One of the first things many businesses do when launching a website or mobile application is add a privacy policy. Unfortunately, many also make one of the biggest compliance mistakes at the very beginning. Instead of preparing a privacy policy that reflects how their own organization processes personal data, they simply copy one from another website, make a few cosmetic changes, and publish it. It seems harmless. After all, a privacy policy is just another legal document, right? Not quite.

A privacy policy is not a generic template or website decoration. It is a legal statement that explains how an organization collects, uses, stores, shares, and protects personal data. It tells people what happens to their information after they hand it over to a business. When that statement is copied from another organisation, it often tells the wrong story.

Under the Nigeria Data Protection Act, 2023 (NDPA), transparency and accountability are fundamental principles of data protection. A privacy policy that does not accurately describe an organization’s processing activities is more than just poorly drafted; it can become a compliance risk.

 

Understanding Who the NDPA Protects

Before discussing the risks, it is important to understand who the Act applies to. The NDPA protects data subjects, who are simply the individuals whose personal data is being processed. Section 65 of the NDPA defines data subjects as an individual to whom personal data relates. Every customer filling out an online form, every employee whose records are kept by an employer, every patient visiting a hospital, and every applicant submitting a job application is a data subject.

The organization deciding why and how that information should be collected is known as the data controller. The controller determines the purpose of processing, the categories of information to be collected, who will receive the data, how long it should be retained, and the safeguards that should be put in place.

There is also the data processor, which processes personal data on behalf of the controller. This could be a cloud storage provider, a payroll company, an email marketing platform, an IT vendor, or any other third party handling personal data on the controller’s instructions.

Each of these parties has a role to play under the NDPA, and each can be affected when an organisation publishes a privacy policy that does not reflect reality.

 

Why Every Privacy Policy Should Be Different

One of the biggest misconceptions is that businesses operating in the same industry process personal data in exactly the same way. They rarely do.

Take two hospitals, for example. Both may collect patients’ names, contact details, and medical records. However, one hospital may use cloud-based electronic health records hosted outside Nigeria, while the other stores everything locally. One may engage an external laboratory, another may operate its own. One may retain patient records for a different period because of its internal policies or regulatory obligations.

The same applies to law firms, banks, fintech companies, schools, online retailers, and virtually every other organization. Even businesses offering similar services often use different software, engage different vendors, transfer data to different countries, or collect entirely different categories of personal information.

That is why privacy policies cannot simply be copied from one organization to another. Every organization has its own data story to tell.

 

Transparency Is More Than a Legal Requirement

Section 24 of the NDPA establishes the principles governing the processing of personal data, one of which is transparency. Transparency means being open with people about what happens to their information. When an individual provides personal information to a business, they should know what information is being collected, why it is needed, whether it will be shared with anyone else, how long it will be kept, and what rights they have over it.

A privacy policy is one of the primary ways organizations communicate this information. If that policy has been copied from another organization, there is a strong possibility that the information being provided is inaccurate. An organization may unknowingly tell customers that it does not share information with third parties when it actually relies on payment processors, cloud hosting providers, external auditors, or marketing platforms. It may state that information is retained for six months when, in reality, it is kept for several years. It may even fail to mention international transfers simply because the organization it copied from does not transfer data outside Nigeria.

 

The Risks for Data Controllers

For data controllers, copying a privacy policy can create problems that extend beyond poor drafting. The privacy policy is often the first document regulators, customers, investors, and business partners review when assessing an organization’s approach to data protection. If the policy says one thing while the organization’s actual practices say another, questions immediately arise about governance and compliance.

Imagine an organization assuring customers that their personal data is never disclosed to third parties, yet its operations depend heavily on external payroll providers, cloud storage services, customer relationship management software, and outsourced IT support.

If the Nigeria Data Protection Commission investigates the organization, those inconsistencies may become evidence that the organization has failed to meet its transparency obligations under the NDPA. Ironically, what was intended to save time may end up creating a far more expensive compliance problem.

Data processors may also be affected, even though they do not determine why personal data is processed. Many processors operate entirely on the instructions of the controller. However, if the controller’s privacy policy fails to disclose their involvement, data subjects are left unaware that another organization is handling their information. This lack of transparency can damage trust and create unnecessary regulatory scrutiny. A processor may be performing its role lawfully, but if the controller fails to communicate that relationship accurately, the entire processing chain becomes less transparent.

 

The People Most Affected Are Data Subjects

Perhaps the greatest consequence falls on the very people the NDPA seeks to protect. One of the cornerstones of the Act is that individuals have the right to know what happens to their personal information. Section 34 of the NDPA gives data subjects important protections, including the right to be informed about how their personal data is processed, the right to access that information, the right to request corrections where information is inaccurate, the right to object to certain forms of processing, the right to withdraw consent where consent forms the basis of processing, and, in appropriate circumstances, the right to request that their personal data be erased.

These rights, however, can only be exercised effectively if people receive accurate information from the beginning. Consider a business whose copied privacy policy states that personal information is never transferred outside Nigeria. A customer reading that policy may feel comfortable sharing their information because they believe it will remain within the country. Unknown to them, the organization stores customer information on servers located overseas. The customer’s right to make an informed decision has effectively been undermined. Similarly, if a privacy policy fails to mention that personal information is shared with third-party vendors, individuals lose the opportunity to understand who else has access to their data and for what purpose. In many respects, copying a privacy policy deprives data subjects of the transparency that the NDPA was specifically enacted to guarantee.

 

Conclusion

The temptation to copy another organization’s privacy policy is understandable. It is quicker, easier, and often appears to save money. However, convenience should never replace compliance. A privacy policy is not simply a document added to a website because every other website has one. It is a public representation of how an organization handles one of its most valuable assets: personal data.

Businesses expose themselves to unnecessary regulatory and reputational risks. Data processors may find themselves operating within an ecosystem that lacks transparency. Most importantly, data subjects are denied clear and accurate information about what happens to their personal data, making it more difficult for them to exercise the rights guaranteed to them under the NDPA.

The best privacy policy is the one that tells your organization’s story truthfully, accurately, and transparently.

 

Ayomikun Oreoluwa Onabanjo Esq.

Managing Associate

Many businesses treat domain name registration as a simple administrative task. Find an available domain, pay the registration fee, and launch the website.

However, from an intellectual property perspective, domain names are much more than website addresses. They are brand identifiers, business assets, and often the first interaction a customer has with a company.

As businesses continue to expand their digital presence, understanding the relationship between intellectual property and domain names has become increasingly important.

A Domain Name Is Not the Same as Intellectual Property

One of the biggest misconceptions among entrepreneurs is that registering a domain name automatically gives them ownership rights over a brand, it does not. A domain name registration merely gives the registrant the right to use a particular internet address for a specified period. It does not automatically create trademark rights or confer exclusive ownership of a name.

In Nigeria, trademark protection is governed by the Trade Marks Act, Cap T13, Laws of the Federation of Nigeria 2004. A registered trademark grants the owner the exclusive right to use that mark in relation to the goods and services for which it is registered. This means that a person may successfully register a domain name but still be infringing another party’s trademark rights.

Domain names and trademarks serve different purposes but often overlap.

A trademark identifies the source of goods or services. A domain name helps users locate a business online. When both contain the same brand name, disputes can arise. For example, imagine a Nigerian fintech startup successfully registers its trademark but delays securing its domain name. Another party then registers the corresponding domain and begins attracting internet traffic intended for the startup.

The startup may own the trademark, but it could still face significant challenges in reclaiming the domain. This is why businesses should think about trademark registration and domain name registration simultaneously rather than treating them as separate exercises.

A Real-World Example: MTN and Domain Name Protection

A useful example comes from the telecommunications industry. As one of Africa’s most recognizable brands, MTN Group has had to actively protect its trademarks against unauthorized domain name registrations incorporating the “MTN” brand.

Like many multinational companies, MTN has relied on trademark rights and domain name dispute resolution mechanisms to challenge registrations that could mislead consumers or create confusion regarding affiliation with the company. The lesson is simple: strong brands are not only protected through trademark registrations; they are also protected through proactive domain name management.

The Nigerian Position

In Nigeria, “.ng” domain names are administered by the Nigeria Internet Registration Association (NiRA), the registry responsible for the management and administration of Nigeria’s country code top-level domain (.ng). NiRA accredits registrars, establishes policies governing the registration and management of “.ng” domain names, and promotes the growth and integrity of Nigeria’s internet namespace.

Although “.ng” domain names are generally allocated on a first-come, first-served basis, registration does not confer intellectual property rights or override the existing trademark rights of third parties. Registrants are expected to respect the intellectual property rights of others, and the registration of a domain name that incorporates another person’s trademark or well-known brand may expose the registrant to legal action.

To address such disputes, NiRA operates the .ng Domain Name Dispute Resolution Policy (DRP), an administrative dispute resolution mechanism modelled on international best practices. The Policy provides trademark owners and other rights holders with a relatively quick and cost-effective process for challenging the bad-faith registration or use of “.ng” domain names. Where a complainant establishes that the domain name is identical or confusingly similar to its trademark, that the registrant has no legitimate interest in the domain name, and that the domain name was registered or is being used in bad faith, the disputed domain name may be transferred or cancelled.

While the Domain Name Dispute Resolution Policy provides an efficient administrative remedy, it does not prevent parties from pursuing their rights before the courts, where appropriate. In addition, businesses may rely on the Trade Marks Act, the Copyright Act 2022 (where copyright issues arise), and the common law tort of passing off where the use of a domain name misrepresents an association with, or exploits the goodwill of, another business.

Final Thoughts

In today’s digital economy, a domain name can be just as valuable as a physical storefront. Yet, many businesses spend time protecting their trademarks while overlooking the online address through which customers will actually find them. The reality is that domain names and intellectual property are closely connected. A strong brand strategy is incomplete without a domain name strategy.

One of the most cost-effective intellectual property strategies is securing relevant domain names as early as possible. The cost of registration is usually insignificant compared to the legal fees and business disruption that may arise from a domain name dispute.

 

Ayomikun Oreoluwa Onabanjo Esq.

Managing Associate

The Corporate Affairs Commission (“CAC”) in a public notice released in July, 2026 urged companies to comply with the statutory requirements of Sections 304(1) & (2) and 729(1)(c) of the Companies and Allied Matters Act, 2020 (“CAMA”) on business letters. The CAC further stipulated that all affected companies must comply with the directive by 1^st August, 2026.

Although the statutory requirements have existed since the enactment of CAMA, the Commission’s directive serves as a reminder that compliance with corporate disclosure obligations is not to be regarded as a mere formality. Rather, it should be considered fundamental to corporate governance. The renewed enforcement initiative emphasizes the obligation of companies to include the prescribed corporate information on their business letters and other official correspondence in accordance with the provisions of the Act.

Compliance with statutory regulation goes beyond incorporation and the filing of statutory returns. One important part of corporate governance is ensuring that companies consistently present the accurate required information in their dealings with the public. Documents such as business letters, invoices, notices, quotations, official correspondence and other corporate communications often constitute the first point of interaction between a company and its customers, regulators, investors and business partners. Hence, it is imperative that such documents reflect the identity and detailed information of the company.

While these requirements are not newly enacted, many companies have either overlooked them or treated them as administrative formalities. The CAC’s renewed enforcement directive has brought an otherwise overlooked provision of the Companies and Allied Matters Act 2020 into practical focus.

 

What Does Section 304(1) & (2) and 729(1)(c) of CAMA 2020 Require?

Section 304 of Companies and Allied Matters Act 2020 (CAMA) mandates every company to make certain disclosures on corporate documents issued by or on behalf of the company. The section imposes a duty on every company to clearly state its corporate name, registration number and its registered office address on its business letters, notices, official publications and other documents through which the company is communicates with external persons or entities.

The Act also requires the names of all its directors to be published on same. Specifically, the company is required to state each director’s current forename or initials together with their current surname. In addition, every former forename and surname previously used by the director must be disclosed. Where a director is not a Nigerian, the Act further mandates the disclosure of such director’s nationality.

Section 729(1)(c) of the Companies and Allied Matters Act 2020 also mandates the disclosure of a company’s registered name and registration number on all business letters, notices, advertisements, and other official publications issued by or on behalf of the company. The same particulars must also appear on all bills of exchange, promissory notes, endorsements, cheques, orders for money or goods, bills or parcels, invoices, receipts and letters of credit issued by or on behalf of the company.

 

Why Disclosure Is Required

The disclosure mandated under Companies and Allied Matters Act 2020 (CAMA) is not just a formal requirement regarding the appearance of the correspondence of a company but one that serves a much wider range of legal and commercial purposes. The requirement operates as a transparency mechanism allowing persons or parties dealing with a company to verify its corporate identity and obtain the necessary information about its corporate status notwithstanding any subsequent change in the company’s name.

A company has a distinct legal identity separate from its shareholders, directors and officers. As such, a person, organization or company dealing with or who seeks to deal with a company should be able to determine precisely which entity is assuming the contractual obligations, receiving payment, making representations and entering into a transaction. The provision to expressly state the company’s registered name and registration number on business correspondence is a straightforward way of establishing that identity. This is necessary especially where a company’s trading name, brand name or other commercial identifier differs from its registered corporate name. The obligation to state its registered address also ensures that members of the public have access to the company’s official address for service of notices and other legal communications.

The obligation therefore is a measure taken to address a practical problem in commercial transactions which is the possibility that a person may rely on a corporate communication without being able to establish the legal identity of the entity behind it. A letterhead containing the company’s prescribed particulars gives the recipient information about the company that can be independently verified against the records of the Corporate Affairs Commission (CAC). In this regard, the disclosure requirement serves to clearly identify the company and the individuals responsible for the running of its day-to-day operations.

Furthermore, it allows for corporate accountability. Where the particulars of directors and other prescribed information are properly disclosed, the corporate structure becomes clear to the public. As such, creditors, regulators, investors and other stakeholders dealing with the company can ascertain its corporate identity and the persons responsible for its management. Thus, supporting the principle that the privilege of operating through a separate legal personality should be accompanied by a reasonable degree of corporate transparency.

In addition, the disclosure obligations facilitate due diligence. Before entering into a commercial relationship, prospective investors, lenders, solicitors, suppliers or contracting parties do a routine verification to establish the existence and status of the company. Where the statutory disclosures are properly made, the initial verification process becomes more straightforward as it creates a starting point for verification.

Another significant advantage is the prevention of fraud and misrepresentation. In modern times, commercial dealings sometimes occur via electronic communications, scanned documents and digital platforms which makes it easier for fraudsters to imitate corporate names, logos and other identifying features of legitimate businesses. While including the statutory particulars on a company’s correspondence cannot prevent fraud, the registration number provides the recipients with an objective identifier against which the company’s identity can be checked. Thus, making it easier to distinguish duly incorporated companies from unregistered or fraudulent entities.

The corresponding disclosure obligations provided in Sections 304 and 729(1)(c) of CAMA 2020 further emphasizes the underlying objective in ensuring that persons dealing with a company can adequately ascertain a company’s identity, its legal status and its officers.

 

Who Must Comply?

The provisions of Section 304(1), (2) and Section 729(1)(c) of Companies and Allied Matters Act 2020 applies to every company incorporated under the Act. These include, Private Companies limited by shares, Public Companies, Companies Limited by Guarantee and Unlimited Companies incorporated under the Act.

A distinction must be made between companies and other forms of businesses recognized under the Act. Registered business names and incorporated trustees are governed by different statutory provisions and do not fall within the scope of the enforcement directive concerning Sections 304 and 729(1)(c).

Hence, compliance with the requirements for incorporation or the filing of annual returns should not be used as the yardstick to determine a company’s overall compliance with the Act. Corporate compliance is a continuous obligation and companies must continue to comply with the statutory provisions applicable to them.

 

Legal and Commercial Risk of Ignoring the Disclosure Requirement

The legal consequences of failing to comply with these sections should not be taken lightly. Whilst the Act states the general requirements, it also makes express provision for the liability for non-compliance. Section 304(3) expressly provides that where a company defaults in complying with the disclosure requirements, every officer of the company who is in default shall be liable to such penalty as may be prescribed by the Corporate Affairs Commission.

Although the Act mainly creates regulatory liability, repeated failure to comply may lead to wider commercial consequences. For instance, a company that constantly issues its correspondence without the mandatory particulars stated on it could suggest poor corporate governance. This will, in turn, discourage prospective investors, lenders, customers, counterparties and regulatory authorities from dealing with the company.

In some transactions like mergers and acquisitions, banking and foreign investments, failure to provide adequate disclosures may require further investigation and verification thereby delaying the transaction. The Commission’s renewed enforcement should therefore be viewed as its attempt to strengthen and improve compliance with existing statutory provisions.

Non-compliance with the regulatory obligation may attract regulatory sanctions, affect credibility and expose companies to enforcement. Section 304 (3) states that failure to comply with the provision to makes corporate disclosures will make every officer of the company liable to a penalty in such amount as the CAC shall specify.

Similarly, where a company fails to comply with the disclosure obligations prescribed under Section 729(1), the company and every officer of the company in default are liable to a penalty to be determined by the CAC. The imposition of liability on both the company and its officers reflects that the Act recognizes the inability of a company to run on its own. Thus, such persons responsible for its management are held accountable for its non-compliance.

 

Practical Compliance Measures

In light of the Commission’s enforcement initiative, companies should make a review of their corporate communication materials. Such review should include company letterheads, electronic letterheads, email signature, templates, invoices and receipts, notices issued to customers and shareholders, company publications and other official correspondence bearing the company’s name.

Where directors’ names are disclosed, companies should ensure that the disclosure complies fully with the requirements of Section 304 rather than listing a selected few of the directors or abbreviated names. Companies may also consider implementing internal compliance policies requiring all departments responsible for external communications to utilize only approved corporate templates.

To comply with section 729(1)(c) of the Act, companies should ensure that the prescribed statutory information appears on all business correspondence and company documents. The company’s registered name, address and registration number must be clearly displayed on its document templates and electronic communication systems such as email signatures and digital document templates which must also include the required particulars in every official communication. Finally, the company may adopt a periodic compliance review to verify that all correspondence and document templates remain compliant with prompt updates made whenever there is a change to the company’s registered particulars.

 

Conclusion

The Corporate Affairs Commission’s enforcement directive does not aim to introduce a new legal obligation but to reinforce the existing laws that have not been adequately implemented since the enactment of CAMA 2020. This enforcement initiative should therefore be viewed as an opportunity for companies to improve their compliance systems and corporate governance.

Beyond simply avoiding sanctions, compliance with the Act promotes transparency and builds the positive image of a company that is trustworthy and accountable. In conclusion, companies that align with the statutory requirements will have greater credibility with stakeholders.

 

Sharon-Amaka Asiegbu Esq.

Associate

INTRODUCTION

“Pseudonymisation” is one of those words that sounds more complex than it is, but its implications for data protection compliance in Nigeria are anything but simple. As Nigeria’s data protection landscape continues to mature, particularly following the enactment of the Nigeria Data Protection Act 2023 (NDPA), pseudonymisation has emerged as a critical technical and legal concept that organizations processing personal data can no longer afford to ignore.

 

What is Pseudonymisation?

Pseudonymisation is the process of processing personal data in such a manner that it can no longer be attributed to a specific data subject without the use of additional information, provided that such additional information is kept separately and is subject to technical and organizational measures to ensure non-attribution.

Pseudonymised data, remains personal data; the link to the individual can still be re-established using the separately held key. Pseudonymised data continues to attract the full protections of the applicable data protection framework. An example is a hospital that replaces patient names with unique codes in its research database has pseudonymised that data. The patients remain identifiable to those with access to the coding key, but the data cannot be attributed to them by anyone without that key.

 

The Nigeria Data Protection Act 2023 (NDPA)

The NDPA recognizes pseudonymisation explicitly as a data security measure. Under Section 24 of the NDPA, data controllers and data processors are required to implement appropriate technical and organizational measures to ensure a level of security appropriate to the risk, having regard to the state of the art, costs of implementation, and the nature, scope, context, and purposes of processing. Pseudonymisation is specifically contemplated as one such measure.

Furthermore, Section 25 of the NDPA reinforces the principle of data minimization; that personal data collected must be adequate, relevant, and limited to what is necessary in relation to the purposes for which it is processed. Pseudonymisation directly supports this principle by limiting the exposure of directly identifiable data.

The NDPA also introduces the concept of data protection by design and by default under Section 26, which requires that data controllers implement appropriate technical and organizational measures designed to implement data protection principles effectively and integrate necessary safeguards into the processing. Pseudonymisation is widely regarded as a core component of privacy by design, embedding data protection into the architecture of systems and processes from the outset, rather than as an afterthought.

 

Pseudonymisation and Risk Reduction

One of the most practically significant aspects of pseudonymisation under the NDPA is its role in risk reduction, particularly in the context of data breaches.

Under Section 40 of the NDPA, data controllers are obligated to notify the NDPC of a personal data breach without undue delay and, where feasible, not later than 72 hours after becoming aware of it. However, where the personal data affected by a breach has been pseudonymised, the risk to data subjects is significantly reduced, as the data cannot readily be attributed to identifiable individuals without the separately held key. This may influence the severity of the regulatory response and the notification obligations owed to affected data subjects.

The NDPA, under Section 30, imposes heightened obligations on the processing of sensitive personal data, which includes data relating to health, biometrics, ethnicity, political opinions, religious beliefs, and financial information, among others. The processing of such data is generally prohibited except where specific conditions are satisfied.

These facts create a compelling incentive for organizations to implement pseudonymisation as part of their data security architecture as a practical risk management strategy.

 

Enforcement and Regulatory Guidance

The NDPC, established under Section 4 of the NDPA, has broad enforcement powers, including the authority to investigate complaints, conduct audits, issue compliance orders, and impose administrative fines. Under Section 48 and Section 49 of the NDPA, administrative fines for data protection violations can reach up to 2% of annual gross revenue or ₦10 million, whichever is higher, for general violations, and up to imprisonment for up to one year or both, for more serious breaches.

While Nigerian courts have not yet produced a substantial body of case law specifically addressing pseudonymisation, the broader enforcement landscape is instructive. In the matter of the NDPC’s enforcement action against certain financial institutions for inadequate data security measures, the Commission signaled clearly that technical safeguards, including encryption and data minimization techniques, are not optional extras but baseline compliance requirements.

Organizations operating in Nigeria, whether as data controllers or data processors should therefore consider pseudonymisation not merely as a technical option but as a compliance imperative.

 

Practical Implications for Different Sectors

Data sharing arrangements: Where personal data is shared between organisations for research, analytics, or service delivery, pseudonymisation limits the risk of unauthorized attribution and supports lawful processing.

Cloud computing and third-party processing: Where data is processed by third-party vendors, pseudonymisation ensures that vendors do not have access to directly identifiable data, reducing risk in the event of a vendor-side breach.

Employee and HR data: Organizations processing large volumes of employee data for internal analytics or reporting should consider pseudonymisation as a measure to protect employee privacy while enabling legitimate data use.

Healthcare and research: Medical research institutions and healthcare providers processing patient data are particularly well-placed to benefit from pseudonymisation, enabling data utility while protecting patient confidentiality.

 

Conclusion

As Nigeria’s data protection framework continues to evolve, pseudonymisation has moved beyond being a purely technical concept to becoming a significant legal and compliance consideration for organizations processing personal data. The Nigeria Data Protection Act 2023 makes it clear that organizations are expected to adopt practical and proportionate security measures capable of protecting personal data and reducing exposure to risk. Organizations that invest in pseudonymisation as part of a broader privacy-by-design approach will be better positioned to demonstrate compliance, mitigate the consequences of data breaches, and build the trust of their customers and partners.

 

Ayomikun Oreoluwa Onabanjo Esq.

Managing Associate

INTRODUCTION

In many commercial transactions, intellectual property ownership is often treated as a secondary issue, something to be sorted out later, or addressed only when a dispute arises. This approach is wrong and can be legally dangerous. One of the most overlooked risks in agreements relating to technology, branding, consulting, software development, advertising, and service delivery is the failure to properly distinguish between background intellectual property and foreground intellectual property.

Poorly drafted intellectual property clauses can unintentionally transfer rights far beyond the actual scope of the transaction, exposing businesses to the loss of proprietary tools, systems, methodologies, and independently developed assets that are central to their operations. This article examines the legal distinction between background and foreground intellectual property, the consequences of inadequate drafting, and the framework for protecting intellectual property rights in commercial transactions under Nigerian law.

 

Understanding the Distinction

Background intellectual property refers to intellectual property rights that existed before the commencement of a transaction or project. This includes proprietary software, internal frameworks, methodologies, templates, algorithms, trade secrets, and designs that a party brings to the engagement. As a general principle, background intellectual property remains the property of the party that originally owned or developed it, irrespective of its deployment during the course of the engagement.

Foreground intellectual property, on the other hand, refers to intellectual property created specifically during the course of the engagement or project. This includes project deliverables, campaign assets, newly developed software modules, reports, branding materials, and custom designs created specifically for the client. Unlike background intellectual property, foreground intellectual property is often transferable, depending on the commercial arrangement between the parties.

The distinction matters enormously in practice, as many agreements contain broadly drafted intellectual property assignment clauses stating that “all intellectual property arising from the engagement shall vest in the client” or “all work products shall belong exclusively to the customer.” At first glance, these clauses may appear commercially harmless. However, without proper carve-outs, they can inadvertently transfer ownership of pre-existing systems, proprietary methodologies, internal tools, and independently developed materials merely because they were used or referenced during the project.

 

The Risk of Broadly Drafted Assignment Clauses

The risk posed by broadly drafted intellectual property clauses is not merely theoretical. It frequently arises in several categories of commercial agreements, including Service Level Agreements, Master Service Agreements, technology and software development contracts, creative and advertising engagements, and joint venture arrangements.

Consider a technology company engaged to build a custom software application for a client. In delivering the application, the company deploys pre-existing proprietary frameworks, libraries, and internal tools developed over many years. If the agreement contains a clause providing that “all intellectual property arising from the engagement shall vest in the client,” and there is no carve-out for background intellectual property, the client may assert ownership over those pre-existing frameworks, not because they were specifically created for the project, but because they were used in its execution.

The same risk arises in creative and advertising engagements, where agencies routinely deploy pre-existing templates, design systems, and creative methodologies to deliver client work. A broadly drafted assignment clause could expose those agencies to a claim that their entire creative toolkit, built over years of independent development, has been transferred to a single client by virtue of a single engagement.

This is not merely a legal problem, it is and has always been a commercial and operational one. The loss of proprietary tools and systems can fundamentally impair a service provider’s ability to continue operating and serving other clients.

 

Drafting Effective Intellectual Property Clauses

The most effective protection against unintended intellectual property transfers lies in careful and deliberate drafting. A well-structured intellectual property clause in a commercial agreement should expressly address several key issues.

First, it should clearly define what constitutes background intellectual property for each party and confirm that such intellectual property remains the exclusive property of the original owner throughout and after the engagement. This carve-out must be unambiguous, general savings language is often insufficient.

Second, the clause should define foreground intellectual property with sufficient specificity, identifying the deliverables that are being created for the client and confirming the basis on which ownership will vest, whether by assignment, license, or some other arrangement.

Third, where the service provider’s background intellectual property is embedded in or necessary for the use of the foreground intellectual property, the clause should provide for a limited, defined license to the client to use that background intellectual property for the specific purposes of the engagement. The scope, duration, and territorial extent of that license should be expressly stated.

This approach ensures that the client receives ownership of the deliverables it paid for without unintentionally acquiring rights to the service provider’s core intellectual assets, and that the service provider retains the tools necessary to continue operating its business after the engagement concludes.

 

Conclusion

Intellectual property clauses are frequently treated as standard boilerplate provisions in commercial agreements. In reality, they can determine the long-term ownership of some of a company’s most valuable assets. The failure to properly distinguish between background and foreground intellectual property, and to reflect that distinction clearly in contractual language, is one of the most common and consequential drafting errors in commercial practice. Businesses and their legal advisers must treat these provisions with the same importance they bring to the commercial, financial, and liability terms of every agreement they sign.

 

Ayomikun Oreoluwa Onabanjo Esq.

Managing Associate

INTRODUCTION

It is well established that upon incorporation, a company assumes a legal personality distinct from its founders, director or shareholders with perpetual succession. In Nigeria, a company obtains a separate personality upon its registration with the Corporate Affairs Commission (CAC). Thus, vested with the legal capacity to carry on business, enter into contracts, own properties, sue and be sued in its own name as though it were a natural person. Put simply, a company is empowered by the nature of its registration to do everything a person can do under the law through its officers

This principle is further established under Section 42 of the Companies and Allied Matters Act (CAMA) 2020, which provides that a company becomes a body corporate upon incorporation with all the powers of a natural person. The doctrine was first enunciated in the celebrated case of Salomon v Salomon & Co Ltd (1897) AC 22 to promote entrepreneurship, encourage investment and limit personal liability. However, this law further affirms that this principle must not be used as a shield for fraud or injustice,. The separation between the company and its members is referred to as the ‘corporate veil’.

The principle of piercing the corporate veil is a vital corrective intervention that was established due to the abuse of the principle of corporate personality. This is because a company, though a juristic person, is not a natural person. As such, it cannot make decisions for or carry on business by itself except through human beings who serve as the directing mind of the company.

 

The Principle of Corporate Personality

The principle of corporate personality was first propounded in Salomon v Salomon & Co Ltd (supra), where the House of Lords held that a properly incorporated company is separate from its shareholders even where an individual controls the majority of shares. The decision established that the company’s debts are its own and not those of its members. As such, the principle serves as the general rule.

This principle has been consistently applied in Nigeria over the years and is reflected in Section 42 of the Companies and Allied Matters Act 2020 which recognizes the company as a separate legal entity with perpetual succession and limited liability see Royal Pet. Co. Ltd. v. F.B.N. Ltd. Nigerian courts have repeatedly affirmed that once a company is legally incorporated, its personality cannot be ignored merely because it is controlled by a single individual or a small group of shareholders.

 

The Principle of Piercing the Corporate Veil as the Exception

The concept of ‘Piercing the corporate veil’ is the situation where a court disregards the separate legal personality of a company going beyond its corporate veil to hold its executives, directors or shareholders personally liable for corporate obligations and liabilities. It is an exception to the general rule established in Salomon v Salomon (supra)

The doctrine operates as a judicial and statutory intervention mechanism established to prevent the abuse of the protection granted to a company by its corporate personality. The “organic theory,” also known as “the directing mind and will theory” propounded by Lord Viscount Haldane in Lennard’s Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] AC 705, provides the framework for the piercing of the corporate veil of a company. The theory stipulates that the Courts identify the individuals who act as the “directing mind and will” of the company, usually senior executives, directors or shareholders and hold them personally liable for the acts or omissions of the company where such acts are unlawful or fraudulent.

It is important to note that Courts do not take the piercing of the corporate veil of a company lightly, as doing so undermines the protection provided by the separate personality. Hence, caution is exercised in piercing the veil and the exception is applied only where it is necessary for the administration of justice. The rationale behind it is that the law will not allow the corporate structure to be used as an instrument of fraud, illegal activities or to evade legal obligation.

 

Legal Framework for the Piercing of the Veil of a Company under the Companies and Allied Matters Act 2020.

The Companies and Allied Matters Act 2020 makes statutory provisions for corporate personality and corporate veil piercing in Nigeria. Section 42 establishes separate legal personality while Sections 305, 316, 334, 433, 672, 729(3) and 862 of CAMA make provisions imposing personal liability on directors and officers of the company in certain situations.

Statutory lifting of the corporate veil may occur in cases of breach of directors’ fiduciary duties, misuse of company funds or property, secret profits made by company executives or conflict of interests, dividends paid out of the company’s capital, fraudulent trading, improper use of company name or seal, misstatements in prospectus or false statements in company documents. These provisions ensure that the company cannot be used by individuals to carry out unlawful conducts or businesses.

 

Grounds for Piercing the Corporate Veil

The courts in Nigeria recognize several grounds for piercing the corporate veil of a company. Fraud, however, remains the most common and major ground, especially where the company is used to deceive creditors or as a cover for illegal activities. These grounds are highlighted succinctly to include;

1. Fraud – The corporate veil may be lifted where a company is used as an instrument of fraud. Courts will disregard the company’s separate personality where it is established that the company was used to deceive creditors, conceal unlawful acts, make false representations, or perpetuate dishonest trading practices. In such circumstances, directors and controlling shareholders may be held personally liable for the fraudulent conduct carried out under the guise of incorporation.
2. Sham or Façade Company – Where a company exists merely as a sham, façade, or alter ego of its controllers rather than as a genuine independent business entity, courts may pierce the corporate veil. Nigerian courts are inclined to disregard the corporate structure where incorporation is used to conceal the true facts, evade liability, or shield individuals from responsibility for wrongful acts.
3. Tax Evasion – Courts will disregard corporate personality where the corporate structure is deliberately employed to evade tax obligations or avoid lawful tax liabilities. The law does not permit incorporation to serve as a device for circumventing statutory tax responsibilities.
4. Avoidance of Legal or Contractual Obligations – Where incorporation is used as a means of escaping existing legal duties, contractual commitments, or statutory obligations already owed by individuals, courts may pierce the veil to enforce such obligations against the persons behind the company.
5. Public Policy and Interest of Justice – The courts retain equitable jurisdiction to lift the corporate veil where maintaining the company’s separate legal personality would result in injustice or offend public policy. In appropriate cases, the interest of justice overrides strict adherence to the doctrine of separate corporate personality.
6. Fraudulent Trading – Under the Companies and Allied Matters Act (CAMA) 2020, directors and officers of a company may incur personal liability where the business of the company is carried on with intent to defraud creditors or for any fraudulent purpose. In such cases, the courts are empowered to lift the corporate veil and impose liability on the persons responsible.
7. Improper Use of Company Name –The improper or deceptive use of a company’s name, particularly where it violates statutory restrictions or falsely suggests governmental approval or affiliation, may justify disregarding the company’s separate legal identity and imposing liability on those responsible.
8. False Statements in Corporate Filings – Directors or officers who make false declarations or submit misleading statutory filings and corporate documents may be personally liable notwithstanding the company’s incorporation. Courts will not permit the corporate form to shield deliberate misrepresentation in official filings.
9. Company Used as an Instrument of Injustice – Courts may lift the corporate veil where preserving the separate legal personality of the company would shield wrongdoing, perpetuate injustice, or defeat the ends of justice. In such situations, the courts will look beyond the corporate structure to hold the real actors accountable.

While the doctrine of separate legal personality remains a fundamental principle of company law, it is not absolute. Nigerian courts and statutory provisions under CAMA 2020 recognize several exceptions where the corporate veil may be pierced to prevent fraud, injustice, and abuse of the corporate form. The doctrine, therefore, serves as an important safeguard against the misuse of incorporation as a tool for illegality or unfair advantage. The courts will also lift the veil in any instance highlighted above and even in more similar instances. The imaginary scale within which the court uses to determine the veil lifting is whether or not the corporate structure has been abused and if holding the individuals personally liable will aid in the administration of justice. The focus is always on preventing injustice rather than punishing legitimate business operations.

 

Fraudulent Trading and Directors’ Liability

Fraudulent trading is the most compelling statutory ground for piercing the corporate veil under the Companies and Allied Matters Act 2020. Where a company is carried on with intent to defraud creditors or for fraudulent purposes, the directors and officers may be held personally liable.

The main aim of this provision is to protect creditors and ensure that lawfully incorporated companies are not used as instruments of deception. Courts examine financial records, company transactions and directors’ conduct to determine whether there was a fraudulent intent. If it is determined that there was an intent to defraud, the corporate veil is lifted, and personal liability is imposed on those individuals responsible for the acts or omissions of the company.

 

Judicial Precedents in Nigeria

Nigerian courts have developed a steady approach to corporate veil piercing in judicial precedents, either upholding the separate personality principle or piercing the veil of the company. In Union Bank of Nigeria Ltd v Tropic Foods Ltd (1992) 3 NWLR (Pt. 227) 231 CA, the court emphasized that corporate personality cannot be used to perpetrate fraud or injustice. Likewise, in Adeyemi v Lan & Baker Nigeria Ltd (2000) 7 NWLR (Pt. 663) 33, the court pierced the corporate veil of the company to impose personal liability on directors or shareholders who use the company as a shield for fraudulent activities, breach of trust, or to evade legal obligations.

In the case of Marina Nominees Ltd v Federal Board of Inland Revenue (1986) 2 NWLR 48, the court recognized that where a company acts as an agent of its shareholders, the veil may be lifted to determine the true nature of the transaction. These cases show the recognition of the Nigerian courts to intervene where necessary.

It is important to note that the piercing of the corporate veil of a company is within the exclusive purview of the judiciary. It is noteworthy to state that certain enforcement agencies may, in the process of lifting the incorporation veil, lend a helping hand through their investigative mechanism; the Court still wield the ultimate power to make pronouncements where there is a liability on any officer of the company. Hence, only a court of competent jurisdiction can pierce the veil of a company and hold its executives personally liable.

 

Policy Considerations and Modern Trends

The doctrine of piercing the corporate veil raises important policy considerations. This is because the consideration for public policy and justice may justify veil-piercing when upholding the corporate form would lead to injustice, violate public policy principles or undermine the integrity of the legal system. In essence, the protection of creditors, investors and the public against corporate abuse will be ensured. However, veil piercing in every action may discourage investment and undermine the corporate personality of companies.

It is for this reason the Courts in Nigeria exercise caution and carefully determine such cases, ensuring that veil piercing is applied only in exceptional circumstances. This approach strikes a balance between ensuring justice and maintaining the legal protections and benefits associated with incorporation.

 

Conclusion and Recommendations

Piercing the corporate veil remains an essential safeguard in Nigerian company and commercial transactions. It ensures that the principle of separate legal personality does not become an instrument for fraud or illegal activities. The doctrine upholds the essence of corporate personality while encouraging lawful business practices.

Caution is recommended to be exercised by the courts in the application of veil piercing. There must also be a strict adherence to corporate and legal obligations by the directing minds of a company to avoid personal liability.

 

 

Disclaimer

The article provides general information relating to the legal issues around the corporate veil in Nigerian company and commercial transactions. It is meant for general information only. It is not, and should not be relied upon as legal advice. If you require any assistance or enquiry relating to the above subject, please contact info@regville.com or Regville Associates Key contacts for advisory on Corporate Governance via www.regville.com    

Sharon-Amaka Asiegbu Esq

B. Adejare Adegbite Esq

INTRODUCTION

The recent public warning issued by the Federal Competition and Consumer Protection Commission (FCCPC) is a reminder that merger notification in Nigeria is not a mere procedural formality, but a substantive legal obligation under the Federal Competition and Consumer Protection Act 2018 (FCCPA). The Commission expressly warned firms, legal advisers, transaction parties and other stakeholders that qualifying mergers and acquisitions must be notified to the FCCPC and cleared before implementation. Merger control must therefore be treated as a central component of legal due diligence and transaction planning.

The legal foundation of merger control in Nigeria is principally contained in Part XII of the FCCPA, particularly sections 92 to 102. Section 92 adopts a broad definition of merger, capturing any transaction through which one or more undertakings directly or indirectly acquire control over the whole or part of the business of another undertaking. This functional conception of control ensures that the regime is not limited to straightforward share acquisitions, but extends to asset acquisitions, amalgamations, and joint venture arrangements where control is acquired or established. A similar approach has been adopted in other jurisdictions. In South Africa, the Supreme Court of Appeal in Distillers Corporation (SA) Ltd v Bulmer (SA) (Pty) Ltd confirmed that “control” is not confined to legal ownership but includes the ability to materially influence the policy of a firm.

A critical feature of the FCCPA is the distinction between small mergers and large mergers. Under the FCCPA, not every merger requires mandatory prior notification. Small mergers are generally not notifiable unless the Commission specifically requires notification, while large mergers must be notified in the prescribed manner and form. Accordingly, the duty to notify arises in respect of notifiable merger transactions which meet the applicable thresholds or otherwise fall within the Commission’s notification requirements.

The applicable thresholds are set out in the Notice of Threshold for Merger Notification issued pursuant to section 93(4) of the FCCPA. Under that notice, a merger becomes notifiable where, among other things, the combined annual turnover of the acquiring undertaking and the target undertaking in, into, or from Nigeria equals or exceeds One Billion naira, or the annual turnover of the target undertaking in, into, or from Nigeria equals or exceeds Five Hundred Million naira. These thresholds determine whether a transaction falls within the Commission’s mandatory pre-merger review jurisdiction.

Recent transactional practice in Nigeria demonstrates the application of the FCCPA merger control regime. A notable example is the acquisition of a controlling stake (71.69%) in Honeywell Flour Mills Plc by Flour Mills of Nigeria Plc, a transaction which attracted regulatory review by the Federal Competition and Consumer Protection Commission due to its implications for concentration within the flour milling sector. This transaction illustrates the practical importance of obtaining regulatory clearance in industries with a limited number of significant market participants.

Once a merger is notifiable, the Act is clear that it must not be implemented before the approval of the Commission is obtained. Section 93 provides that a proposed merger subject to the notification threshold shall not be implemented unless it has first been notified to and approved by the Commission. Section 96 further reinforces this position in relation to large mergers, providing that parties shall not implement such a merger unless and until it has been approved, with or without conditions, by the Commission; any step taken in contravention of that requirement is void. The implication is that premature consummation of a notifiable transaction exposes parties to both regulatory sanctions and validity risks.

This position is consistent with merger control regimes in other jurisdictions. In the European Union, the Court of Justice in Ernst & Young P/S v Konkurrencerådet clarified the scope of the standstill obligation, holding that steps capable of contributing to a change of control may constitute unlawful early implementation.

In reviewing a merger, the FCCPC applies the substantive test of whether the transaction is likely to substantially prevent or lessen competition in the relevant market. Where anti-competitive effects are identified, the Commission must then consider whether the merger is likely to generate technological efficiency or other pro-competitive gains that outweigh those effects, or whether the transaction may be justified on substantial public interest grounds.

The inclusion of public interest as part of merger review is an important feature of the FCCPA. Nigerian merger regulation does not focus exclusively on market structure or pricing effects; it also permits consideration of broader economic implications where appropriate.

The statutory framework is complemented by the FCCPC Merger Review Regulations 2021 and related instruments published by the Commission. These instruments govern the filing and review process under Part XII of the Act and underscore the need for careful procedural compliance. The Commission has also encouraged early engagement, including pre-notification consultations where necessary, as a means of facilitating regulatory certainty and efficient review. For transaction counsel, early merger-control assessment is now an indispensable aspect of deal execution.

The consequences of non-notification are significant. In its recent warning, the FCCPC reiterated that any qualifying transaction that meets the prescribed threshold must be notified to the Commission for prior review and approval before implementation, and that failure to notify may attract penalties and other enforcement action. This warning makes clear that the Commission expects compliance not only from merging firms, but also from legal advisers involved in structuring and implementing transactions.

Although Nigerian merger jurisprudence under the FCCPA remains in an emergent phase, the broader enforcement climate is becoming more assertive. A notable illustration is the decision of the Competition and Consumer Protection Tribunal upholding the FCCPC’s 220 million dollars administrative penalty against Meta Platforms Incorporated and WhatsApp LLC. While that matter did not arise from merger control, it reflects the Tribunal’s willingness to affirm the Commission’s authority and enforcement posture under the FCCPA.

Non-compliance with merger notification and approval requirements under the FCCPA exposes parties to administrative penalties, including fines of up to 2% of turnover under the FCCPC Administrative Penalties Regulations 2020. In addition, the FCCPC retains broad powers to review and impose remedies on completed transactions, including requiring a merger to be unwound or restructured where necessary.

For legal practitioners, the implications are straightforward. Advisers must determine at an early stage whether a transaction constitutes a merger within the meaning of section 92, whether it meets the applicable thresholds, and whether any proposed step could amount to implementation before approval. Competition law analysis is therefore central to M&A advisory practice in Nigeria.

In conclusion, the merger control regime established by the FCCPA reflects Nigeria’s commitment to a structured system of competition regulation. Notifiable mergers must be disclosed to and approved by the FCCPC before implementation. Compliance with merger notification requirements is a substantive legal obligation, breach of which may affect both the validity and commercial outcome of a transaction.

Eghonghon Akhimien Esq
Junior Associate
Regville Associates

INTRODUCTION

Micro, Small and Medium Enterprises (MSMEs) occupy a central position in Nigeria’s economic structure. According to various National Bureau of Statistics and SMEDAN reports make up approximately 96%-99% of all businesses in Nigeria, contributing around 46% -48% to the national GDP and accounting for 84% of total employment, yet they remain among the most legally exposed actors in commercial practice. This exposure is most evident in dispute resolution, where the formal justice system, though constitutionally guaranteed, often proves economically inaccessible. The emergence of the MSME Arbitration Scheme by the Chartered Institute of Arbitrators Nigeria Branch is best understood not merely as an institutional innovation, but as a response to a structural imbalance between legal rights and practical enforceability.

The legal and regulatory understanding of MSMEs in Nigeria is rooted in the framework established by the Small and Medium Enterprises Development Agency of Nigeria Act 2003, which designates SMEDAN as the central body responsible for the promotion, coordination, and development of small and medium enterprises in Nigeria. While the Act itself does not prescribe statutory thresholds, the classification framework developed under the National Policy on Micro, Small and Medium Enterprises coordinated by SMEDAN has become the accepted standard in policy and practice. Under this framework, a micro enterprise is typically defined as a business employing fewer than 10 persons with assets not exceeding ₦5 million excluding land and buildings. A small enterprise employs between 10 and 49 persons with assets between ₦5 million and ₦50 million, while a medium enterprise employs between 50 and 199 persons with assets ranging from ₦50 million to ₦500 million.

Although this asset and employment based classification is widely adopted, certain regulatory and financial institutions incorporate additional indicators such as turnover when assessing enterprise size for specific programmes, financing, or compliance purposes. This reflects a broader lack of uniformity across Nigeria’s MSME framework, where definitions may vary depending on the regulatory context in which they are applied.

This regulatory classification is complemented by the Companies and Allied Matters Act 2020, which introduces a more precise statutory concept of a small company under section 394. A company qualifies as small where its annual turnover does not exceed ₦120 million and its net assets do not exceed ₦60 million. Although this definition is primarily intended for corporate governance and compliance, it reinforces the broader legislative recognition that a significant category of Nigerian businesses operate within constrained financial and structural limits.

Read together, the SMEDAN framework and CAMA thresholds establish that MSMEs are not merely smaller versions of large corporations, but entities with fundamentally different operational realities. They often lack internal legal capacity, rely on informal documentation, and are unable to sustain prolonged or complex dispute resolution processes. This context is critical in understanding why conventional mechanisms have historically failed them.

In practice, MSMEs have relied largely on litigation for the enforcement of contractual rights. However, the procedural demands of court processes, combined with delays arising from congested dockets, often render litigation commercially irrational. A small business pursuing a claim risks expending more in legal costs and time than the value of the dispute itself, leading in many cases to abandoned claims or forced settlements.

Arbitration, though theoretically more flexible, has not traditionally resolved this problem. Under Nigerian law, now consolidated in the Arbitration and Mediation Act 2023, arbitration agreements are binding and enforceable, and judicial intervention is limited. Courts have consistently affirmed this position in cases such as M.V. Lupex v NOC and Statoil Nig Ltd v NNPC. This pro arbitration stance has been reaffirmed in more recent decisions, including NNPC v Fung Tai Engineering Co Ltd, P.E. Bitumen Resources v Cocean Nigeria Integrated Ltd, and NICN Insurance v Brighthouse Estate Ltd, where the courts continued to emphasise the binding nature of arbitration agreements and the limited scope for judicial interference. Yet, despite this strong legal foundation, arbitration has remained functionally inaccessible to MSMEs due to cost, procedural formality, and institutional complexity.

The MSME Arbitration Scheme operates within this gap. Rather than creating a new legal regime, the Scheme adapts existing arbitration principles to the realities of small scale commercial activity. Its jurisdiction is deliberately limited to disputes with monetary values between ₦250,000 and ₦5,000,000, thereby aligning the process with the scale of disputes typically encountered by MSMEs.

Access to the Scheme is dependent on the existence of an arbitration agreement, but the approach adopted is notably flexible. In addition to formal contractual clauses, arbitration agreements may be evidenced through signed invoices, receipts, or post dispute submission agreements. This reflects a practical recognition of the informal documentation practices common among small businesses.

The procedural structure of the Scheme is designed to ensure both speed and accessibility. A party initiates the process by notifying the other party and applying to the Chairman of the Chartered Institute of Arbitrators Nigeria Branch for the appointment of a sole arbitrator, accompanied by a modest administrative fee. The appointment is typically made within seven days, and the arbitrator is required to issue a timetable shortly thereafter.

Proceedings are conducted with a high degree of procedural flexibility, with the arbitrator retaining discretion over the process subject to the overriding objective of efficiency. The Scheme contemplates documents only proceedings and the use of online dispute resolution mechanisms in order to minimise cost and delay. Written submissions are expected to be concise, and legal representation is not mandatory, thereby lowering barriers to participation.

A defining feature of the Scheme is the strict timeline imposed on the arbitral process. The arbitrator is expected to deliver a final, reasoned award within 90 days of appointment, or as soon as practicable. This emphasis on speed directly addresses one of the most significant weaknesses of both litigation and conventional arbitration from the perspective of MSMEs.

A defining feature of the Scheme is its cost structure, which introduces a level of predictability rarely seen in arbitration and directly addresses one of the primary barriers to MSME participation. Unlike conventional arbitration, where fees may be negotiated or accrue unpredictably, the Scheme adopts a fixed and tiered cost regime tied to the monetary value of the dispute.

For disputes with a value between ₦250,000 and ₦1,000,000, the arbitrator’s fee is fixed at ₦50,000, while all other recoverable arbitration and party expenses are capped at a maximum of ₦25,000. For disputes exceeding ₦1,000,000 but not more than ₦2,000,000, the arbitrator’s fee increases to ₦100,000, with recoverable expenses capped at ₦50,000. For disputes above ₦2,000,000 and up to ₦5,000,000, the arbitrator’s fee is fixed at ₦250,000, while recoverable expenses are capped at ₦100,000.

In addition to these amounts, a party initiating arbitration is required to pay a non refundable administrative fee of ₦10,000 at the point of application for the appointment of an arbitrator.

This structured approach ensures that parties are able to determine, at the outset, the maximum financial exposure associated with the arbitration process. It also reflects a deliberate policy choice to align dispute resolution costs with the economic scale of MSME transactions, thereby preventing situations in which the cost of enforcement exceeds the value of the underlying claim.

Despite its simplified procedures, the Scheme retains full legal validity. Awards issued are final, binding, and enforceable in the same manner as arbitral awards under Nigerian law. Courts continue to play a supportive role through enforcement and limited supervisory jurisdiction, reinforcing confidence in the process.

The significance of the MSME Arbitration Scheme lies in its practical orientation. It does not seek to redefine arbitration in doctrinal terms, but rather to recalibrate it in a manner that aligns with the economic realities of MSMEs. By reducing cost, simplifying procedure, and compressing timelines, it addresses the long standing disconnect between the existence of legal rights and the ability to enforce them.

In this respect, the Scheme represents a pragmatic shift in Nigeria’s dispute resolution landscape. It transforms arbitration from a mechanism primarily utilised by large commercial actors into a functional and accessible tool for small businesses, thereby advancing a more meaningful conception of access to justice within the Nigerian legal system.

 

REFERENCES

1. Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) Act 2003.
2. National Policy on Micro, Small and Medium Enterprises (MSME Policy Framework).
3. Companies and Allied Matters Act 2020, Section 394.
4. Arbitration and Mediation Act 2023.
5. V. Lupex v NOC(2003) 15 NWLR (Pt. 844) 469.
6. Statoil (Nig.) Ltd v NNPC(2013) 14 NWLR (Pt. 1373) 1.
7. NNPC v Fung Tai Engineering Co Ltd(2023).
8. E. Bitumen Resources v Cocean Nigeria Integrated Ltd(2024).
9. NICN Insurance v Brighthouse Estate Ltd(2025).
10. Chartered Institute of Arbitrators (Nigeria Branch), MSME Arbitration Scheme Guidelines.

Ehonghon Akhimien Esq

Introduction

Shareholder disputes are a common occurrence in the Nigerian corporate landscape, often arising from conflicts over control, management, and the distribution of profits. These disputes can have significant implications for the company, its shareholders, and the broader business environment. This article explores the legal remedies available to shareholders in Nigeria, particularly within the framework of the Companies and Allied Matters Act 2020 (CAMA 2020), with a focus on oppression and unfair prejudice.

Shareholder Rights Under CAMA 2020

The Companies and Allied Matters Act 2020 (CAMA 2020) includes several provisions that aim to strengthen the rights and involvement of shareholders in corporate governance.

Shareholder meetings remain a central mechanism for participation. The Act mandates the holding of annual general meetings (AGMs) and extraordinary general meetings (EGMs), allowing shareholders to participate in key decisions. Shareholders are entitled to receive notice of meetings, access relevant materials, and vote on important matters.

Voting rights under CAMA 2020 are proportionate to shareholding. The Act discourages the use of disproportionate voting structures that could undermine shareholder democracy.

Access to information is also strengthened. Shareholders are entitled to key company information such as annual financial statements, statutory registers, notices of meetings, and minutes of proceedings. This access enables shareholders to monitor management decisions, detect fraud or mismanagement, and exercise their voting rights effectively.

Nature and Causes of Shareholders Dispute in Nigeria

Shareholder disputes often arise from recurring governance issues within companies.

Exclusion from management is common in small or quasi-partnership companies, where minority shareholders may be denied participation despite legitimate expectations. Disputes may also arise where directors or majority shareholders divert corporate opportunities for personal benefit or to related entities.

Improper dilution of shares is another frequent trigger, particularly where additional shares are issued to weaken minority interests. Similarly, misuse of corporate funds and mismanagement of company assets often give rise to conflict.

Disputes relating to dividends are also prevalent, especially where financial records are manipulated to deny minority shareholders their entitlement.

Legal Framework Governing Shareholder Disputes in Nigeria

The principal legislation governing shareholder disputes in Nigeria is the Companies and Allied Matters Act 2020 (CAMA). It provides the statutory basis for minority protection, including actions by minority shareholders, derivative actions, and relief against unfairly prejudicial or oppressive conduct.

Jurisdiction over company matters is vested in the Federal High Court under the Constitution and the Federal High Court Act. Nigerian courts also rely significantly on common law principles, particularly those derived from English company law.

Foss v. Harbottle Principle

A fundamental principle of company law is majority rule, derived from the rule in the case of Foss v Harbottle (1843) 2 Hare 461.

The rule establishes that the company is the proper claimant where a wrong is done to it, and that courts generally will not interfere in internal company management where the majority can ratify the act. This principle promotes corporate autonomy and efficiency in decision-making.

However, strict application of the rule can allow majority shareholders to abuse their powers. To prevent injustice, courts developed exceptions covering situations where acts are illegal, ultra vires, procedurally improper, or constitute fraud on the minority. These exceptions form the foundation of modern minority protection mechanisms.

Oppression and Unfair Prejudice Under Nigerian Law

Oppression refers to conduct that is burdensome, harsh, wrongful, and lacking in probity and fair dealing. It typically involves deliberate abuse of majority power against minority shareholders, such as exclusion from management, denial of voting rights, or manipulation of company accounts.

Unfair prejudice is broader in scope. It includes conduct that damages the interests of shareholders or disregards their legitimate expectations, even where there is no deliberate intention to oppress. Courts generally treat unfair prejudice as encompassing both oppressive and inequitable conduct.

Judicial Interpretation of Oppression and Unfair Prejudice

Nigerian courts have demonstrated a willingness to intervene where shareholder rights are threatened.

In Aero Bell Nigeria Ltd v Fidelity Union Merchant Bank Ltd (2006) 19 NWLR (Pt. 1013) 46 (CA), minority shareholders challenged the manipulation of financial records intended to avoid dividend payments. The Court of Appeal held that such conduct could amount to unfairly prejudicial treatment.

Similarly, in Adibua v Storm 360 Ltd (2016) 11 NWLR (Pt. 1524) 1 (CA), the court invalidated the removal of a director carried out in violation of statutory procedures, holding that such conduct was unfairly prejudicial.

In Re Nigerian Bottling Co Ltd, the court affirmed that minority shareholders may challenge decisions of the majority where such decisions are oppressive or unfairly prejudicial. These cases collectively underscore judicial readiness to protect minority interests.

Derivative Actions

A derivative action allows a shareholder to institute proceedings on behalf of the company where those in control refuse to act. This remedy is particularly relevant in cases involving breach of fiduciary duties, misappropriation of corporate assets, or failure of the board to take action.

Under CAMA 2020, derivative actions require the leave of court before commencement. The court will typically consider whether the company has a valid cause of action, whether those in control are unwilling to act, and whether the action is in the best interest of the company.

Personal Actions by Shareholders

Where personal membership rights are infringed, shareholders may institute actions in their own name. Such rights include the right to vote, receive declared dividends, transfer shares, and participate in meetings.

This distinction between personal and corporate rights is important, as it determines whether a shareholder may sue directly or must proceed through a derivative action.

Relief Against Oppression and Unfairly Prejudicial Conduct

CAMA 2020 provides a comprehensive framework for relief where company affairs are conducted in a manner that is oppressive or unfairly prejudicial.

The court is empowered to regulate the affairs of the company, restrain wrongful conduct, set aside transactions, compel the purchase of shares, appoint or remove directors, and award compensation. These remedies are designed to restore fairness without necessarily bringing the life of the company to an end.

Winding up on just and equitable grounds remains available where disputes become irreconcilable, particularly in cases of deadlock, loss of trust, or breakdown of quasi-partnership arrangements. However, courts treat this remedy as a last resort.

Challenges in Minority Protection

Despite the availability of statutory remedies, minority shareholders continue to face practical challenges. Litigation can be costly and time-consuming, and access to company information may be limited. Majority shareholders often retain control over corporate machinery, making enforcement difficult.

These realities frequently discourage minority shareholders from pursuing formal legal remedies.

Practical Strategies for Resolving Shareholder Disputes Without Litigation

In practice, many shareholder disputes are resolved outside the courtroom. Litigation is often expensive, slow, and disruptive to business operations. As a result, corporate lawyers frequently adopt alternative dispute resolution mechanisms.

Negotiation remains the first step in most disputes, allowing parties to reach commercially viable solutions while preserving relationships. Outcomes often include share buy-outs, restructuring, or agreed exit arrangements.

Buy-out arrangements are particularly common where trust has broken down, allowing minority shareholders to exit the company while enabling the business to continue operating.

Mediation provides a structured but flexible process facilitated by a neutral third party, promoting confidentiality and collaborative problem-solving. Arbitration, on the other hand, offers a more formal but private dispute resolution process, particularly useful in complex or cross-border transactions. The framework for arbitration in Nigeria is provided by the Arbitration and Mediation Act 2023.

Shareholder Agreements as a Preventive Tool

Well-drafted shareholder agreements remain one of the most effective tools for preventing disputes. These agreements typically address governance structure, voting rights, dividend policies, exit mechanisms, and dispute resolution processes.

Clauses dealing with deadlock resolution, buy-out mechanisms, and minority protection play a crucial role in managing potential conflicts before they escalate.

Corporate Governance Reforms

Many shareholder disputes stem from weak corporate governance structures. Strengthening governance practices can significantly reduce the likelihood of conflict.

Key measures include the use of independent directors, clear board procedures, transparent financial reporting, defined management responsibilities, and separation of leadership roles within the company.

Conclusion

Although Nigerian law provides robust judicial remedies for shareholder disputes, litigation should often be the last resort. Practical dispute-resolution strategies such as negotiation, mediation, arbitration, and well-structured shareholder agreements offer more efficient and commercially viable outcomes.

Ultimately, these mechanisms contribute to corporate stability, investor confidence, and effective corporate governance.

 

References

• Companies and Allied Matters Act 2020
• Foss v Harbottle (1843) 2 Hare 461
• Aero Bell Nigeria Ltd v Fidelity Union Merchant Bank Ltd (2006) 19 NWLR (Pt. 1013) 46 (CA)
• Adibua v Storm 360 Ltd (2016) 11 NWLR (Pt. 1524) 1 (CA)
• Re Nigerian Bottling Co Ltd
• Adenuga v Arowolo (2015) 7 NWLR (Pt. 1457) 1
• Alhaji Yakubu Eleto & Ors v Alhaji Adebisi Bamgbose & Ors (2012) LPELR-19495 (CA)
• Arbitration and Mediation Act 2023
• Nigerian Law Forum
• Cronfa (Swansea University Repository)
• LegalDoc Nigeria
• Resolution Law Nigeria

 

Ayomikun Oreoluwa Onabanjo Esq.

In commercial litigation and pre-suit negotiations, parties frequently engage in settlement discussions to avoid protracted court battles. In an effort to protect such negotiations from later use in evidence, legal practitioners often label correspondence and offers with the phrase “without prejudice”. Despite its widespread use in legal practice, the legal effect of without prejudice communications is often misunderstood; it is not an automatic shield that renders all marked material inadmissible but rather operates within defined statutory and judicial parameters under Nigerian law.

The without prejudice rule refers to the principle that statements made in a genuine attempt to settle a dispute are inadmissible in evidence in subsequent legal proceedings between the parties. Where an offer or admission is made “without prejudice” or a motion is denied or a suit is dismissed without prejudice, it is meant as a declaration that no rights or privileges of the parties concerned are to be considered as thereby waived or lost except in so far as may be expressly conceded or decided……….

The protection applies whether the communication is oral or written.

For the rule to apply, two essential conditions must be satisfied:

1. There must be an existing dispute between the parties; and
2. The communication must have been made in a genuine attempt to settle that dispute.

It is settled law that merely marking a document “without prejudice” is not conclusive. Where a communication is not connected to settlement negotiations, the court may admit it notwithstanding the label. Conversely, where the substance of the communication shows a genuine attempt at settlement, the protection may apply even if the words “without prejudice” were not expressly used.

The without prejudice rule is a common law doctrine rooted in public policy. The rule serves two interrelated purposes:

1. To encourage parties to settle disputes amicably; and
2. To ensure fairness by preventing admissions made for settlement purposes from being used prejudicially.

Nigerian courts, through the reception of English common law, recognize and apply the without prejudice rule as part of the law of evidence. The rule complements statutory provisions on relevance and admissibility by excluding evidence on policy grounds, even where such evidence may otherwise be relevant.

It is therefore important to note that the without prejudice rule is applied to protect the joint interests of the parties engaged in settlement discussions. As a result, the protection is generally regarded as joint, not unilateral.

In light of this, one party cannot unilaterally waive the rule, because the rule protects both parties. Allowing unilateral waiver would undermine the confidence necessary for candid negotiation. Where both parties agree, the protection may be waived. This may occur expressly, through written agreement, or implicitly, where both parties rely on the communications in proceedings without objection.

The main statute governing the principle of ‘without prejudice’ in Nigeria is Section 196 of the Evidence Act which states:

“A statement in any document marked without prejudice made in the course of negotiation for a settlement of a dispute out of court, shall not be given in evidence in any civil proceedings in proof of the matters stated in it.”

This puts the common law principle of ‘without prejudice’ into writing in Nigerian statutes.

Additionally, Section 26 also support this legislation; the statutory foundation of the without prejudice rule may be traced to Section 26 of the Evidence Act 2011, which renders inadmissible any admission made upon an express or implied condition that such admission shall not be given in evidence. The provision reflects the common law policy that parties should be encouraged to engage in frank negotiations without fear that concessions made in the course of settlement discussions will later be used against them. Although section 26 does not expressly employ the phrase “without prejudice,” its effect substantially mirrors the doctrine, as communications made during genuine attempts at compromise are excluded from evidence where the circumstances indicate an intention that they should remain confidential. Accordingly, Nigerian courts have treated section 26 as reinforcing the common law position that the admissibility of such communications depends not on the label affixed to them, but on their substance and the context in which they were made.

In Nigeria, the courts have upheld that communications made in the course of genuine settlement negotiations are excluded from evidence even if they are not expressly labelled “without prejudice”. In Ashakacem Plc v. Asharatul Mubashurun Investment Ltd, the Supreme Court held that a letter written during mediation between disputing parties is inadmissible in subsequent proceedings whether or not it was expressly marked “without prejudice”, on the basis that settlement negotiations should be protected so that parties can speak freely and attempt resolution without fear that concessions will later be used against them.

Similarly, in Obande Obeya v. First Bank of Nigeria Plc, the Court of Appeal confirmed that an offer made “without prejudice” in the course of negotiation cannot be relied upon as evidence in a later suit, reinforcing the public policy underpinning the rule.

For commercial actors and legal practitioners, the without prejudice rule carries important practical implications:

a. Careless wording in correspondence may result in unintended admissions.

b. Parties should avoid mixing open communications with settlement discussions.

c. The misuse of the “without prejudice” label may lead to false expectations of protection.

d. Lawyers must clearly distinguish between negotiation correspondence and formal demands.

In commercial negotiations involving debt recovery, contract termination, or breach of agreement, proper use of the without prejudice rule can significantly affect litigation strategy.

In conclusion, the without prejudice rule plays a vital role in commercial dispute resolution by fostering open and frank settlement discussions. While the rule generally renders settlement communications inadmissible, its application depends on substance rather than form, and it is subject to carefully defined exceptions. Legal practitioners and commercial parties must therefore exercise caution and precision in their use of without prejudice communications to ensure that the intended protection is effectively achieved.

 

Eghonghon Akhimien Esq.

Junior Associate.