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Till date, the cardinal business law in Nigeria remains the Companies and Allied Matters Act 1990. The Act itself has a rich history of evolution. From the Bubble Act of 1720 to the Joint Stock Companies Act of 1844, it developed to the Companies Ordinance of 1922 and later the Companies Act of 1958. It later evolved into the Business Act of 1968 before the formal Companies Act of 1968 emerged to become the gamut of Nigeria business law for the next 20 years. The Companies Act of 1968 Act was eventually replaced by the current Companies and Allied Matters Act of 1990.

The basic structure of the Companies and Allied Matters Act 1990 in Part A are incorporation of companies, acts on behalf of a company, membership of companies, share capital, shares, debentures, meetings and procedure, directors and Secretaries, protection of minorities against illegal and oppressive conduct, financial audits, dividends and profits, receivership and managers, winding up of companies, arrangements and compromise, and finally miscellaneous matters. Part B deals with Incorporated trustees while part C deals with schedules.

The development of the law, legal events and time have been complimentary for centuries. Every standard law will require updating after the occurence of influential events especially comparative global trends in corporate law and practices. One of such laws is the Nigerian Companies and Allied Matters Act 1990 which remains the most single significant corporate law in Nigeria. Some of the required updating to the Companies Act are new business laws, new corporate regulatory practices, corporate ethics, new accounting standards, protectionism, curtailing corporate sharp practices, regulation of foreign companies, cross border operations, cross border taxation etc. Some of the recommended but tentative updating recommendations are:

A. Recognition of special purpose vehicles.
Special purpose acquisition companies (SPACS) are now the most advanced form of investment vehicles in cross jurisdictional transactions. The Companies and Allied Matters Act streamline companies into business names, companies limited by liability, Public Limited Companies, incorporated Trustees etc. These generic classifications have since become outdated in modern financial dynamics. With the privatization crises that have often beguiled Nigeria whereby special purpose vehicles have no statutory foundation, there exist huge regulatory lacunas for SPAC vehicles. The new Chinese Companies Act of 2007 recognizes and classifies special purpose vehicles as equity joint venture (EJV), wholly foreign owned Enterprise (WFOE), contractual joint ventures (CJV), foreign invested companies limited by shares (FICLS) etc. SPACS have also become very popular in India with Heckman’s acquisition of China Water for $625 Billion and Jaguar’s takeover of China Cablecom etc.

B. Codifying Corporate Governance Laws and Rules.
With the dotcom burst in the mid nineties, the fall of corporate giants such as Enron and Adelphia and the current global economic meltdown, advanced economies have now enacted corporate governance laws covering accounting standards, auditing standards, corporate governance, financial disclosures, corporate responsibility, corporate tax returns etc. The foremost of these corporate governance laws is the United States Public Company Accounting Reforms and Investor Protection Act 2002 popularly called the Sarbanes- Oxley Act 2002 or SOX. We also have Basel 1 and II covering corporate accounting and reporting standards in Europe.

Nigeria still has no corporate governance law leaving majority of companies to be self governing. There was an effort by the Nigerian Securities and Exchange Commission to codify corporate governance rules in 2004 but these efforts dissipated sooner thereafter. A new coporate governence code has been drafted and is about to be implemented by the Securities and Exchange Commission in 2009. There is a need to enact a new corporate governance law by the National Assembly to set a uniform code of governance and ethics for all corporate bodies in Nigeria. Strict compliance penalties should be imposed on corporate defaulters.

C. Paid Up Capital as at Incorporation.
Section 27(2)A of the Companies and Allied Matters Act 1990 states that in the memorandum of a company authorized share capital shall not be less than N10, 000 in case of a private company and N500, 000 for a public company. Under Sub section 2(B) of Section 27 “…the subscribers of the memorandum shall take among them a total number of shares of a value not less than twenty five percent of the authorized share capital....” The combined effects of these two subsections are that subscribers only require a minimum of N10, 000 share capital for private company and N500, 000 for public company. In 1990, these were hefty sums. But with the current rate of inflation, these sums are now meager. The proper solution is to increase minimum share capital for private companies to a minimum of N100, 000 while that of public companies should a minimum of N5, 000, 000. On 25% paid up capital of total share capital, this again has long been overtaken by business evolution. The Chinese Companies Act 2007 has increased minimum paid up capital to 50% of total investments in the company. The proper solution is to increase paid up capital to 50% to curtail proliferation of firms.

D. Diffusing corporate liability from the Individual.
Globally, partnerships are formally recognized as the alternative to limited liability and public companies. India has recently passed Limited Liability Partnership Act as at April 2008. The U.S. and Canada have for decades recognize limited liability partnerships popularly called LLP. Partnerships structures signify wider corporate responsibility than business enterprises whose liability is often indeterminable or at best limited to an individual, the very problem the juristic personality concept solves. Any amendment to CAMA must adopt partnerships as the preferred corporate vehicle for small entities in preference to business names.

E. Unclaimed Dividends.
Under Section 382 of the Companies and Allied Matters Act 1990, where unclaimed dividends are returned to the company as unclaimed after the expiration of three months, the company may invest the unclaimed dividends for its own benefits as investment. Under Section 385 of CAMA, if after twelve years, such dividends still remain unclaimed; the company shall convert such proceeds to company capital forever. The combined effects of these sections are that companies have continued to convert unclaimed dividends to company capital for several years since they hardly exhaust efforts to trace shareholders. The bulk of unclaimed dividends owners are dependents of deceased shareholders, relocated shareholders, shareholders whom have lost interest in their shares etc.

As at 2005, the total value of unclaimed dividends in Nigeria totaled over N10 Billion. There was an Unclaimed Dividend Bill forwarded to the National Assembly of Nigeria by the Securities and Exchange for the enactment of the Unclaimed Dividend Commission to take custody of these funds. But till date, the bill is yet to see the light of the day. The proper amendment to CAMA is to make it mandatory for companies to announce all unclaimed dividend holders in three national dailies and if they remain unclaimed after five years, empower the company to make necessary arrangements for their disposal in the owners favour. The period of twelve years can also be increased to say 15 years or more.

F. Incorporation of Internet Contact Addresses.
The current Companies and Allied Matters Act 1990 was enacted during the pre-Internet era. In the last twenty years, the Internet revolution has overtaken all spheres of corporate activities. In the 21st century corporate world, almost all directors, officers or members of the company use email addresses as contact addresses. There would also be a need to reflect this significance in the new corporate law. Corporate Internet operations can also be extended to include notice of annual general meetings, dispatching unclaimed dividends certificate, registration particulars of promoters and subsequently director etc. A provision can also be made for corporate websites in the new Companies Act to provide for a mandatory website for all registered corporate bodies as a basic information guide.

G. New Securities Law.
The Investments and Securities Act (ISA) is a badly drafted and confusing piece of legislation. It is responsible for over 70 percent of the confusion in the Nigerian capital market. Moreover, new trends in global securities law have since made the ISA obsolete. A National Committee was established by the Securities and Exchange Commission (SEC) in September 2008 to review the Nigerian capital market. The Committee has recommended 32 new policies and solutions that will improve the Nigerian capital market including the amendment of the ISA.

Some of the defects of the ISA which the Committee has highlighted include: The ISA makes no provision for the recognition of special investment purpose vehicles (SPV) like its companion CAMA. The new Chinese Companies Act of 2007 recognizes and classifies special purpose vehicles into equity joint venture (EJV), wholly foreign owned Enterprise (WFOE), contractual joint ventures (CJV), foreign invested companies limited by shares (FICLS) etc.

The ISA also fails to regulate foreign financial investments in the Nigerian capital market such as private equity funds, venture capital, hedge funds etc. The Act also makes no provision for cross border listing. The ISA also fails to properly make provisions for capital market expansion to include over the counter transactions (OTC), mutual funds, real estate investment trusts. The largely profitable pension funds operations are not utilized by the capital market to enhance liquidity. The slow pace of development of the Nigerian bond market is largely due to the inconsistencies of the ISA. The ISA fails to provide appropriate regulation for a competitive bond market. There is also the largely profitable futures and derivatives market and credit swap markets which the ISA ought to have built a foundation for in the Nigerian capital market, even if it is only for cross border transactions. The Chinese Securities Regulatory Commission is currently expanding the Chinese capital market to include these financial instruments. So also are the Hong Kong Securities and Futures Commission which has introduced new rules for corporate takeovers in 2008. The U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission were merged in January 2009 to create a single regulatory commission for the futures market.

The mergers and acquisition process in the ISA is complicated seeking SEC approvals at each level of the transaction. Fortunately, the Committee has recommended the abolishment of this process. The Committee has also recommended that SEC impose International Financial Reporting Standards (IFRS) on all listed companies. The Committee has also recommended the establishment of a financial services regulation committee to meet regularly made up of cross sector financial regulators. Finally, the responsibility of amending the ISA lies on the National Assembly of Nigeria and the Securities and Exchange Commission. SEC should commence work shops among all capital market stakeholders to identify specific short term and long terms amendments for the ISA.

H. Corporate Taxation.
Under Nigerian tax laws, companies are subject to taxation under the Companies Income Tax Act 1990 at the rate of 30% per annum. There is also Capital Gains tax under the Capital Gains Tax Act, 1990 which is 10% levy on disposal of company’s assets. Then there is value added tax for goods which is a standard 5% under the Value Added Tax Act of 1993. Then there is a withholding tax for local dividends earnings at the rate of 10% under the Company Income Tax Act 1990. There is also education tax at the rate of 2% under the Education Tax Decree No. 7 of 1993. There is also the personal income tax applied to employees of companies under the Personal Income Tax Act of 1993 charged on pay as you earn basis.

The trend globally is to reduce corporate tax to make a country competitive investment wise. The 30% company tax provided for by the Companies Income Tax Act is considered comparatively high. A progressive look at comparative corprate tax regimes shows that Ireland corporate tax is 12.5 %, Hungary's corporate tax is 18%, Canada is 19%, Russia’s is 24%, Norway is 26%, U.K. is 28% while that is the U.S. is 35%.

From the estimated one million registered companies at the Corporate Affairs Commission, Nigeria, it is believed that an estimated 50% of these companies do not pay company tax making the Government forgo billions of Naira annually in corporate tax. Besides non compliance to the Companies Income Tax Act by local companies, foreign companies are even smarter in corporate tax avoidance. Besides foreign companies operating in a cluster of holding and subsidiary companies, several foreign companies register their companies in tax havens such as Cayman Islands, Luxemburg, Switzerland etc. Employing tax reduction mechanisms, these foreign companies domicile their tax residency in tax havens covered by double tax protocols. The other tax avoidance mechanism is transfer pricing whereby foreign companies paying domestic taxes are allowed to price those taxes to their corporate offices abroad.

The Federal Inland Revenue Service (FIRS) last year commenced the long awaited reforms in Nigeria’s corporate taxation launching a new national tax policy. The reforms are expected to cut corporate tax to about 20%. While reduction in corporate tax is commendable and will ensure Nigeria’s corporate tax is globally competitive, new reforms must also include increase of tax treaties with more countries especially mutual reciprocity treaties and protocols. The Tax residency protocols and transfer pricing issues involving foreign companies need to be domiciled in Nigeria. The FIRS also need to increase it monitoring and compliance of corporate entities to ensure payment of company income tax. The recent issuance of tax identification numbers to companies by the FIRS can only be effective if detailed tax directories are established with these tax numbers.

I. Regulating Foreign Companies.
The provisions of the Companies and Allied Matters Act are restrictive and insufficient to properly regulate and control foreign companies and their incorporated subsidiaries in Nigeria. Complex multi- national ownership structures are the new corporate vogue eliminating tax responsibilities, local operational regulations and even operational visibility. Using as our benchmark a foreign company recently in the news, a foreign company operating in Nigeria is usually the 4th or 5th in succession to the original offshore foreign parent company eliminating almost all levels liabilities and responsibilities with each new level of subsidiary. Chevron Nigeria Limited is wholly owned by Chevron Nigeria Holdings Limited. Chevron Nigeria Holdings is wholly owned by Chevron Africa Holdings Limited, who is owned wholly by Chevron Global Energy Incorporated. Besides complex ownership structures, most foreign companies domicile their tax residency abroad usually in offshore tax jurisdictions. A recent U.S. Internal Revenue Service Report (IRS) shows that a five storey building in South Church Street, Cayman Islands houses nearly 20, 000 registered companies operating all over the world. Other popular offshore jurisdictions incorporating foreign companies are Panama, Luxembourg, Switzerland, Liechtenstein etc.

Section 54 (1) of the Companies and Allied Matters Act 1990 (CAMA) states that all foreign companies doing business in Nigeria must be registered in Nigeria under CAMA except such company has exemptions under Section 56 of CAMA. Section 54(2) of CAMA states that any act of the company in contravention of sub section 1 of CAMA shall be void. Sub Section 3A of Section 54 of CAMA says nothing in the section shall affect any foreign company granted an exemption before the commencement of CAMA, while sub section 3(B) states that foreign companies are exempted from registration under CAMA if they are already exempted under any treaty to which Nigeria is a party.
Under Section 56 of CAMA, the exemptions are only granted where:
1. Such foreign company was invited to Nigeria by the Federal Government of Nigeria.
2. Foreign companies is in Nigeria on behalf of specific donor countries or international organization.
3. Foreign company is a foreign government owned company operating export business.
4. Engineering and technical foreign consultants under contract from any government body or agency.

Under Nigerian law, foreigners are allowed to wholly owed companies or part own companies with Nigerians. The laws that govern foreign investments are the Nigerian Investment Promotions Act 1995, the Foreign Exchange Act 1995, the Investment and Securities Act 1999, the Immigration Act Cap III 1990. Under the Nigerian Investment Promotion Act 1990, non-Nigerians are permitted to own businesses wholly or partly with Nigerians in spheres of businesses except production of arms, ammunition, production of narcotic drugs, production of military wears equipments etc. The said foreign investor is required to incorporate a company under the Companies and Allied matter Act 1990, register with the NIPC, comply with the requirements of the Immigration Act 1990, apply and obtain the relevant license of the sector it intends to invest, apply for business permit, expatriate quota and residence permit from the Federal Ministry of Internal Affairs, etc.

Still, there are hundreds of thousands of foreign companies operating in Nigeria in defiance of Nigerian corporate laws. The bulk of these companies are Chinese and Indian firms who fail to comply with basics such as registration requirements, employment requirements, expatriate quota, company taxation, customs duty, etc. The final straw of non-compliance is foreign companies’ liquid or wind up their subsidiaries in Nigeria after breaching Nigerian laws.

The provisions of Nigerian company laws are too restrictive in dealing with the excesses of foreign companies. The axiomatic solution is to enact a new regulatory regime whereby all foreign companies registered or operating in Nigeria must be made subject to Nigerians laws. There will also be the need to blend local equity control or shareholding of foreign holding companies to a minimum of 30%. Finally new regulations must also contain disclosure policies that will ensure all operating companies in Nigeria with complex ownership structures disclose their ownership structures.

J. Protectionism or International Fair Trade.
The now acceptable global trend is the promulgation of protectionism laws to protect local or companies from international competition. The U.S. recently passed Foreign Investments and National Security Act (FINSA) requiring permission from the Committee for Foreign Investments (CFUI) for any foreign equity acquisition of more than 10% of a U.S. based company. China has recently passed the National Economic Security Act. Thailand also recently passed the Foreign Business Act restricting foreign equity to a maximum of 50%.

Furthermore, the Chinese Anti-Monopoly Law was promulgated in 2007 and came into effect in August 2008. Under the law, Chinese Ministry of Commerce (MOFCOM) is to handle mergers and acquisitions. The National Development Reform Commission (NDRC) handles pricing issues while the State Administration for Industry and Commerce (SAIC) handles dominant monopolies.

Nigeria require laws that protect its local companies from international competition. The Nigerian corporate laws are the only corporate regulation in the world which allows wholly owned foreign companies to establish wholly owned companies in Nigeria without any form of protection to the local market and competing local companies. At par, Nigerian companies do not have the capacity to compete with standard international companies whether in terms of quality of services, depth of technical products, capacity, finance and net worth. The realistic solution is to enact a protectionism legislation that will ensure a level playing field by limiting foreign equity in Nigerian stock or companies to a baseline.

K. Establishment of an Integrated National Business Regulatory Commission.
The Corporate Affairs Commission is the primary body vested with the responsibility of registering companies, issuing certificates, maintaining company accounts, winding up etc. But at times it is over stretched. Nigeria has no uniform commercial code. All fundamental corporate laws are contained in CAMA, ISA, english common law or customary international corporate laws etc.

The regular and continuous regulation of corporate organizations can be best effected by an independent integrated national business regulatory commission. This Commission will ensure the constant regulation of all business companies after securing a full database from the Corporate Affairs Commission. This database will be categorized into specific sectors each with its registration particulars, identification number (including a tax identification number) and computer file. Thereon, it will be easier to identify companies, produce business guides and brochures as is done by the the United States Federal Trade Commission. This Commission will be responsible for day day corporate regulations, bilateral investment treaties (BITS) entered into between local and international organizations, company premise inspections, capacity building etc.

L. Conclusion.
The Federal Government of Nigeria recently constituted a law reform commission to review all corporate laws in operation in the country. Inspite of of the heated debates amongst the legal community as to the equitable spread and acceptance of members of the law reform committee, the committee will certainly need to consider several of the above suggested reforms. The practicable solution will be for the Government to broaden the membership of the law reform committee to include Attorney Generals of the 36 states and prominent legal practitioners in Nigeria. There will also be a need to conduct regular seminars and workshops targeted at interacting with the legal public, civil society especially local and international stakeholders, on the ways forward in amending and modernizing Nigerian business laws.