Etim Imisim
14 August 2008
Lagos — The public is often confused on how to register company names and non-governmental organisations with the Corporate Affairs Commission. Etim Imisim, who sought to find out business registration processes, writes that registration of companies is both a legal and accounting issue
The Corporate Affairs Commission (CAC) plays a central role in the facilitation of business, trade and investment in Nigeria. It is the first port of call for people who want to register companies, and has a direct bearing in the setting up of businesses. By making registration easier, the agency is assisting in the growth of businesses and the national economy.
From the outset, the registrar general of the commission, Mr. Ahmed Almustapha, admitted that his agency faced challenges like every other organisation doing business in a developing country environment, including Nigeria.
"By that I mean, for instance, that we don't have power. We have to run on generators and running on generators, as you know, comes with the associated problem of getting diesel, the price of which is prohibitive," he said. Besides, the law requires that CAC decentralise, that it operates from the 36 states of the federation, and the Federal Capital Territory, Abuja. It made sense then that, when he took over as registrar general in 2001, and the Nigerian government was embarking on reforms, Mr. Almustapha decided not only to talk, but to walk the talk of reforms.
"Yes, the government is talking of reforms and we are talking of reforms," Almustapha told THISDAY. "Otherwise, we would be going in different directions. We are a government organisation and we have been doing reforms. Since the world is changing, organisations also have to change. If you don't change, you can't adapt to changes. The world is a global village now, and citizens are becoming more and more aware of their rights and expectations. You can't improve your services without reforms. Our reforms are supposed to help government achieve their objectives."
The objective of reforms at CAC was specific. Almustapha promised to transform his agency into a world-class organisation. Wanting to build a world-class agency is one thing, attaining the international standard it requires is another thing. But Almustapha said, firmly, "We believe in standard. Being a world-class-company registry, first of all, meant that we must have standards, and those standards should not be decided internally by us. They must be standards set by some outside agency, preferably, an international organisation. This is what prompted us to embark on our ISO certification process, which we have accomplished, and feel that it is a starting point, since corporate improvement is a continual process."
The registrar general set the target in 2001, when he resumed as registrar general. Years later, many began to think that what he had achieved qualifies to be called revolutionary. For example, former Federal Minister for Finance, Dr. Ngozi Okonjo-Iweala had remarked that CAC was performing better than most of its African counterparts. That was at the one-stop-shop Presidential retreat at the Banquet Hall of the State House Abuja March 2006. But Mr. Roy Allan of the United Nations Conference on Trade and Development, who was also at the occasion, permitted himself to contradict the minister, when he said that CAC, was performing at European standard.
A number of other international authorities have since agreed with the UNCTAD representative. An example can be found in USAID/Nigeria Development Policy Series number three, titled "Letter from Nigeria." According to the policy paper, which USAID country office shares with its Washington DC headquarters, business registration in Nigeria "compare favorably with industrialised countries such as Canada, the United States, and Australia."
"Nigeria is now meeting or exceeding word-class standards in the time it takes to register a business," the report added. "Since 2001, the Corporate Affairs Commission (CAC) - the government agency charged with business start-up procedures - has totally revamped its operations, upgrading its technology, rooted our corruption, and increased morale with a renewed focus on customer service."
Also, in a joint report released May 20, 2008, the International Finance Corporation, the private sector arm of the World Bank, the Multi-donor Investment Climate Advisory Service, also of the World Bank Group, and the UK Department for International Development (DFID), singled out CAC for praise. Titled "Doing Business in Nigeria 2008," the report said, in general, that the first substantial research finds significant variations in ease of doing business in the country.
Specifically, the report adds, "registering a business has become significantly easier, due to a computerised registry and newly established zonal branches of the country's Corporate Affairs Commission and Stamp Duty Offices." The current CAC report for the second quarter of this year shows that agency registered 299 businesses between April and June 2008, and all of them were completed within just a day.
Almustapha is a graduate of the Ahmadu Bello University, where he read law and graduated in 1978. From Bauchi State, he finished at the Nigerian Law School in 1980, after doing the National Youth Service in 1979. "I still refer to it as the good old days," he said. "I recall that the civil service and companies used to come to the universities to conduct interviews even before your final examinations. By the time I finished at ABU, I was offered employment in the Ministry of Justice. I went to law school as a legal trainee. By the time we came back from the NYSC, I was in the Ministry of Justice briefly, before I transferred to the judiciary and was sworn in as a magistrate."
He was later made the chairman of the Rents Tribunal in Bauchi State. After one and half years, he resigned and started private practice until 1993 when he moved to the Nigerian Deposit Insurance Corporation, where he became the board secretary and legal adviser. He told THISDAY that CAC gets a large volume of enquiries every day. "The ones that are most frequently asked, as they affect us, are trade enquiries: Is this company registered, who are their directors? How are they performing? Are they genuine business men and women? People want to know whether they are dealing with genuine people."
One thing the registrar general thought he should clarify was the extension of CAC office to the United States of America. "It is not that we are going to open an office in America," he said. "I don't want you to think that we are going to New York, for instance, hire buildings, put in some staff, and operate from there. That is not what we are going to do. We are using the same Internet; we are going to give them access.
"Right now, we are giving some Nigerians in the US the opportunity to access to our database, so that they don't have to come to us physically to conduct searches. But we are now faced with the multiplicity of e-mails from abroad, especially from the United States, from foreigners and Nigerians living in the United States who approach Nigerians (for business enquiries). We get enquiries from embassies in the United States.
Still, confusion exists in the mind of the public about the activities of CAC, which Almustapha said he has been dealing with, and is still dealing with. One is a belief harboured by people who think that the business registration agency wants people to go through agents to carry out all its incorporation activities. According to Almustapha, this impression is partially, but not completely, true.
The agency handles three types of registrations, he explained. The first two, the registration of business names, which are done by small timers, and the creation of non-governmental organisations, need no intermediation. "Our customer service personnel routinely put members of the public through the procedures of forming these two categories of businesses," the registrar general said. "And it may surprise you to know that most law and accounting firms register business names without the assistance of agents."
Of the three types of registrations, it is only the formation of the limited liability company, that the agency insists that people should go through intermediaries, the registrar general continued.
"We naturally advice people to consult accredited agents because the process of company formation is a legal as well as an accounting matter," he said. "Our accredited agents of over 15,000 consist of lawyers, chartered accountants and chartered secretaries," he added.
Further, unlike business name registration, the incorporation and post-incorporation of companies have implications, which require the services of agents who are lawyers and chartered accountants. Company owners have duties and responsibilities after business registration which they are often blissfully not aware of, or are aware, but are unwilling to perform. For example, the law requires that companies file annual returns or quarterly returns, in the case of financial institutions. CAC needs updates and accurate information about companies.
The registrar general noted, "We need to know whether the names of the shareholders, directors, registered office amongst others are the same, or whether they had changed since the last returns had been filed. When returns are not properly filed or are not filed at all, the data and information about corporate activities are available at CAC."
Naturally, this comes with the challenge of technology, since the implication is not only that the agency has to coordinate and integrate its computers and other machines. It presupposes also that there has to be a kind of connectivity or network between the state offices and the corporate headquarters in Abuja.
The registrar general noted that another problem that those who transact business with the CAC appear to face is their own inability to ask for receipts from the agents who represent them at the commission. "And there is the tendency by some members of the public to confuse our operations with those of the Federal Inland Revenue Service. The FIRS is not a part of the commission and the commission is not a part of the FIRS. But we work together. When you incorporate a company at the CAC, the stamp duty is paid to the FIRS. We gave the FIRS accommodation in our head office in Abuja and in our state offices throughout the federation only for the purpose of easing the process of incorporation of companies.
"For the avoidance of doubt, nothing stops a person from trading, investing or doing business as Chinedu Haruna Adewale, if his or her name is Chinedu Haruna Adewale. But if the person adds something, for example, Co, Enterprises, Thomas Limited, Plc, to Chinedu Haruna Adewale, which is not his or her personal name, he or she has to register with the CAC. This is the provision of the law.
"Now, it is possible for people to do business not in their personal names and is, at the same time, not registered. Such people are operating illegally and are committing a breach of the law. They are liable to prosecution, which is a function of the police. But that is not our concern. Our concern is with the companies that are registered, and we have over 6,000 of them in Nigeria, to ensure that they comply with the provisions of the law."
It has also been reported that forgery of documents take place at CAC which, according to Mr. Almustapha, amounts to saying that CAC counterfeits CAC's documents, "which does make sense to us," he said. "It should interest you to know that we don't print in-house. We farm it out and ensure control. A foreign company that prints our security documents has a representative in Nigeria.
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