Engage Series

April Engage with Temitayo Ogunmokun, Bolanle Isijola and Tobi Adebowale

On the 28th of April, we hosted on our Twitter handle, an enlightening seminar tagged April Engage. It was basically for Start-ups and SMEs. This post contained the highlight of the event.
Our facilitators did answer questions in the order they were asked per tweet. Each tweet contained a question and the facilitator, to whom the question was directed answerered them. Our facilitators include Temitayo Ogunmokun @Tbabz__ Bolanle Isijola @bolanle_esq and Tobi Adebowale @TobiBowale.

Below are the questions and the answers provided by the facilitator they were directed to:

1. I and two of my friends are running a business but we are always having issues like disagreement when it comes to sharing of profit and loss, what do u advice we do to avoid such?

Temitayo Ogunmokun @Tbabz__ replied :

Hello and thank you for having me on #Engage this fine afternoon. My colleagues and I will be responding and proffering practical solutions to FAQs on SMEs and start ups beginning with this question.

Profit and loss sharing is a common issue in business arrangements that involve more than one person. Usually, it’s advisable to clearly delineate this before the business is registered and commences operation.

Now in the instant case, if the business isn’t formally registered yet, this issue can be resolved in a number of ways depending on the proposed type of corporate structure it seeks to take on.
If it’s a coy limited by shares, parties may draw certain pre-incorporation docs to settle profit and loss sharing. These can subsequently be incorporated by reference into the Articles of Association. In the event of dispute later, parties would simply refer to the Articles.

If it’s a business name, profit and loss sharing would be an indispensable clause in the Partnership Agreement which would be filed together with other registration documents when registering the business.

Now if all of the foregoing was not done and issues arose post registration, to conclusively settle this issue, parties would either have to define their rights and obligations in a Shareholders Agreement (Ltd) or mutually amend the Partnership Agreement (BN) accordingly.

Simply put: irrespective of the corporate structure of your business, always draw up a written agreement between you and your partners on how you want to share profits and loss at all times.

2. As a start up business owner, please what are the things I need to have or put in place before registering my business?

Bolanle Isijola replied :

Beautiful question. The first thing you should consider as a start up business owner based on the nature of your business is what category of corporate organization do I want to register? This would determine what you need to have in place before commencing the registration process. Under the Companies and Allied Matters Act, you may either register your business as a business name or you may incorporate it into a Company.
Business names are usually for partnerships, sole proprietorship, professional firms (law firms, accounting firms) etc, and it is available for all legal business types. It is relatively easy to register with few documentation requirements and few restrictions.

It can be registered by a one or more proprietors. If you decide to register a business name you may engage the services of legal practitioner or a CAC accredited agent or you may explore registering it online at the CAC portal with the personal data and particulars of the Proprietors. You do not need to have started business per say to register a business name. You must however ensure that the name of your business is not one that is identical or closely similar to names already registered or capable of misleading, offensive, violate any existing trade mark.

With respect to a partnership It is essential that a partnership agreement defining the nature, terms of business and stake of each partner is executed by all partners. Although this is not fundamental in registering the partnership as a business name with CAC. Partnerships are also regulated by relevant partnership laws in its operating area and recommend partnership agreements between partners.

With respect to Companies, there are several things that a start-up business must put in place before incorporation. Here is a checklist of things to put in place that would guide you in incorporating a company as a start-up business.

1) Determine the type of company (Start up usually opt for Ltd)
2)Minimum of two shareholders
3)Engage a minimum of Directors
4) Minimum share capital of 10,000
5) Preparation of the Memorandum and Articles of Association of the Company.
6) Location/Registered Address of the Company
7)Engage a company secretary.
8)CAC Application form and payment of the necessary application fees.

As a start up business you can engage the services of company promoters to assist in putting all preliminary pre-incorporation matter in place.

3. Is it important that I register my trademark even as small business owner?

Temitayo Ogunmokun @tbabz__ replied :

To properly answer this, it is important we understand what a trademark is. A trademark is a name or mark that is peculiar to your business. It symbolizes your corporate identity, values, products, expertise and other intangible assets. It’s basically how your patrons know you.

The importance of protecting something so small yet precious cannot be overstated. Because when a competitor beats you to registering it, you’ll be constrained to drop the name and may incur extra costs expunging or erasing it from your existing products.

When your compare the value cost of registering your trademark with the downside of losing it to another brand, it is too disproportionate. Therefore as soon as you register a business, endeavor to protect your business name & logo from competitors by immediately trademarking it.

4. Why do I need to register my business?

Temitayo Ogunmokun @tbabz__ replied :

Registration requirements are determined by the type of business i.e. Company (Ltd) or Business Name (commonly called enterprise). My colleague Bolanle Isijola @bolanle_esq already differentiated between these two in her related tweets. I’ll proceed to list the registration requirements of each.

To register a company, you need to provide proof of name reservation, a filled out application form CAC 1, means of ID of directors (min of 2), evidence of payment of registration fees and stamp duties, Memorandum & Articles of Association.

If one or more of the shareholders are other companies, you need to provide their certificates of incorporation and board resolutions agreeing to take up specific shares, become director and or nominating someone as a corporate representative on the board of the new company.

For business names, you’re required to provide proof of name reservation, proof of payment of registration fees, means of ID, passport photo of proprietor and if more than one, a Deed of Partnership where applicable.

It’s worthy of note that while all of these can personally be done by a person seeking to start a business by virtue of the intensive efforts of the govt on the ease of doing business, it is best that one consults a lawyer for proper guidance on procedure and requirements.

5. Wouldn’t it be too financially demanding to get a lawyer for my business?

Temitayo Ogunmokun @tbabz__ replied :

Plainly speaking, the answer is no. Avoiding legal advice on the basis of cost when starting out may turn out to be a classic case of kobo wise, naira foolish. You run the risk of running into troubles that you could have effectively circumvented with prior sound legal advice.

Consider money spent legal advice as part of your capital investment. As a start up seeking to break into the market, you don’t need to engage a Tier 1 law firm before you get the basic legal help you require. Chances are you may not be able to afford one anyway.

So look inwards. Talk to your network and friends. Get lawyers as friends and ask questions constantly. But ensure to reasonably & fairly remunerate them when appropriate. You’ll be better off for it and as your business scales, you’ll be able to retain optimum legal assistance.

6. How do I recover the debts owed me by a bigger company?

Temitayo Ogunmokun @tbabz__ replied :

Either of two options I.e. non-litigious and litigious
For Option 1, you could explore amicable settlement via negotiation or mediation at the Lagos State Multi Courthouse (LMDC). Proceedings are party driven so lawyers aren’t ‘necessary. It requires concessions but it is quick.

When option 1 fails, you could sue to recover the debt. In Lagos, If the debt is above 10million, sue for it in the High court nearest to you. From 5.1million to 10m, go to the Magistrate Court. If 5m or less, you’re advised to file for recovery of debt at the Small Claims Court.

A small history on the Small Claims Court. It was set up in April 2018 to fast track the recovery of debts to the value of #5million and below. The proceedings last only 60 days from start to finish and as a creditor, you can file and represent yourself in court without a lawyer!

An action is commenced by filing & filing certain forms which can be done by anyone. Matters have been known to start & finish (filing, service, trial & judgment) within 30 days (own experience). It’s arguably the most effective means of recovering debts in Lagos state currently.

7. Please I will like to know if there is any limitation as to time when I can register a business?

Tobi Adebowale @TobiBowale replied :

Thank you for having me on #EngageApril.
In response to the question, the law generally requires registration of a business prior to operations if it is to be formally recognised. Registration wih the Corporate Affairs Commission either as a Business Name or a Company (could be Limited or Unlimited and Private or Public) is for instance required prior to opening a corporate account with a bank or registration with the tax authorities.

In addition to the benefit of formal recognition which will usually be a prerequisite to accessing capital from financial institutions, among other requirements, there are also strictly regulated sectors an unregistered entity cannot do any business at all.

It is therefore important to seek legal counsel prior to starting a business venture. The venture can thereby be guided to enjoy the benefits of registration and to avoid sanctions from applicable regulators of the sector.

8. Is it OK to start a business with my boyfriend?

Bolanle Isijola @bolanle_esq replied :

Yes, there is absolutely nothing wrong with starting a business with your boyfriend. However, I would advise that from the inception of the business you define the business relationship; if it is a partnership, ensure to have a partnership agreement and set out of the stake of each partner in the business.

This is because while no one ever goes into a business anticipating dispute, it is not uncommon. Setting out the business relationship from inception would not only distinguish it from your personal relationship but may save the business at the long run.

9. How do I make my transition from a business name to a LTD?

Tobi Adebowale @TobiBowale replied :

This entails a re-registration of the business name as a Private Limited Company (“LTD”) at the Corporate Affairs Commission and indicating that the particular Business Name is being converted to a LTD at the point of name reservation. A lawyer can provide guidance.

10. Can I enforce an oral agreement? And how if yes?

Bolanle Isijola @bolanle_esq replied :

Generally speaking, an oral contract can be enforced in Nigeria. Before now, in our society tenancy agreements, employment contracts and contracts for sale of goods were contracted orally.
However, where certain statues specify that such contracts must be reduced into writing, an oral contact cannot be enforced in that regard. For instance, contract for mortgage, insurance contract, guarantee, lease of land beyond a period of three years, these are strictly required by statue to be written.

The challenge in enforcing an oral contract is proving the existence and/or terms of the contract. The way out of this is through circumstantial evidence that can objectively infer the existence and/or the terms of the contract such as as receipts of payment, delivery notes transfer of possession of sold goods, text messages and correspondence etc. It is therefore important that all documents relating to a transaction are kept safely as they become extremely valuable in situations where the terms of the contracts are not reduced into a written document.

11. Are there bodies that offer loans to start ups in Nigeria?

Tobi Adebowale @TobiBowale replied :

There are a number of incubation platforms that provide both technical and financial support for startups. Startups may also take advantage of funding provided by the government through its dedicated institutions such as the Bank of Industry, Development Bank of Nigeria etc.

A business lawyer will be able to advise on the most appropriate public or private institutions to approach for funding depending on the nature of business for which the startup has been established, market performance and other factors.

12. I want to buy a small business from it’s current owner, what do I need to look out for? And is there a problem in buying it in the name of my kids?

Bolanle Isijola @bolanle_esq replied:

Before buying a business over you must conduct due diligence, depending on the kind of business you can conduct search at the Corporate Affairs Commission to verify that the business is

1) Duly registered with CAC either as a business name or as a Company.
2) In the case of the company, the Share Capital or assets of the Company and its borrowing power against the encumbrances that has been incurred by the company such are mortgages and charges.
3) Examine the Memorandum and Articles of Association of the company, ensuring that its provisions capture good corporate governance practice and all objective are satisfactory. This would go a long way o reveal the sustainability of the Company.
4) Examine all audited accounts and look at past annual and quarterly financial statements. It is essential to ensure that the company is in good financial standing before acquiring it or is at least capable of being revived.

Lastly examine all physical assets of the company, the value of the current inventory, a breakdown of its real estate and equipment.

Buying a business in Nigeria involves buying the shares in the business if it is registered as a Limited Liability Company or buy parts or all the assets that the business owns (with or without its debt). Both can be done in the name of your child. However, if your child is below the age of 18, there are several legal restrictions, He can only be a shareholder in a company so far as they are at least 2 other shareholders who are adults. A minor can never be a director in any company in Nigeria.

13. How do I protect my idea in a jointly business owned?

Tobi Adebowale @TobiBowale replied :

The foundational legal documents for the business should clearly state what assets belong to the partnership/joint venture and how the ownership of all other assets is to be treated. It is advisable that the party seeking to retain the right to the intellectual property in an invention that forms the basis of a business should independently seek protection of that right by applying for patent registration at his cost and in his name prior to licensing it to the partnership/joint venture.

14. Is it safe to get loans from these new mobile money companies as opposed to the regular banks.?

Tobi Adebowale @TobiBowale replied :

The Central Bank of Nigeria has been making efforts to promote financial inclusion and remains quite vigilant in regulating micro-lending and mobile money operations in Nigeria. To the extent that a platform is duly licensed to lend money within its state of operation, it is safe to approach such platform for a loan. It is however very important to properly understand the terms and conditions attached to the loan. It is advisable to consult with a legal and financial adviser prior to taking such loans.

15. Am I suppose to pay my taxes to the federal government or the state government? And what is the effect of not paying at all?

Tobi Adebowale @TobiBowale replied :

Taxes can be either corporate or personal. Corporate tax such as the Company Income Tax is payable to the Federal Government through the Federal Inland Revenue Service (FIRS) while Personal Income Tax is payable to the state of residence through the relevant State Inland Revenue Service. Tax is imposed by law and tax evasion is a violation of the law. Consequences for tax evasion could include prosecution and a jail term upon conviction. Compliance is strongly advised.

16. Can I sue a government agency that owes me and win in court?

Bolanle Isijola @bolanle_esq replied:

Yes! Most definitely! You can sue a government agency indebted to you to recover the debt and even sue for damages. However, it is essential to note that there are statutory incorporation that require pre-action notice before a litigant is entitled to sue such body.

17. What do I need as required by law to go into the Oil and gas industry?

Tobi Adebowale @TobiBowale replied :

A primary requirement is incorporating a company while other requirements will depend on the segment of the oil and gas industry being considered. For the upstream sector, you will need to apply to the Minister of Petroleum Resources for an Oil Prospecting Licence or Oil Mining Licence.

For the midstream and downstream, various Permits and Approvals as granted by the Department of Petroleum Resources apply depending on the exact nature of operations. Registration with other relevant agencies such as the Nigerian Content Development & Monitoring Board, the Nigerian Investment Promotion Commission, and the National Office for Technology Acquisition and Promotion among others, may also be required.

It is a great privilege for us @LawAxis360 having this conversation with you Tobi Adebowale @TobiBowale, Temitayo Ogundokun @Tbabz__ and Bolanle Isijola@Bolanle_esq. This has been enlightening, stimulating and indeed impactful.
We have come to the end of this session of #AprilEngage. We are glad having you impact so much wisdom to business owners. So much to take away. Thank you so much for honouring our invitation.

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