Category: Insights

Home / Insights
10th June 2022
by Admin Team
0 Comments

Commentaries on the New SEC Rules on Issuance, Offering Platforms and Custody of Digital Assets.

 

The Securities and Exchange Commission (SEC) on 13th May, 2022 released its guidelines for digital asset related activities titled “New Rules on Issuance, Offering Platforms and custody of Digital Assets”; in an effort to create regulation for the activities within the digital assets market. The Rules comprises five parts numbered A to E. In this article, we examine the provisions of the Rules and make recommendations for effective regulation of digital assets by the SEC.

SEC New Rules on Digital Assets Wigwe and Partners
Continue Reading
12th October 2020
by Admin Team
0 Comments
, , , ,

The Securities and Exchange Commission (SEC) circulated an exposure on the Proposed New Rules (PNR) on Crowdfunding. This PNR made a laudable attempt to regulate the activities of stakeholders and reduce investors’ risk in Crowdfunding schemes.

Wigwe & Partners lends its view through its write-up on “The Effects, Legality, Practicability of the Proposed SEC Rules on Crowdfunding in Nigeria” featured on Page 13 of the CMSA Newsletter – Issue No. 4. October 9, 2020; which highlights the validity and operability of the proposed rules in view of the provisions of the Investments and Securities Act 2007.

Click here to read the write-up.

Continue Reading
12th August 2020
by Admin Team
1 Comment
, , , , ,

THE NEW CAMA 2020

A dominant feature in developed economies is the simplified and flexible processes of incorporation and management of corporate entities which underscores the importance of creating an atmosphere that promotes ease of doing business and making of strategic investments. It is for this reason that the significance of the Companies and Allied Matters Act, 2020 (“CAMA 2020”) cannot be gainsaid.

For instance, the CAMA 2020 which repealed the Companies and Allied Matters Act, 1990 (“CAMA, 1990”) introduced essential reforms geared towards whittling down regulatory hurdles thereby promoting ease of doing business in the corporate sector. It is hoped that the extant legal regime will attract more foreign investors to Nigeria since the salient and innovative changes made by the CAMA 2020 are in line with international best practices.

Some of these salient and innovative changes are highlighted as follows:

A. COMPANY INCORPORATION AND RELATED MATTERS

  1. The Single Shareholder

Interestingly, a private company can now have a single shareholder based on the provisions of Section 18(2) of CAMA 2020, subject to the requirements of the Act relating to private companies and capacity of an individual to form a company.

This innovation offers an attractive option to start-ups by allowing small and medium businesses operating previously as sole proprietorships, an avenue to enter the corporate domain, which would also grant much wider access to banking facilities and corporate finance options.

  1. The Minimum Issued Share Capital

Section 27 of CAMA 2020 replaces the previous requirement of an “Authorized Share Capital” under the CAMA, 1990 with a “Minimum Issued Share Capital” in respect of the Memorandum of Association of a company, which would have fair implications on businesses as per shares not needed at a specific time.

It further sets out the minimum amount for each type of company, in the case of a private company the minimum issued share capital must not be less than N100,000.00 (One Hundred Thousand Naira) and N2,000,000.00 (Two Million Naira), in the case of a public company.

  1. Withdrawal/Cancellation/Revocation of a Company’s Certificate of Incorporation

By the provisions of Section 41 (7) of CAMA 2020, the Corporate Affairs Commission (“the Commission”) reserves the right to withdraw, cancel or revoke a company’s Certificate of Incorporation, where it is discovered that the certificate was fraudulently, unlawfully or improperly procured which may be published in the Federal Government official Gazette. This serves as a welcomed development and paves a path towards preventing the exploitation of corporate entities for fraudulent purposes by lifting the corporate veil.

  1. Re-registration of a Public Company as an Unlimited Company

A striking addition under the CAMA 2020 can be glimpsed from the provisions of Section 55 (e), which now provides for the re-registration of a Public Company as an Unlimited, subject to compliance with the requirements stipulated under Section 75 of CAMA 2020.

  1. Exemption from Registration for Foreign Companies

The general rule remains, that where a foreign company seeks to carry on business in Nigeria, it must take all necessary steps to obtain incorporation as a separate entity in Nigeria for that purpose. Under the CAMA 1990, a Foreign company may be exempted from incorporation, on an application to the President of the Federal Republic of Nigeria, addressed to the Secretary to the Government of the Federation.

However, under Section 80 (2) CAMA 2020, the application for exemption by a Foreign Company will now be made to the Minister charged with responsibility for Trade. It is thought that this change was implemented in line with the ease of doing business mandate of the Federal Government.

  1. Statement of Compliance

The stringent requirement of submitting a “Declaration of Compliance” during company registration, which must be signed by a lawyer or attested to before a notary public under the CAMA, 1990, is now replaced with “Statement of Compliance” under Section 40 (1) CAMA of 2020 which can be signed by the applicant, an agent or a lawyer.

B. CHAIRMAN, DIRECTORS AND COMPANY SECRETARY

  1. The Positions of Chairman and Chief Executive Officer in a Public Company

The provisions of section 265 (6) of CAMA 2020 expressly prohibits the Chairman of a public company from serving as the Chief Executive Officer of such a company. The above provision falls in line with the Federal Reporting Council’s Code of Corporate governance for Public Companies, 2018 (2018 Code).

  1. Number of Directors in a Company

Under the repealed CAMA 1990, all companies were mandated to have at least two (2) directors, however by virtue of Section 271 (1) of CAMA 2020, a company which qualifies as a small company as per the provisions of Section 394 CAMA 2020, can operate with a single Director.

  1. Minimum of three Independent Directors in Public Companies

In recognizing the key importance of a good Corporate Governance structure in any corporate enterprise, the CAMA 2020, under Section 275 (1) features a stringent requirement of at least three Independent Directors in all public companies. Worthy of note is that the provisions of the CAMA 2020 as regards the definitions of an Independent Director do not whittle down the relevant provisions on same under the 2018 Code.

  1. Multiple Directorships

Based on Section 278 (2) CAMA 2020, any person who is proposed to be appointed a Director of a public company shall disclose any position he holds as a Director in any other public company at the meeting he/she is proposed for appointment. Where such a person fails to disclose the fact of his/her multiple Directorship as required above, by the provisions of Section 278 (3) CAMA 2020, he/she shall be liable to a penalty in such amount as the Commission shall specify in its regulations.

Furthermore, unlike the repealed CAMA, 1990 which did not restrict multiple Directorships, section 307 (1) of CAMA 2020 prohibits a person from being a Director in more than five (5) public companies at a time.

  1. Appointment of the Company Secretary

Under Section 330 (1) of CAMA 2020 the appointment of a company secretary optional is made optional for a small company whilst retaining its mandatory nature for public companies and private companies that do not fall under the classification of a small company under Section 394 of CAMA 2020.

C. PROVISIONS RELATING TO INCORPORATED TRUSTEES AND COMPANIES LIMITED BY GUARANTEE

  1. Merger of Incorporated Trustees

Based on Section 849 of CAMA 2020, two or more associations such as Incorporated Trustees (NGOs, Foundations, Charities, etc.) with similar aims and objects may merge under such terms and conditions as may be prescribed by the Corporate Affairs Commission.

Furthermore, by the provisions of Section 164 of the Federal Competition and Consumer Protection Act, 2018 (“FCCP Act”), any enactment relating to or connected with matters of competition and consumer protection are to be read with such modifications as are necessary to bring them in conformity with the FCCP Act. Therefore, all provisions relating to Section 849 CAMA 2020 must be interpreted or read to be in conformity with the FCCP Act.

  1. An Alternative to the Consent of the Attorney General

Generally, promoters of a Company Limited by Guarantee must obtain the consent of the Attorney General of the Federation prior to incorporation.

However under Section 26 of CAMA 2020, an alternative is provided where no decision has been made by the Attorney General within the 30 (thirty) days period of making the application (does not apply to a refusal or an objection), allowing the Commission to step in and assent or withhold its assent to the application authorizing the incorporation, subject to the provisions of Section 26 (7)-(10) of CAMA 2020.

D. INTRODUCTION OF A NEW BUSINESS STRUCTURE

  1. Limited Liability Partnerships (LLPs) and Limited Partnerships (LPs)

Section 746 of CAMA 2020 provides a dynamic business structure in the form of a Limited Liability Partnership (LLP).

E. INTRODUCTION OF A NEW BUSINESS STRUCTURE

  1. Limited Liability Partnerships (LLPs) and Limited Partnerships (LPs)

Section 746 of CAMA 2020 provides a dynamic business structure in the form of a Limited Liability Partnership (LLP).

The LLP under CAMA 2020 enjoys the flexibility and tax status of a Partnership and also the limited liability status of a Company. Another significant feature of an LLP is that it is a legal entity with perpetual succession. This makes it easy for start-ups to choose between incorporating an LLP and a company.

Limited Partnerships (LPs) are also now registrable as business names under Section 797 of CAMA 2020. Therefore, Partnerships may now comprise of a general partner and limited partners.

F. SHARES

  1. Ratification of Improperly Issued Shares

Previously, the ratification of shares which were improperly issued or allotted can only be done by the court upon an application to the court on the ground that based on the circumstances, it is just and equitable to validate the allotment.

Section 148 of CAMA 2020 authorises companies to validate the issuance and allotment of shares which were improperly issued or allotted by way of a special resolution.

However, where the company refuses to ratify an improperly issued or allotted share, an application can be made to the court for the ratification of such improperly issued or allotted share.

  1. Prohibition of delegation of the power to allot Shares to Directors of Public companies

Generally, the power to allot shares is vested in the company [members in General meeting]; likewise, under the repealed CAMA 1990, such power can be delegated to the directors by the members of the company.

Interestingly, Section 149 of CAMA 2020 prohibits the delegation of the power to allot shares to Directors of public companies. Consequently, only private companies can delegate their power to allot shares to the directors of the company subject to the articles of association and the members in general meeting. Additionally, it should be noted that the power to allot shares of a public company remain subject to the provisions of the Investments and Securities Act.

  1. Share Certificate

As a result of the provision of CAMA 2020 making the possession of a common seal optional, where a company chooses not to have a common seal, its share certificates may be signed as a deed by the company. See Section 171(1) CAMA 2020.

  1. Power to Vary Rights

Section 166 of CAMA 2020, same as the repealed Section 141(1) of CAMA 1990 provides that the rights of a class of shares may only be varied with the consent of the holders of three-quarter of the issued shares of that class in writing, or by a special resolution passed at a separate general meeting of the holders of the shares of the class where the articles of the company do not provide for the variation of those rights.

However, Section 166 of CAMA 2020 goes further to provide that all other amendments or inclusions in a company’s Articles relating to the rights attached to a class of shares, shall be treated as a variation of those rights.

Therefore, before the commencement of the procedure for the amendment of the articles, the written consent of the holders of three-quarter of the issued shares of that class must be obtained.

  1. Disclosure of significant control and beneficial ownership

Section 119 of CAMA 2020 makes transparency in shareholding and corporate governance more assuring as it provides that every person with significant control over a company shall, within seven days of becoming such a person, indicate to the company in writing the particulars of such control.

Previously, this was a requirement for only public companies. Therefore, the companies must inform the Commission within one month of receipt of the information, disclose the information in their annual returns to the Commission and update their registers of members with the appropriate details

  1. Obligation to disclose substantial shareholder in Public Companies

Section 120 (2) of CAMA 2020 defines what constitutes a person with substantial interest in a public company as one who he holds, under his name or by his nominee, shares in the company which entitle him to exercise at least 5% of the unrestricted voting rights at any general meeting of the company.

The Public company is mandated to give notice to the Commission, of the any person who is a substantial shareholder, within 14 days of receipt of the notice from the substantial shareholder or upon becoming aware that a person is a substantial holder; and any person who ceases to be a substantial shareholder, within 14 days of becoming aware of such cessation.

G. MEETINGS

  1. Disclosure of the remuneration of managers of a company

The joint reading of Section 257 of CAMA 2020 and Section 238 of CAMA 2020  demands that the issue of the remuneration of managers of a company must be disclosed to members of the company at the AGM and that such disclosure is categorized as a key business to be transacted at an AGM  which can be deemed an ordinary business.

Irrespective of the above, it is necessary to note that the “disclosure of remuneration of managers of a company” was not included in the list of business to be transacted as ordinary business at an AGM under Section 242 of CAMA 2020. This omission creates a bit of conflict as to the stance of CAMA 2020.

  1. Location of meetings for Small Companies and Companies with a single shareholder

A small company or any company having a single shareholder is exempted from mandatorily having its Annual General Meetings in Nigeria based on Section 240 (1) of CAMA 2020.

  1. Virtual/Electronic meeting for Private Companies

Section 240 (2) of CAMA 2020 provides that a private company may hold its Annual General meeting virtually subject to the articles of association of the company.

  1. Persons entitled to receive Notice of a General Meeting of Public Companies

Section 243 of CAMA 2020 includes the Commission as a party entitled to receive notice of general meetings of public companies. This was previously a requirement that only applied to incorporated trustees. However, this innovation is geared to foster the supervision over the management of Public companies by the Commission.

  1. Exemption from Audit requirement

Under CAMA, 1990, all companies were mandated to appoint an auditor or auditors at their AGM to audit the financial records of the company.

However, going by the provisions of Section 402 of CAMA 2020 a small company or any company having a single shareholder is exempted from the requirements of the Act relating to the audit of accounts in respect of a financial year.

H. CORPORATE RESTRUCTURING

  1. Pre-emptive rights or right of first offer of members of Private Companies

Section 22 of CAMA 2020 introduces statutory pre-emptive right (or right of first offer) of members of private companies. In other words, subject to the provisions of the articles of association of a private company, members of a private company cannot transfer their shares in the company to a non-member, without first offering the said shares to the existing members of the private company.

Section 22 of CAMA 2020 further provides that a shareholder or a group of shareholders, acting in concert, cannot agree to sell more than 50% of the shares of the company to a non-shareholder without such non-shareholder agreeing to buy the shares of the other existing shareholders on the same terms.

  1. Modification of the provisions on financial assistance by Company for the acquisition of its shares

The CAMA 2020 expands the definition of “financial assistance” to include any other financial assistance given by a company and unlike the repealed CAMA 1990, the CAMA 2020 defines “net assets”. Accordingly, Section 183 of CAMA 2020 states that “net assets” are the “aggregate of the company’s assets less the aggregate of its liabilities”

Furthermore, a company can now render financial assistance for the acquisition of its shares where the shares are to be acquired in furtherance of an order of the court under a scheme or restructuring of a company; or where the financial assistance is given in good faith and in the interests of the company for the principal purpose of reducing or discharging any liability incurred by a person in the acquisition of the shares in the company or its holding company.

  1. Share Buyback – Company’s acquisition of its own shares

CAMA 2020 stipulates the procedure to be adhered to by a company seeking to acquire its own shares and the persons from whom a company may buy back its own shares in Sections 184 (1) of CAMA 2020 and Section 186 of CAMA 2020 respectively.

  1. Jurisdiction on Mergers and related matters

The CAMA 2020 lays to rest the jurisdictional controversy between the Federal Competition and Consumer Protection Commission (“FCCPC”), the Corporate Affairs Commission (CAC) and the Securities and Exchange Commission (“SEC”) on Mergers giving the FCCPC precedence over SEC and CAC in line with FCCP Act.

Therefore, Mergers will now be subject to Guidelines on mergers jointly issued by the FCCPC and the SEC.

  1. New Corporate Restructuring Options

The CAMA 2020 also provides new corporate restructuring options which are geared towards aiding insolvent companies to modify their structure and also secure their finances. The new corporate restructuring frameworks which will aid companies in distress are – Company Voluntary Arrangements under Sections 434 – 442, Administration under Sections 443 – 549 and Netting under Sections 718 – 721.

  1. Arrangement or Compromise between two or more companies

Under a proposed restructuring scheme between two or more companies, the whole or any part of the undertaking or the property of any of the companies concerned in the scheme is to be transferred to another company, the Court is empowered by virtue of Section 711 of CAMA 2020 to order separate meetings of the companies upon an application in summary of any of the companies to be affected by the scheme.

The Court can only sanction the scheme where in such separate meetings, at least three-quarter of the members of the companies present either in person or by proxy agree to the scheme.

Section 711 of CAMA 2020 provides a legal framework for mergers in the stead of the repealed Sections 118 – 128 of the Investments and Securities Act (“ISA”) (repealed by the FCCP Act).

  1. Provisions applicable to Scheme or contract involving transfer of shares in a company

Furthermore, Section 712 of CAMA 2020 provides that where a scheme or contract, not being a take-over bid under the ISA involving the transfer of shares or any class of shares in a company to another company, has, within four months after the making of the offer in that behalf by the transferee company, been approved by the holders of at least nine-tenth in value of the shares of the company (other than shares already held at the date of the offer by a nominee for the transferee company, or its subsidiary), the transferee company may at any time within two months after the expiration of the said four months give notice in the prescribed manner to any dissenting shareholder that it desires to acquire its shares.

It can be noted that Section 712 of CAMA 2020 is in line with the provisions of Section 129 of the ISA.

  1. Moratorium on creditors voluntary Winding Up in a Scheme of Arrangement

Under Section 717 of CAMA 2020 provides a moratorium of 6 (six) months for creditors voluntary winding up in a scheme of arrangement; the Court shall not entertain any winding up petition or enforcement action by a creditor (secured or unsecured) against any company or its assets that has commenced a process of arrangement and compromise with its creditors for a period of 6 (six) months from the time that the relevant company provides all the requisite documents for such arrangement or compromise to the Court by way of affidavit.

However, where the conditions stated in Section 717 (2) of CAMA 2020 are met, a secured creditor may, by application to the court filed within 30 days of notice of the arrangement and compromise, discharge the 6 (six) months’ moratorium period provided that the company, upon the approval or consent shall file a further affidavit updating the court of the dissipation of the said asset.

I. DEBENTURES/SECURED CREDIT

  1. Constructive notice of registered Floating Charges

Section 204 of CAMA 2020 stipulates that everyone shall be deemed to have constructive notice of a floating charge where notice of the existence of the said floating charge is registered at the CAC.

In addition, according to Section 223 of CAMA 2020, where there is a notice indicating the existence of any provisions in a floating charge that prohibit or restrict the company from granting any further charge ranking in priority to, or pari passu with, the floating charge, the Commission is mandated to indicate such notice in the register.

  1. Priority of fixed charges

Furthermore, Section 207(4) of CAMA 2020 provides that, notwithstanding any provision in the CAMA 2020 or any other law to the contrary, the holder of a fixed charge shall have priority over other debts of the company including preferential debts.

  1. Elimination of the restriction on substantial shareholders

Previously, substantial shareholders of a company were restricted from acting as trustees of a debenture trust deed to which the company is a party.

However, this provision has been omitted in the CAMA 2020. Consequently, it could be implied that the restriction on substantial shareholders has been jettisoned.

  1. Registration of Charges created by Companies

Under the previous regime, registration of charges cost N10,000 for every N1,000,000 or part thereof for private companies; and N20,000 for every N1,000,000 or part thereof for public companies.

However, Section 222 (12) of CAMA 2020 provides a significant reduction in fees payable for filing of a charge. Under the new regime, filing has been reduced to 0.35% of the value of the Charge.

  1. Avoidance or Attachments etc

Where a company is being wound up, only a fixed charge holder (or any other validly created and perfected security interest other than a floating charge holder) will be able to enforce security, sequestrate, attach or levy execution on the assets of the company. This proviso in Section 577 of CAMA 2020 was not in the repealed CAMA 1990.

  1. Application of bankruptcy rules in certain cases

Section 656 of CAMA 2020 further introduces a proviso which states that nothing shall affect the power of any secured creditor to realise or otherwise deal with its security during the winding up of an insolvent company registered in Nigeria.

J. WINDING UP

  1. Preferential Payments

Insightfully and in line with current trends in employment rights, the CAMA 2020 under Section 657 (1) (b)(c) grants a significant preferential payment priority upon winding up, to deductions made from the remuneration of employees, contributions of the company under the Pension Reform Act and contributions and obligations of the company under the Employee’s Compensation Act.

  1. Fraudulent Preference

In all aspects of corporate practice, there remains the ever present need to curtail fraudulent acts or omissions. Perceptively, Section 658 of CAMA 2020 dilates the provisions on fraudulent preferences under the repealed CAMA 1990 by providing that where a company at any time within the period of years ending with the onset of insolvency or the period of three months does anything or procures anything to be done which has the effect of putting a person, being one of the company’s creditors or a surety or guarantor under undue advantage, it shall be deemed to be a preference of that person, and be considered invalid accordingly.

The above is however subject to the provisions of Section 658(1) CAMA 2020, which holds that, a preference given to any person is not invalid unless the company, which gave the preference was influenced in deciding to give it by a desire to produce in relation to that person the aforementioned effect.

K. MISCELLANEOUS COMPANY OPERATIONS

  1. Restrictions on Distributable Profits

Section 427 of CAMA 2020 restricts the profits of a company available for payment of dividends only to, the company’s accumulated, realised profits (so far as not previously utilised by distribution or capitalisation) less the company’s accumulated, realised losses (so far as not previously written off in a lawfully made reduction or reorganisation of capital).

In other words, in a financial year, the part of a company’s profits utilised for purpose of capitalisation and the losses incurred by a company as a result of legally valid business reorganisation shall not be considered in determining the distributable profits of the company.

  1. Common Seal

Based on Section 98 of CAMA 2020, the procurement of a Common Seal is no longer a mandatory requirement. Howbeit, where a company has a Common Seal, the design and use of that seal shall be regulated by the Company’s articles. This salutary provision is in line with international best practices, especially as local and cross-border transactions are increasingly negotiated and finalized timeously without parties having to physically meet each other.

  1. Electronic transfer of shares and Electronically filed documents

Worthy of note, is the provisions of Section 176(1) of CAMA 2020, which provides that Register of transfer of shares includes electronic register of transfer and also Section 860(2) states that a certified true copy of an electronically filed document, filed at the Commission shall be admissible as evidence in all proceedings and rank pari passu in validity with the original documents.

The provision for the admissibility of electronic filing and electronic share transfer are in line with the provisions of the Evidence Act and promotes ease of doing business by curtailing the need to visit the branch offices of the Commission for filing purposes.

  1. Display of the audited accounts of Public companies on their websites

In line with the Nigerian Stock Exchange and SEC requirement, Section 374(6) of CAMA 2020 requires public companies to display its audited accounts on their website.

It is trite to note that by the provisions of Section 869 (2) CAMA 2020 transactions or acts which had been validly commenced and still in force immediately before the commencement of the CAMA 2020 will remain unaffected and shall continue in force.

In conclusion, the CAMA 2020 provides a paradigm shift which is in tune with the international best practices and the current realities of virtual interactions and also, will promote transparency and accountability in corporate governance. To deepen these gains, it is more than necessary to review the Companies Regulations (as amended) and the Companies Procedure Rules to align with the new legal regime.

WIGWE & PARTNERS

AUGUST 2020.

 

Disclaimer

The information provided in the write-up does not, and is not intended to, constitute legal advice; instead, the information contained herein are for general informational purpose only. Readers of this write-up should contact their solicitors to obtain advice with respect to any particular legal matter. No reader should act or refrain from acting on the basis of the information herein without first seeking legal advice from their solicitor. All liability with respect to actions taken or not taken based on this write-up are hereby expressly disclaimed.

Continue Reading
13th April 2020
by Admin Team
1 Comment
, , , ,

CORONAVIRUS (COVID-19) – A LEGAL REVIEW OF IMMIGRATION POLICIES AND BORDER CONTROLS

1. Introduction

The global emergence of the Coronavirus (COVID-19) has taken a downward trajectory for most countries in terms of sustaining existing policies on health, insurance, business, immigration, security, public international laws; forcing nations to articulate provisional directives and establish municipal laws to uphold its citizenry, preserve peace and order, while mapping out strategies to curtail the virus-related pandemic.

Although, these impromptu directives are expedient in the given circumstances, the extensive scope of such intervening policies hold an overstretching effect on the rights open to the general population of a state which may comprise indigenes, foreign nationals, immigrants (legal and illegal), tourists, visitors, students, business professionals, to mention a few.

These recently established COVID-19 directives without doubt would have significant legal implications on all and sundry. Hence, border closures, travel restrictions, stay-at-home order, visa offices lockdown wields consequential effects which may innocuously result to mass infringements of the rights and privileges of the transient populace – travelers, tourists, visitors, students, business personnel and immigrants.

2. Permitted Rights of Entry

It is common knowledge that lawful entry into a sovereign state is validated by a Visa, granted for specified purposes of entry, be it for transit, working, medical, student, visitor, business, tourist or relocation basis. Visa approvals are administered by the Immigration offices, Embassies or Consulates.

A Visa is an endorsement on a passport indicating that the holder is allowed to enter, leave, or stay for a specified period of time in a country. t can be described as a “legal paper which has been seen and approved” of every individual travelling out of the country. With such authorization, permits and travel arrangements lies the ensuing rights of travelers/immigrant.

3. Immigration Policies & Border Controls

Most countries in reaction to the COVID-19 pandemic have reorganized their visa applications arrangement, restrict travels, closed borders till further notice, resulting to airlines being grounded and leaving travelers stranded.

On the home front, Nigeria has closed its borders and the Nigerian Immigration Services (NIS) which had earlier rolled out a Visa on Arrival (VoA) application process for business travelers and African nationals to be effective 1st January 2020 have been constrained to revise same owing to the pandemic. The Federal Government of Nigeria, as part of efforts to prevent and curtail the spread of the virus, has directed the temporary suspension of issuance of Visa on Arrival (VoA) effective from midnight, Saturday 21st March, 2020.

South Africa issued quite stringent measures in reaction to COVID-19. Previous visa exemptions for national of high risk countries have been cancelled, existing visa waiver agreements for medium to high risk countries are suspended, entry bans of high risk countries are banned, while visa issued to nationals of China or Iran on or before March 15, 2020 have been revoked and declared null and void. Immigration offices are closed and non-citizens arriving on flights from high-risks countries will be turned back.

Although, the United Kingdom (UK) Visa Application Centres (VACs) have been closed, the UK has been quite considerate in relaxing some of its applicable laws in view of the COVID-19 pandemic. Stranded travellers/immigrants that cannot leave the UK owing to travel restrictions or self-isolation related to coronavirus (COVID-19) have been availed an extension of visa for a given period. Holders of Tier 1 Entrepreneur visa whose business operations has been disrupted are offered a modified package on employment of workers for 12 consecutive months each.

Doctors, nurses or paramedic working for the National Health Services (NHS) have their visa automatically extended by One year if it is due to expire before 1st October 2020 and family members with a visa due to expire before 1st October 2020 will also have their visa extended. The extension is free, and no payment is required. It is automatic, no need to apply!

In Europe, most immigration laws have been totally relaxed. For instance, New Zealand released an Epidemic Management Notice on immigration matters, allowing extensions of all temporary entry class visas, where the holder is still in New Zealand, and their visa expires between 2nd April and 9th July inclusive. Thus, if one holds a work, student, visitor, limited or interim visa with an expiry date of 2ndApril to 9th July inclusive, and are still in New Zealand, the visa will be automatically extended to 25thSeptember 2020. An email to this effect would be sent to confirm visa extensions.

On the flip side, if one holds a work, student, visitor, limited or interim visa with an expiry date of 1st April or earlier, and have not applied for another visa, such holder is now unlawfully in New Zealand. One can either leave the country immediately if possible or make a request for a special temporary or resident visa under Section 61 of the Immigration Act.

On March 20, 2020, the United States of America (US) embassies and consulates suspended all routine immigrant and non-immigrant visa services and emergency visa services are available only on a case-by-case basis. While the US maintained most of their visa policies and immigration laws, in terms of testing, treatment and care of immigrants, alternative provisions were considered. Community health centers would provide healthcare services to all patients regardless of immigration status.

The Immigration and Customs Enforcement (ICE) in its “Guidance on COVID-19” stated that Immigration enforcement would not take place at or near health care facilities as ICE will not carry out enforcement operations “at or near health care facilities such as hospitals, doctors’ offices, accredited health clinics, and emergent or urgent care facilities, except in the most extraordinary of circumstances”. The unanswered question is what happens within the period before the immigrant gets to the health centre and/or after he leaves the health centre to his place of abode?

From review, the immigration policies and border controls however aimed towards similar combative measures remains a country-by-country arrangement and the consequential rights that may accrue to stranded travelers/immigrants would vary, that is if any right exists and if positive how such rights can be claimed in this COVID-19 era.

4. Rights of Travelers/Immigrants

The rights of travelers/immigrants are embedded in the airlines of choice, country location and regulatory association/commission guiding the passengers’ right. Amid the COVID-19 outbreak, travel plans of passengers have been denied, downgraded, delayed, and cancelled leaving many stranded. Regulatory Authorities are enforcing guidelines to ensure that travelers’ rights are preserved – the Africa Union and European Union as a Case Study.

The approach of the African Union (AU) in the spate of the COVID-19 pandemic has been generic in line with the World Health Organizations (WHO) directives imploring stranded travellers/immigrants to comply with the directives for preventing the spread of the virus and limiting travels for meetings. Thus, its advice for travellers/nationals caught up in the COVID-19 is to stay at their abodes, hotels and isolate.

On the other hand, the European Union (EU) is more robust on its guidelines for travellers/immigrants. It is apt to mention that the emergence of COVID-19 being novel was not contemplated in EU guidelines for compensation and protection of travellers’ rights remain intact except for “extraordinary circumstances”. What are ‘extraordinary circumstances’?

It is entrenched in the EU guidelines that an airline has the right not to compensate an individual, if any delays was caused by ‘extraordinary circumstances”. Extraordinary circumstance for flight delays include bad weather (i.e. snowstorms, windstorms, low visibility), strikes of the airport personnel and union strikes, bird strikes, Air traffic control restrictions (including runway closures) and political and civil unrest.

In view of this, can cancellation as a result of border closures be considered as an “extraordinary circumstance”? Can airlines hide under the exemption to avoid providing compensation to stranded travelers? To clarify the above requisitions, the International Air Transport Association (IATA) has lent a voice on the need for total compliance with the European Union’s Passenger Rights’ Guide.

IATA officials hold the considered view that the type of compensation detailed on the guide is “inadequate” and makes the airlines responsible for “unlimited care to passengers who have been stranded as a result of government decisions to close borders” in this case of COVID-19. The following rights are upheld and preserved in the EU’s guidelines:

a) Air Passenger Rights:

If one is scheduled to travel through Europe with an aeroplane, but due to the recent events one’s flight has been cancelled, the EU guarantees some fundamental rights as an air passenger which may depend on the airline.

  • Right to reimbursement or re-routing. If the airline cancels flights, no matter what the reason is, they should offer the affected passenger the following choice to pick among: reimbursement (refund), re-routing at the earliest opportunity, or re-routing at a later date at the passenger’s convenience.
  • Right to care. All passengers who are affected by a flight cancellation have the right to care, free of charge which must be offered must by the operating air carrier including meals and refreshments based on the waiting time; hotel accommodation if necessary, and transport to the place of accommodation.
  • Right to compensation. Travellers whose trips are cancelled due to ‘extraordinary circumstances’ that could not have been avoided even if all reasonable measures had been taken are also entitled to for fixed sum compensations.

b) Rail Passenger Rights:

  • Right to be informed. Before rail passengers buy a ticket railway, ticket sellers must provide passengers, upon request, with pre-journey information. Information here means any activities that have a high chance to disrupt or delay services. Similar information should be provided to passengers during the journey as well.
  • Right to Compensation. In cases when passengers have not asked for reimbursement but rather for the continuation of the journey or re-routing, passengers also have the right to compensation.

5. Obligations of Airlines

In order to protect travelers and respect their rights, the European Union established the EU Regulation 261/2004. The Regulation sets out minimum rights for passengers when they are denied boarding against their will, their flight is cancelled, or their flight is delayed and other similar cases.

It should be noted that all airlines have their corresponding regulations and passengers’ rights shall be on a case by case basis. The EU Regulation applies only to flights that are in one way or another connected to the EU, and only the passengers of such flights can make a compensation claim where the flight is within the EU and is connected to the EU.

6. Enforceability of Rights

Having highlighted a few of the likely rights stranded travelers/immigrants may benefit, it is imperative to discuss how viable and enforceable these rights are taken into considerations the restrictions placed in view of the COVID -19 pandemic.

ADR- Recourse may be sought through any operative Alternative Dispute Resolution entity (ADR) in the country. Neutral out-of-court bodies such as conciliators, mediators, arbitrators, and the ombudsman or complaints boards may be consulted to enforce claims against the airline. In the alternative, there exist Online Dispute Resolution (ODR) platforms, if you bought your ticket online. Complaints can be submitted through the online platform. The EU has an Online Dispute Resolution site where disputes are resolved at no cost.

COURT – Approaching a Court with competent jurisdiction is another mode of enforcement of rights should the earlier recommended legal redress options fail. A compensation claim may be presented at the place of arrival or departure for flights as operated by the airline, or before the courts in the country where the airline is registered. In Nigeria, depending on the claims, the Lagos State Court for Small Claims procedure requires the complaint to pay a court fee as assessed. The fee will be reimbursed and factored in the judgment if the case is successful. The court is not viable means of enforcement as most courts have been closed till further notice due to the pandemic.

Basically, it is advisable to promptly present valid claims as the laws on limitations would apply state by state. For instance, the EU countries have different rules on how far one can claim compensation, and the limitation periods. The time limit, in which a person can claim compensation depending on the origin of the airline, is as follows: 1 year – Belgium and Poland, 2 years – Croatia, Iceland Slovakia, Slovenia, Switzerland, 2 years 4 months – Italy, 3 years – Austria, Czech Republic, Denmark, Estonia, Finland, Germany, Lithuania, Norway, Portugal, Romania, Sweden, 5 years – Bulgaria France, Greece, Hungary, the Netherlands, Spain, Scotland, 6 years – Cyprus, Ireland, UK (except Scotland), 10 years – Luxembourg, No limit – Malta.

7. Conclusion

It is settled that the affairs governing immigration laws, border controls, travel restrictions, enforced to curb the spread of the COVID-19 pandemic have been established in good faith. However, the rights of persons caught in the other end of the laws may not be fully recognizable. The Public (State) laws are overriding private rights of individuals, the law of reciprocity is abandoned and those at sea, are subjected to the laws of the Flag (Country) of the ship.

Legal pundits of Public International Laws have encountered some difficulties in reaching a consensus on appropriate remedies and framework on how the legal rights of immigrants and travelers can be sustained. From our standpoint, it is more than a jurisprudential assessment rather it is required that all nations soft-pedal their laws to accommodate innocent by-standers.  

The laws on immigration, and border controls should be flexible. Governments should take a cue from the Portugal Government who granted migrants and asylum seekers full citizenship rights in this COVID-19 Outbreak, of which such rights may be revoked after this pandemic is resolved.  In considering legal rights of individuals, it is should be more of a call that humanity is preserved rather than an exercise of sovereign states’ rights and boundary powers.

WIGWE & PARTNERS

APRIL, 2020.

Disclaimer:

The information provided in the write-up does not, and is not intended to, constitute legal advice; instead, the information contained herein are for general informational purpose only. Readers of this write-up should contact their solicitors to obtain advice with respect to any particular legal matter. No reader should act or refrain from acting on the basis of the information herein without first seeking legal advice from their solicitor. All liability with respect to actions taken or not taken based on this write-up are hereby expressly disclaimed.

Continue Reading
8th April 2020
by Admin Team
0 Comments

APPRAISING THE LEGALITY OF PRESIDENT BUHARI’S ANTI-CORONAVIRUS LOCKDOWN ORDER

Introduction:

As the number of confirmed cases of Coronavirus (“COVID-19”) surges and its transmission remains fluid, President Muhammadu Buhari made a televised broadcast on Sunday, 29th March, 2020. Paragraphs 34-45, and 49-54, and 57 of the Presidential Broadcast contain orders and directives that restrict all movements in the Federal Capital Territory, Abuja (“FCT”), Lagos State and Ogun State for an initial period of 14 days.

To legalize the aforesaid restriction of all movements and satisfy the requirement of the Quarantine Act, 1926. Cap Q2 LFN 2004 (“Quarantine Act”), the President issued COVID – 19 Regulations 2020 wherein he declared COVID – 19 a dangerous infectious disease. In so doing, the President hinged his powers to restrict all movements in the affected states on sections 2, 3 and 4 of the Quarantine Act.

The pertinent question, therefore, is whether the President can suspend all constitutional rights to freedom of movement based on the Quarantine Act. The answer to this question cannot be hastily given because it may be argued that the Quarantine Act has no provision for restriction of movement of any citizen and as such a fundamental right expressly granted by section 41 (1) of 1999 Constitution cannot be taken away by assumption, inference or deductions.

On the other hand, it is correct to say that the Quarantine Act is a specific public health and safety legislation, containing special provisions which empower the President to make regulations to contain and manage infectious diseases and as such, the President can restrict all movements in the affected states for the purpose of containing the spread and transmission of an infectious disease without infringing on right to freedom of movement as enshrined in the Constitution.

Hence, we shall appraise the legality of President Buhari’s anti-coronavirus lockdown order under the extant legal frameworks and consequently answer the above question.


COVID – 19: Can the Quarantine Act legalize restriction of movement

The essentials of right to freedom of movement guaranteed under section 41 of the 1999 Constitution cannot be gainsaid. It is the right that evidences the existence of other rights and without it, other notable rights will become otiose and most economic activities will be halted.

Howbeit, right to freedom of movement ends where the necessity to protect other rights arises. For instance, right to freedom of movement cannot substitute or take the place of right to life. It is for this reason that right to freedom of movement guaranteed under section 41 of the 1999 Constitution must be read in conjunction with the provisions of section 45 of the 1999 Constitution.

Section 45 (1) of the 1999 Constitution provides that nothing in section 41 of the Constitution shall invalidate any law that is reasonably justifiable in a democratic society (a) in the interest of defence, public safety, public order, public morality or public health; or (b) for the purpose of protecting the rights and freedom or other persons.

Flowing from the provisions of section 45 (1) of the 1999 Constitution are two questions – whether the Quarantine Act, 1926 is an Act of the National Assembly and whether there must be express provision for restriction of movement in the Quarantine Act before the President can rely on it to suspend constitutional right to freedom of movement for the interest of public safety or public health as permitted under section 45 (1) of the 1999 Constitution.

In answering the first question, recourse must be made to section 315 of the Constitution. Section 315 recognizes existing law, which is in force before the commencement of the Constitution, as an Act of the National Assembly if such law borders on any matter which the National Assembly is empowered by the Constitution to legislate-on. It is based on the aforesaid recognition of existing law that section 318 of the 1999 Constitution defines “Act of the National Assembly” to include any law which takes effect under the provisions of the Constitution.

Therefore, one can conclude that the Quarantine Act, 1926 is an Act of the National Assembly under the 1999 Constitution, more so, since Item 54 of the second schedule to Part 1 of the 1999 Constitution empowers the National Assembly to exclusively legislate on “Quarantine”.

As regards whether there must be express provision for restriction of movement in the Quarantine Act before the President can rely on it to suspend constitutional right to freedom of movement. Sections 4 (c) and (d) of the Quarantine Act provides that the President may make Regulations for the purpose of preventing the spread and transmission of any dangerous infectious disease from any place within Nigeria, whether an infected local area or not, to any other place within Nigeria.

Suffice it to say that the reason for not providing any particular measure to be taken by the President in containing the spread and transmission of a dangerous infectious disease under section 4 of the Quarantine Act is because an infectious disease is usually new and unanticipated and as such it is the form or manner of its spread and transmission that will determine the particular and appropriate Regulation (s) to be made by the President in containing such spread and transmission.

In other words, where restriction of all movements is the appropriate and effective means of containing the spread and transmission of a dangerous infectious disease, any Regulation issued to that effect by the President is apt and for the interest of public safety or public health.

Therefore, the Quarantine Act need not expressly provide for restriction of movement before the President can issue any Regulation to that effect. To argue otherwise will certainly defeat the flexibility and easiness required in making any exigent Regulation as envisaged in section 4 of the Quarantine Act.

However, it is not out of place to pass such Regulation into Law, as done in some States, and where such is done, the Quarantine Act will no longer be the legal instrument backing the restriction of all movements rather the Regulation-cum-law becomes the legal instrument pursuant to which movement is restricted for public safety or public health.

Conclusion:

Since constitutional right to freedom of movement is not absolute and given the prevalent global trend and practice, we hold the well considered view that by community reading of section 45 of the 1999 Constitution, the Quarantine Act and the Regulation, the President can restrict all movements for the interest of public health and safety without infringing on section 41(1) of the 1999 Constitution.

Need be mentioned, the Quarantine Act may be amended to, among others, include restriction of all movements as part of measures the President can take in containing the spread and transmission of some dangerous infectious diseases so as to avoid future legal tussle on the legality or illegality of a presidential order or directive which restricts movement of persons in order to contain the spread of infectious dangerous diseases.

WIGWE & PARTNERS

APRIL 2020.

Continue Reading
2nd April 2020
by Admin Team
0 Comments
, , , , ,

THE EFFECT OF COVID – 19 PANDEMIC ON CONTRACTUAL OBLIGATIONS

INTRODUCTION:

In all human endeavours, the principle of Sanctity of Contract guarantees the performance of contractual obligations ensuring that  parties are bound by the terms of their agreement and cannot renege from the contract on the basis that the terms of the contract are onerous to perform or unfavorable to either party.

Like other principles of law, Sanctity of Contract is not without exceptions. For instance, parties can agree on the suspension or termination of contractual obligations upon occurrence of certain events. Such events can be in form of the actualization of the purpose of the contract or by the occurrence of a “force majeure” event.

Force Majeure has been defined as the superior force that prevents parties from meeting their contractual obligation. It is inserted as a protection clause in most contracts to remove liability for unavoidable catastrophes that interrupts the expected course of events and restricts the performance of a contract. However, in the absence of force majeure clause in the agreement of parties, the concept of Frustration of Contract can be pleaded and successfully relied upon by a party.

The concept of Frustration of Contract has been recognized as an exception to the Sanctity of Contract. In Nospecto Oil & Gas Ltd. v. Kenney & Ors. (2014) LPELR – 23628 (CA), the Courtheld that frustration in a contract arises when an event occurs without the culpability of any of the parties and which hinders or prevents the performance of an obligation or duty under the contract and fundamentally changes the circumstance and striking at the root of the Agreement.

Flowing from the above judicial authorities and the proactive measures adopted to curtail the spread of Coronavirus Disease 2019 [COVID–19], we consider it necessary to answer the following questions:–

– whether the global outbreak COVID–19 and the resulting measures employed by the Federal Government of Nigeria [i.e. the prohibition of mass gatherings and inter-territorial restrictions] can be regarded as a force majeure to constitute an unforeseen circumstance[s] capable of frustrating the Agreement of parties?

– if the answer is in the affirmative –  what happens when the force majeure is longer than the period provided by parties for suspension of their contract? and

– what are the remedies available to parties?

COVID – 19 AND FORCE MAJEURE OR FRUSTRATION OF CONTRACT:

There will be no difficulty classifying COVID – 19 as force majeure even though parties do not include “pandemics” as part of circumstances constituting force majeure in their contracthowever there are other words that may be construed as addressing the issue of pandemics within the definition/description of what amounts to force majeure in most contracts. In the absence of such express provision, it will be necessary to have recourse to the principle of frustration of contract.

The Supreme Court in Nwaolisah v. Nwabufoh (2011) LPELR – 2115 (SC) held that “a contract is not frustrated merely because its execution becomes more difficult or more expensive that either party originally anticipated and has to be carried out in a manner not envisaged at the time of its negotiation”.

The Supreme Court’s decision in Nwaolisah v. Nwabufoh(Supra) made it pertinent to note that it is the nature of the contractual obligation to be performed by a party that determines whether COVID – 19 pandemic or the prohibition of mass gatherings and interterritorial restrictions can frustrate the contract.

In other words, where the contractual obligation to be performed by a party is such that cannot be performed due to restriction of movements, prohibition of mass gatherings orinterterritorial restrictions, then COVID – 19, can, in that circumstance, constitute circumstances capable of frustrating Agreement of parties.

Exceptions to the above;

– where other options are available to a party in the performance of his contractual obligations; and

– where COVID–19 caused the death of a party to a contract for personal service. In the latter situation it is the death of the party that frustrates the contract and not COVID–19.

In summary the nature of the contractual obligations to be performed by a party to a contract would determine if the COVID-19 pandemic and the Federal Government of Nigeria’s restrictions can be regarded as a force majeure to constitute an unforeseen circumstance[s] capable of frustrating the agreement of parties.

COVID – 19 AND THE SUSPENSION OF A CONTRACTUAL OBLIGATION:

For contractual obligations that cannot be performed, due to the COVID–19 pandemic and the resulting measures imposed by the Federal Government of Nigeria, these can be suspended temporarily until the frustrating intervening event has abated and parties resume business.

It is however not in all circumstances that a contract will be suspended due to frustration. Frustration a times may warrant the immediate discharge of a contract. For instance, the Court in Okereke & Anor v. Abia North L.G.A (2014) LPELR – 23770 (CA) recognized the frustration of contract as one of the ways in which a contract can be discharged.  

A discharge of contract by frustration in the present circumstance is where, for instance the COVID-19 situation subsists beyond the period agreed by parties for suspension of their contract and time is of the essence in the performance of the contract; the contract will be discharged.

COVID – 19 – REMEDIES AVAILABLE TO PARTIES:

Except parties expressly provide otherwise in their agreement, the remedy available to them is dependent on whether the contract is suspended or discharged by frustration. Generally, suspension of contract merely puts the rights and obligations of parties in abeyance and does not affect the validity or subsistence of the contract.

Judicial Remedies:

– By an Injunctive Order, a party can be restrained from rescinding the contract during the period of suspension, and at the end of the suspension a party can seek an order of specific performance if the other party fails to discharge his contractual obligation.

– Contrarily, parties are legally relieved of all pending contractual obligations when a contract is discharged by frustration. However, where there is a payment of monetary sum without the performance of any contractual obligation, the party who paid the monetary sum is entitled to recover same in an action for money had and received and under the failure of consideration.

Non Judicial Remedies:

– Parties can proactively extend the agreed period for suspension of their contract. This can be done by an ADDENDUM to the already signed contract.

– Parties can extinguish the rights and obligations that the original contract has created and substitute the same with a new agreement.

The second option above has long been recognized and sanctioned by the Supreme Court in Grover v. Int’l Textile Ind. (Nig.) Ltd (1976) LPELR – 1342 (SC) when the Honourable Court held that:

“the law is well settled that a later Agreement by the parties to an original contract, to extinguish the rights and obligations that the original contract has created is itself a binding contract, provided that the later Agreement is either made under seal or is supported by consideration.”

CONCLUSION:

From all intent and purposes, COVID–19 pandemic and its preventive measures may constitute a force majeure event or unforeseen circumstances capable of frustrating performance of the contract. However, it requires a fact-to-fact analysis of the terms of the Agreement of parties and the contractual obligation[s] to be performed to determine whether such a contract can be suspended or discharged and the applicable remedy.

WIGWE & PARTNERS

MARCH, 2020.

Disclaimer:

The information provided in the write-up does not, and is not intended to, constitute legal advice; instead, the information contained herein are for general informational purpose only. Readers of this write-up should contact their solicitors to obtain advice with respect to any particular legal matter. No reader should act or refrain from acting on the basis of the information herein without first seeking legal advice from their solicitor. All liability with respect to actions taken or not taken based on this write-up are hereby expressly disclaimed.

Continue Reading