Many Nigerians, after incorporating their companies with the CAC, believe that they don’t owe any other obligation to the government. Some, who are not that naive, still hold to the belief that they owe the government no obligations after their registering their business. If it comes to the worst, they think, they would fold up the company.
No wonder then that many Nigerian companies don’t exist for long. In fact, some business men intentionally evade performing their obligations to the government for the purpose of gaining more profits, and after wards, when the government is on their trails, they declare the company bankrupt, and fold it up. Then they go on ahead to incorporate another company. And on and on.
Some people have become expert incorporators of companies. They incorporate a company solely for a particular purpose, like getting a contract from the government, or securing loan from the bank, or grant from a donor organisation. And once they get the money, the company is abandoned with no track record whatsoever, except in the annals of the CAC as a registered company which has failed to fulfil its obligations.
This article is for those who are serious minded businessmen and women, and truly desire the growth of their companies, and want to ensure that they stay above board with regards to their obligations to the government. So that, when the government begins to set its wary eyes on their prosperous company, the company would not be found wanting.
Again, the sooner a company becomes aware of its various obligations to the government, the better it is for the company, because, the company would have been able to avoid the cumulative effects of non-adherence to government obligations. Avoiding tax payments for instance results in penalties, which would lead to avoidable losses for the company.
Let us look at some of these obligations, which are in no way exhaustive, but just to give an alert to company owners to be aware and awake to their duties to the government. If you are just starting your company, you would do well to consider the following. The discussion below particularly relates to all types of companies. Obligations owed by business names to the government have been discussed in another article.
The obligations are divided into three sets: obligations owed by a company to the CAC, those owed to various tax authorities, and those owed to other government agencies for the obtaining of various licenses, permits and certificates.
CAC Obligations
Filing of Annual Returns
Filing of annual returns with the CAC is compulsory for any incorporated company. Annual returns are filed yearly with the CAC, and it is basically to show to the CAC that the company is still in business. It is imperative to file the annual returns whether you are operating the company or not. If the company has ceased operations, it is better to formally wind up the company and notify the CAC. For every year that the company continues to remain incorporated in the records of the CAC, it is eligible to file annual returns, again, whether it did business or not.
There are many advantages for filing annual returns.
1. Filing of annual returns simply means that the company is still in business. It presents your company as a serious company in the business world. Imagine a company sending out proposals and adverts for its products, but has failed to meet a basic obligation like filing its annual returns with the CAC. It doesn’t sound good at all.
2. The company would be better placed to take advantage opportunities. Whereas, many other companies, which have fallen behind in their filings, may find it very difficult to take advantage of such opportunities because they might not be able to bear the cost of filing the annual returns together with the accrued penalties. There are some companies that have been operating or being in existence for more than 15 years without filing any annual returns.
3. It will help you to sustain the company name for a very long time. The truth is that, following from the above, many people find it easier to incorporate a new company than go on with the one that they registered several years ago, because now they cannot bear the cost and penalties of filing their annual returns. The result is that they have to jettison the name that they have been known for in order to continue in business. And Even if they keep that name, they will not be able to use it to take advantage of opportunities that arise.
4. It saves cost. This needs no further emphasis. If you your company annual returns on time, you only pay the nominal and processing fees. However, late filing connotes payment of penalties, as well as extra processing fees.
Other Post Incorporation Matters
It is not only annual returns that a company must file with the CAC, but also other post incorporation matters. The difference between the annual returns and other post incorporation matters is that, while the annual return is a compulsory filing, other post incorporation matters become compulsory when the company changes or intends to change anything in its particulars of incorporation. These other filings include, changes in the particulars of directors, change or addition of shareholders, increase or reduction in share capital, change of secretary, registration of debentures or charges, winding up, change in memorandum and articles of association, etc. The company must fulfil certain procedures before the changes and filings can be effected.
Another thing to note is that, a company must be up to date with filing of its annual returns before other post incorporation matters can be effected. This is usually when the rubber meets the road for most companies still in operation. If for instance a company intends to remove one of its directors so as to get a document signed or obtain a contract, the first consideration would be to find out if it is not in default in filing its annual returns with the CAC. If it has met its annual return obligations, filing a change in its directors would be without any extra costs. However, if it happens to be in default, then that backlog must be cleared and penalties paid before it can proceed with the filing of the removal.
Tax Obligations
Registration with Internal Revenue Service
Basically, it is important to register with the State Internal Revenue Service of the registered office of the company for the purpose of filing and payment of personal income tax payments of the company’s employees. Usually, this is done by the PAYE service of the tax body in charge. Default warrants penalties.
Registration with the Federal Inland Revenue Service (FIRS)
The company is also liable to pay company income tax to the Federal Government. This is the purpose of the TIN that is included at the bottom of the certificate of incorporation of the company. It is the company’s tax identification number for payment of taxes with the FIRS. It is mandatory for every company to file tax returns for every year of its existence, and pay the assessed taxes. Failure attracts penalties.
Value Added Tax (VAT)
VAT is paid by companies for every product sold by it to the consumer. It is usually billed to the final consumer and remitted to the federal government. Every company must include the VAT amount as part of its charges to its customers, and must endeavour to remit same to the government. VAT currently calculated at the rate of 7.5% of the product sold.
Obtaining Relevant Statutory Licenses and Permits
Foreign National and Foreign Owned Companies
If a company is foreign owned or has foreign participation, there are certain statutory obligations that it must fulfil while operating the company. If the company is primarily registered in Nigeria and has foreign investors as its shareholders, it must register with the National Investment Promotion Commission. If any of its directors or employees is a foreigner, then it must obtain work permit.
Special Control Unit against Money Laundering (SCUML)
SCUML certificate is compulsory for virtually all companies. It is an arm of the Economic and Financial Crimes Commission established to look into and prevent laundering of money through the use of certain companies and associations. In the past, several government personnel used companies and incorporated trustees (NGOs) to launder huge sums of money out of the country. In a bid to checkmate the wrong, SCUML was established. Every Association or NGO is required to register with the SCUML and obtain a certificate to enable it have certain amounts of moneys in its bank account without being disturbed by the EFCC.
Virtually all banks now require SCUML certificate before a company can open a bank account with it. Obtaining SCUML certificate is not so hard. A company representative would only visit the SCUML site and fill the form. The company will be notified when the certificate is ready for collection.
Other licenses and Permits
There are other licenses that a company may be required to obtain from government agencies before it can successfully operate in Nigeria. This largely depends on the type of business that the company intends to carry out in the country. If the company is registered to engage in oil and gas, it must register with and obtain a license from the Department of Petroleum Resources (DPR). If the company intends to deal in foods, drugs, beverages, packaged water, chemicals, and other consumable products, it must register with and obtain a certificate from the National Agency for Food and Drugs Administration and Control (NAFDAC). These are only a few of the agencies.
Articles on this site are meant for general knowledge only, not as professional advice. If you need personal advice on matters contained herein, you are advised to contact a professional.
We are a firm of legal practitioners and CAC certified agents. We help business owners, entrepreneurs and associations register their businesses, companies and associations with ease. If you need our help with any of the matters contained in the article, feel free to send us a mail at niyiama@yahoo.com or reach us on WhatsApp @ +234-08126194751.
Comments
Post a Comment