporation of Company

  • Company and Allied Matters Act governs everything about incorporation and Registration of Business name
  • CAMA established Corporate Affairs Commission (C.A.C).
  • The C.A.C has the power to incorporate Companies and register Business Names. It also has the power to conduct investigations into the affairs of any company where the interests of the shareholders and the public so demand.

Formation of a company

  • Two or more persons may form and incorporate a company having fulfilled the statutory requirements of the type of company they intend to incorporate.
  • Formation of company is the exclusive responsibility of a legal practitioner.

Types of Company

There are different types of company but the most relevant to SME is Private Company.

The following are the features of a private company

  1. Membership-Maximum of 50 excluding employees and employee shareholders.
  2. The minimum share capital of a private company is N10, 000.00
  3. It is a legal person that can own property, sue and be sued
  4. Memorandum and Article of Association guard its activities:  While Memo is the charter of the company and contains fundamental provisions, which among other things define and limit its powers; Article contains internal regulations for the management of the company.
  5. Private companies are entitled to pay tax under the federal taxation law
  • Prohibited names

a)    Identical with the name of a company, which is already registered or it nearly resembles that name as to calculate or deceive.

b)   Contains the word, ‘Chambers of Commerce’

c)    Capable of:

  1. Misleading as to the true nature or extent of its activities.
  2. It is undesirable or offensive
  3. Contrary to Public Policy

d)   Would violate any existing Trade Mark or Business name unless the consent of the owner of the Mark or Business name has been obtained.

e)    The use of the following words as a name is subject to the approval of C.A.C:

  1. Federal ii. National iii. Regional iv. State v. Government
  2. Any other name suggesting governmental patronage: Municipal, Chartered, Co-operative, Building Society, Group or Holding.

.     Registration of Business Name

Advantages

  • Cheap: it is not as expensive as incorporation
  • Flexible: it is in fact created with small businesses in mind and it is done within one week.
  • Decentralized: while incorporation can only be done in Abuja, registration of business name can be done in the state office of C.A.C closest to you.

Names that can be registered

  1.  Firm-names other than true surnames and true forename of the partners.
  2. If both names are not true surnames
  3. Where an individual is trading with his true surname without any addition other than true forenames or the initials

Exceptions

  • An addition that indicates that the business is carried on in succession of the former owner of the business
  • Where two or more individual partners bear the same surname and there the addition of an “s” at the end of the surname
  • The business is carried on by a receiver or manager appointed by the court
  • “And” will not render a name registrable if it copulates surnames.

Prohibited Names

  • Similar to incorporation

Time of Registration

  • Application of registration is to be submitted to the Registrar within 28 days of commencement of business.
  • Certificate to be displayed conspicuously at the principal place of office

Default of Registration

  • Penal Sanction Section 667

“If any firm or individual required under this Decree to be registered … fails to comply with the provisions… every partner in the firm or the individual shall be guilty of an offence and liable on conviction to a fine of 50 for every day during which the default continues, and the court shall order a statement of the required particulars to be furnished to the Registrar within such time as may be specified in the order…”

  • Civil Remedies

a)    Bar to action to enforce partnership rights

b)   Effect on contract: Not void but unenforceable. However an application can be brought before a High Court in which any such contract would otherwise be enforceable for relief from the disability.

Effect of Registration

  1. It apprises the public of the true identity of the person(s), who trade under the name
  2. Registration gives priority to use of name even against registered companies.
  3. Registration does not confer legitimacy on a prohibited name
  4. Not proof of partnership.
  5. With the certificate of registration of business name you can open a current account for your business.
  6. Registration of business name does not make your business a legal person that is capable of owning property and being suing or sued
  7. When your business name is registered, your business is not entitled to pay tax under the federal taxation law. But this is without prejudice to the fact that we have a responsibility to pay tax as individuals.

NOTES

  • Annual Returns: to be delivered not later than 30th June each year except the calendar year in which the name was registered
  • Removal from register

a)    On notice by proprietors within 3 months of cessation of business.

I hope we have not had a boring day. The purposes of intimating us with the foregoing straight facts are only two:

  • Many of us have not registered our businesses with the law, which limits our opportunities.
  • Some of us, whose businesses are registered or incorporated, do not know the implications.

Let me promise you as we close that next week will surely be juicier. Shalom!

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LAWpreneurship™: Dealing With the Fundamental Issues (2)

We are still on this mountain called, issues before issues. We arrived here last week and the fact that it a major stopover in our journey to the land of business exploits thorough proper legal counsel; we are here spending another week. Well it is a cozy harbor; to this much, those who hanged out with us last week can testify. If you do or don’t, one fact remains incontestable about our stay here today, we are in for a better time than last week.

Last week we considered it safe to drop the pen after we had examined the credentials of an expert. Without further preambles, we proceed today to discuss the reasons why we, as SME operators need the services of these experts, whose credentials we scrutinized last week.  Note that we are going to be focusing on the legal practitioner as an expert that you cannot do without.

Now, don’t think we about to start making a case for experts or lawyers. No! Not all. The truth is that this column is neither for lawyers nor experts. It is for you. The mission here is to make a case for you.  We need to labour in this clarification because we don’t want your perception to be wrong. Because once your perception is wrong, you can never be impacted and our joy is only full when you are fully impacted.

Going straight to the issue: why do we need a lawyer or any expert’s advice? Let us quickly run through the following six points in finding satisfactory answers to the question asked:

1. A sign of vigilance:

We live in a selfish world where people don’t do business according to the dictates of their conscience but at the expense of the other person’s ignorance. Our consciousness of this fact helps us to be vigilant in our business dealings. And since we cannot see beyond our knowledge, we may need trained eyes to help us out. Where we pretend to see beyond our knowledge, we may have set a snowball rolling and when we do that, we only know the beginning, the end is never predictable. Did I hear the wise ones say, ‘a stitch in time saves nine.” Well that is a perfect wisdom key for this situation.

2. A viable antidote to lack of integrity in business:

Our nation Nigeria is plagued with the lack of integrity virus. For many business people integrity is not a prerequisite in business dealings. As a SME businessperson, who intent to do business on the platform of integrity we must protect ourselves against the bug of perfidy in business and one of the ways to do that is to ensure that our transactions are documented under the watchful and informed eyes of experts, particularly lawyers.

For example, a young model entered into a contract with a company. The contract was that his pictures would appear on their billboard. He discovered that the picture was used for other purposes. He did not need to fight. He merely contacted his lawyers and he was duly compensated. Why? Simply because the contract was properly documented under the supervision of his lawyer.

3. Aiding the need to keep records straight:

When you employ the services of an expert, it helps you to keep different kinds of records. For example if you engage the service of an accountant, you keep standard financial records; when you use a lawyer all documents of business transactions are kept properly.

4. Promoting image making and prestige:

Perception is very important in business, particular to SME. This is call packaging and image making. It talks about the impression we give clients of ourselves. And you know that as Small Businesses, we have a lot of point to prove.  We live in a country where perception is very important. Once you are discussing with a client and you introduce the subject of a lawyer it introduces respect. It gives your business a corporate outlook, which is the language the some of the people you are dealing with understand perfectly. This may sound funny, but the reality is, a principle does not need to sound logical for it to before its veracity is established.  Don’t forget we are in Africa where the basis for respect can be sometimes ludicrous.

5. It introduces caution:

When you introduce the issue of legal or experts’ advice, healthy caution is introduced. Those who are dealing with you become aware that they cannot ride roughshod on your rights as a businessperson.

6. It gives you the full view, knowledge and proper legal implication of the transaction at hand, which promotes proper and realistic business dealings.

Having established the reasons why we cannot do without experts’ advice as small businesses, we have almost come to the end of these preliminary issues, but just before that I beg to address one more issue. What is this issue that will keep us on this mountain for few more minutes? It is our inability to stick to experts’ advice even when, we have accessed them. For the purpose of brevity, I choose to speak in points, viz:

  1. Pressure:

Pressure either from within or without will stop us from reaping the benefits of experts’ advice. What is pressure within? This is a self-inflicted agitation imposed by lack of confidence in one’s services or products. When a businessperson becomes a victim of the foregoing, his decisions are propelled by fear and not an adherence to the due process of decision-making in business. External forces, that is, our clients, exert pressure without. It is an effort aimed at getting us to make permanent decision without an opportunity to consider all the factors. The first check against falling victims of pressure in business decision-making is to deliberately think of what you can lose if you don’t follow the due process, which may include experts’ advice.

We are pressured most of the time into unwise decisions when we are dealing with influential client, who may be bigger than us. Now, to be free from pressure, you must guide against what I call, ‘the rain-beating chicken mentality.’ What is the ‘rain-beating chicken mentality?’ Three things characterize the life a rain-beating chicken. The first thing is that it is sickly, it’s fearful and the most significant one is that it is obvious to everybody that it needs help. We cannot avoid presenting ourselves as the weeping child of the marketplace. When we present ourselves a weeping child, we become the whipping child. We must understand that we have rights and obligations. We are in the marketplace because we have identified a need. So we are valuable. And we cannot behave less. To behave or carry ourselves less is to be taken for granted and pressured out of business. Make it therefore a rule of thumb never to make a business decision under pressure.

  1. Lack to personal integrity and courage.

Now the strength of any expert’s advice is a readiness of the recipient to follow it to the letter. There is no point going for expert’s advice if we know that we will not follow it. Now, no one can follow an expert’s advice through except by the power of courage, discipline and integrity. It is one thing to know what to do. It is another to have the moral courage and strength of character to follow it when the ships are down. Many things stare at us in the face when we want to apply principles. One of which is the fear of losing a contract or how to get another I we lose the one at hand insisting on principle.

  1. There is always this unfounded and superstitious African belief that business dealing will not always go sore. The reasons for that conclusion are always two for two categories of businessmen and women:
    1. The mentally lazy and ignorant African Business man and woman, who believe things cannot just go wrong. When you probe into the basis of such assurance, they can’t give facts, either puerile or sound. They forget that business functions by facts and not by fictions. If not so, why do we carry out market research, feasibility studies etc? The question we ask such people is this, does a business deal, which is going to generate problem, have special features or colors?  Like a tragic day, business deals that will generate problems do not have special features.
    2. Religious zealots, who have zeal without knowledge. They say stuffs like ‘nothing will go wrong because I believe in God.’ They simply equate foolishness with faith. Faith in God is a principle that has tenets and except you are committed to the tenets you are not applying faith.

In rounding off these issues before the issues, I ask the question, where are these experts that we need as small businesses? Considering our purse, they are our friends, our neighbors, our family members, old classmates, mentors etc. who recognize the state of our business and will charge us little or nothing for standard advice and are ready to grow with us.

We see next week as we begin to explore the deeper matters of the law as they affect small businesses. Shalom.

LAWpreneurship™: Dealing With the Fundamental Issues (1)

We are yet to lunch into the deep of pure legal issues as they relate to Small and Medium Enterprises and I suspect that the inquisitive ones may be wondering why. Not to worry, as typical lawyers that we are, we are just trying to follow what we call, ‘the normal procure.’  What is this ‘normal procedure,’ you may ask? It is nothing but the necessary foundation we are mandated by our discipline and order to lay before delving into the weightier matter of the law as they relate the SME sector.

Now, one necessary foundation we want to lay, which we believe will help us maximize the benefit of this column is to address our attitude as Small and Medium Enterprises operators to the relevance of experts’ advice in the management of our businesses. I am afraid that if this issue is not addressed, considering the tendency of the SME operators to neglect experts’ advice in our decision-making process this column that is out to offer legal clinical service to all SME-related legal challenges may be another exercise in futility. A sage once said, “When the purpose of a thing is not known abuse is inevitable.”

One thing that we can only shy away from at our own peril is the fact SME sector in Nigeria plagued with sundry problems. While a cursory observer may conclude that the most prominent of the problems is lack of funds, experience with the sector reveals that commoner than the challenge of funds are the fundamental problems of lack of organizational vision, principles and procedure of operation, absence of administrative structure and zeal for excellence. In fact these problems are the reasons for lack of funds. For instance, many SMEs are not able to access the funds under the Small and Medium Industries Equity Investment Scheme (SMIEIS) because they are not able to meet the requirements.   Mr. Ben Arikpo of Akada Consults shed light on the situation in an interview as follows: “Every SME wants to keep their own business; they want to continue to do things they’ve been doing. And if they continue that way, of course, no bank will put their money into them. Most of them don’t even have policies and procedures…One of the problems we have found with SMEs is that there is no clear distinction between the business person and the business…” 

These problems adversely affect the management of the SME sector by the operators. In fact these problems take their toll on decision making in the management of SMEs. The very bitter truth is, when a large chunk of a sector lacks structure, vision, principles and procedure of operation it will definitely make fatal decisions, which can only attract negative effects.

It is important to note that at the root of the challenges itemized above are two major factors:

  1. Lack of exposure as regards the standard required of a twenty-first century SMEs, which must be well positioned to milk the benefits of globalization, which have for too long eluded the African Continent.
  2. Most SMEs lack proper structures for effective administration. This is often reflective in the facts that that they are not only in most cases understaffed but also have to cope with unskilled workforce.

The way out of the woods of business mismanagement by the SMEs operators is for us to learn the wisdom of recognizing the peculiarities as stated above and therefore fashion out the strategies of survival. One of such strategies, in fact the most strategic is the resolve of SME operators to embrace the services of experts in major areas of business management.

Before we say, where do we get the funds from, let me clarify that what stands between experts’ advice and us, most of the time is not funds but information. There are Non-Governmental Organizations, government agencies, individuals etc. that exist for the sole purpose of rendering managerial support services to the SME sector.

Having established the relevance and inevitability of experts’ advice to the successful administration of SMEs, it is important to define who an expert in a particular field lest we think we can open our business to every Tom, Dick and Stupid Harry, who cannot in any way help us. When we do that we are simply though, foolishly casting you precious jewel before the swine. It will not only trample on it, it will turn round to rend us.

Who then is an expert? Going straight to the point, three qualities mark out an expert. They are as follows:

  1. Skill: It is in this sense acquired formal or personal training. The fact  that we live in a society that lays high premium on formal education makes this an important factor.
  2. Experience: This is acquired by time. It is the practical use of the skill acquired backed up by results.  It is not a requirement that an expert cannot do without at the initial stage of his career as an expert. The fact is that   it only increases his worth and effectiveness in his chosen field.
  3. Integrity: This is  honesty, honour and reliability.  This is the most important credential. That someone has skill and experience does not mean he will properly protect our interest as an expert. It is the same skill and experience, which he is suppose to use to protect us that he is going to use against us. This is because we are expected to trust an expert and his judgment.  I am in a profession that skinks with corruption and perfidy. Lawyers embezzle clients’ funds. There are all kinds of double-dealings. We just have to be sure, whom we are talking to. As far as I am concerned skill and experience without integrity is zero.

I think this is a safe point to stop this first part of issues before the issues. It is a necessary appetizer for the table that we are about to greet as this august column progresses.

The Law Rules all Things

Yes, the law rules all things. This is a well-thought-of conclusion. This is not a slip of the pen. It is the truth against which no man can do anything. Many are used to hearing that the law is an ass. But I have come to declare to you today that the law beyond being an ass, it is as relevant as water against which there is no enemy.

Those who are religious may accuse me of heresy. They may say, “the Lord, and not the law rules all things.” Yes they have a point but this is not an exercise in religion, we are here talking law. But can I quickly add one thing before I go any step further? Well, it is the same Lord, who rules all things that has empowered us through the law to rule all things for without order we cannot rule and without the law there can never be order.

Now, what do we mean when we say the law rules all things? All we are saying is that the law governs every human relationship (husbands and wives, children and parents, employers and employees, governments and citizens businesses and customers etc.). Thus the law has many parts. Family Law governs family matters; the law of contract regulates major areas of business transactions; Constitutional Law spells out the rudiments of governance and citizens’ rights and duties; the Law of Medical Ethics deals with the relationship between medical practitioners and their patients, to mention just a few.

Don’t mind what appears to be a too-copious preamble. I guess the point I am frantically trying to make is that the law is relevant to all. If you have been caught in the web of that conclusion, which I believe you have, then you will not have the slightest difficulty in believing that the law is relevant to the growing activities of Small and Medium Enterprises in Nigeria.  The law will not fold her arm and watch without having a contribution to make to a sector as important and significant as the Small and Medium Enterprises. Now, don’t ask me the cheap question, how important and significant is the SME sector? If you dare, I will readily say the SME sector has become an engine room of economic growth in every serious nation of the earth. That the sector has the seemingly lost answers to the ailing economic situation in the Third World is a fact that has been established in countries like Pakistan, Thailand, Mauritius, Philippines, Malaysia, India, and Taiwan.

The inevitable relevance of SMEs to the African economic development was reiterated at the recently concluded 15th International Conference of World Association of Small and Medium Enterprises (WASME). The conference, which “called for the chanelling of at least 25 per cent of all public sector procurement to small and medium scale enterprises” observed as follows, “ in a globalizing world, Africa is the continent most marginalized. It is yet to benefit from globalization; its share of the world’s trade and investment is a mere 2 per cent. Of the 49 least developed countries in the world, 70 per cent of them are on the African Continent. With globalization and liberalization the gap between these countries and the developed world is widening which need not be the case. If the gap is to be narrowed and poverty reduced, African governments must build a strong SME sector. Their highest priority must be to raise the productivity of the informal economy and to integrate it into the economic mainstream”

Welcome reading friend, this is introducing to you, Lawpreneurship™. It is a column that is poised with the zeal of an envisioned mind and equipped with the skill of legal practice to dissect, on a weekly basis, the law to the very last letter as it relates to the SME operator and the entire gamut of his/her business activities from registration or incorporation of business, employment issues, contract with clients, partnership arrangement, taxation, importation and exportation to drafting of contract letters and agreement, to mention a few. It is a much-awaited open legal clinic, where without cost, (except just visiting this blog) you are logged on to the exciting time of legal education as it relates to the day to day running of your business. This is an attempt, a noble one at that, to make you a better manager of your business by understanding, from the perspective of the law, the implications of your business decisions.

Do you know one thing that scares me about decision-making? It is simply this: the fact that you don’t know the consequences of your decisions is never a strong enough force to stop the consequences from manifesting. This explains why many innocent but wrong decisions have seen many out of the businesses they have toiled to build. Innocence or sincerity is not always enough in decision making in every sphere of life, only adequate information makes all the difference.  Those, who have embraced the foregoing as a bosom truth, make it a rule of the thumb to ensure that the first thing they do when they are confronted with the challenge of making a decision is to embark on a journey of fact finding, no matter how long and how much it may cost.

One major challenge with the SME sector is that her operators always downplay the place of experts’ advice in the decision-making process. This is basically because of two major reasons:

I. The quest to maximize profit.

II.  The unfounded conclusion that I can always do it myself.

To deliver this crucial sector from the devastating claws of decision-makings without thorough experts’ guidance, particularly legal is the reason for this weekly season of legal companionship for the SME sector.

Hear the final word: you are inexcusable oh SME operators, now that the mountain has proverbially decided to come to Mohammed in the form of free weekly legal clinics. Shalom!

Stay INSPIRED.