The Fate of Foreign Companies in the Nigerian Legal Arena: A Peek into CAMA 2020

Abstract

This article examined the power of foreign companies to sue in Nigeria under the Company and Allied Matters Act (CAMA) 2020, which is the law regulating the formation and operation of companies in Nigeria. This article considered Section 78 and 84(b) of the said Act as it relates foreign participation. It seeks to examine Nigeria’s approach as regards the power of foreign companies. The courts in deciding matters usually hold that foreign companies have the right to enforce their right accruing to them under a contract in Nigerian courts.

It also examined the limitations as regards the power of foreign companies to sue in Nigeria. The courts are limited by some pre conditions. This article also highlighted the relevance of sections 78 and 84(b) of the CAMA 2020 to the Nigerian economy. On conclusion, this article recommends measures and policies to improve the effectiveness of the aforementioned sections and punitive measures for defaulting companies.

 

Introduction

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On August 7. 2020, President Muhammadu Buhari assented to the Companies and Allied Matters Act, 2020 (CAMA 2020), which repeals and replaced the Companies and Allied Matters Act, 1990. The CAMA 2020 came in as a progressive development in the Nigerian business landscape and an enabler of the Ease-of-Doing-Business (EoDB) campaign of the Government.

The Companies and Allied Matters Act (CAMA) 2020 is the primary legislation governing the formation, registration, and operation of companies in Nigeria. It also addresses the legal capacity of foreign companies to engage in legal proceedings within the country.

However, it’s imperative to know that the conferment of juristic personality on foreign companies is not only present in Nigeria. It has also been registered in other jurisdiction on the basis of reciprocity in international relations.

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Power of a Foreign Company to Maintain an Action in Nigerian Courts

Generally, Section 78 mandates every foreign business to be incorporated and registered under the Act with the Corporate Affairs Commission (CAC) before it can carry on business in Nigeria. It is pertinent to note that section 78 is a carryover of section 54 of the former Act.

Section 78 0f CAMA 2020 provides:

“(1) A foreign company shall not carry-on business in Nigeria unless it is registered under this Act.

(2) A foreign business that carries on business in Nigeria without being registered under this Act shall be liable to a fine of not more than N10,000 000 or to imprisonment of not more than 3 years, or both.

(3) A foreign company that carries on business in Nigeria without being registered under this Act shall be liable to be sued in Nigeria in its corporate name or in the name of its agent in Nigeria.”

This begs the question, can a foreign company not incorporated in Nigeria sue and maintain an action in Nigerian Court?

Section 84(b) of the same Act makes express provisions for a foreign company to sue and be sued (in its corporate name or its agent) regardless of whether it is a registered or incorporated company in Nigeria

It provides:

“A foreign company may sue or be sued in its corporate name or in the name of its agent in Nigeria”

The interplay between Sections 78 and 84(b) of CAMA 2020 has significant implications for foreign companies operating in Nigeria

  • Registered Foreign Companies: Foreign companies that have duly registered with the CAC enjoy the full legal capacity to sue and be sued in Nigerian courts. Their registered status also allows them to engage in various business activities within the country.
  • Unregistered Foreign Companies: While unregistered foreign companies are prohibited from carrying on business in Nigeria, they can still initiate legal proceedings in Nigerian courts. This provision ensures that foreign companies have access to legal remedies even if they have not complied with the registration requirements.

These two sections of the CAMA 2020 collectively provide that foreign companies have the power to sue and be sued in Nigeria, regardless of whether they are incorporated in Nigeria. This power is very germane to the operation of foreign companies in Nigeria as it allows them to protect their legal rights and interests in Nigerian courts and also be accountable for their actions whenever sued.

In Companhia Brasileira De Infraestrutura (INFAZ) v Companhia Brasileira. De Entrepostos E Commercio (COBEC) Nig. Ltd. 2004 13 NWLR 376, the issue of whether the plaintiff-appellant, who’s a foreign company (incorporated in Brazil) not incorporated in Nigeria was competent to sue and be sued in Nigeria came up.

The Court of Appeal held that by virtue of Section 60(b) of CAMA 1990 (now Section 84(b) CAMA 2020); a foreign company not registered in Nigeria can sue and be sued in Nigerian courts provided that the said foreign company was duly incorporated according to the laws of a foreign state recognized in Nigeria but if there is a change in the name of that foreign company, evidence of compliance with the law of the land where it was incorporated must be given.

The court held to the same effect in the case of Edicomsa International Inc and Associates v. CITEC International Estates Ltd. (2004) 4 NWLR 114, where it held that a foreign company although not registered in Nigeria can maintain an action in court. The bone of contention involved a foreign company incorporated in the USA but not registered in Nigeria.

In the more recent case of BCE Consulting Engineers v. NNPC (2021) All FWLR (Pt. 1083) 359, the Supreme Court rejected the argument of the respondents that the contract entered by the appellant (a foreign company without incorporation in Nigeria) was illegal and therefore unenforceable.

Although, the court didn’t consider section 84(b), its final decision was right in light of a foreign company unregistered in Nigeria, maintaining an action in court. As an aside, the Apex court should have seized this opportunity to expressly and exhaustively put this issue to rest.

 

Limitations

The Power of a foreign company to maintain an action in Nigerian courts is not absolute. It is subject to some pre conditions.

Firstly, such company must carry on business in Nigeria. The power to maintain an action in court is not available to a foreign company that does not carry-on business in Nigeria.

The question of what “carrying on business” mean was answered by the Court of Appeal in the case of Citec Int’l Estates Ltd. V. Edicomsa Int’l Inc & Associates where the court interpreted section 54 CAMA 1990 (now section 78 CAMA 2020) as regards “carrying on business.

It held thatcarrying on business means to conduct, prosecute or continue a particular vocation or business as a continuous operation or permanent occupation. The repetition of acts may be sufficient. To conduct business also means to hold oneself out to others as engaged in the selling of goods and services. (Black’s Law Dictionary 5th edition p.194)”

Secondly, such legal right/ claim must be justiciable in Nigerian courts. Non-justiciable rights as contained under Chapter 2 of the Constitution of the Federal Republic of Nigeria 1999 (as Amended) are outside the jurisdiction of Nigerian Courts.

Needless to say, foreign companies can’t enforce illegal contracts (contracts barred by statutes) in Nigerian courts. Illegality of contract or transaction impacts the jurisdiction of the court whenever it is raised as a defense to a claim founded on the said transaction.

The court will decline to enforce any ex-facie illegal contract for the court only exercise their jurisdiction to administer the law of the land. They do not help the plaintiff to break the law.

In Citec Int’l Estates Ltd. V. Edicomsa Int’l Inc. & Associates (2017) Sc, the Apex court held that Section 60 (now 84(b) CAMA 2020) of CAMA 1990 does not confer on foreign companies, the right to enforce illegal contracts.

 

Relevance Of Sections 78 and 84(b)

These sections are relevant to the Nigerian economy in a considerable number of ways as they both enhance international trade and commerce. Firstly, they provide certainty and assurance to foreign companies that do business in Nigeria. By granting this power, the risks of unresolved disputes are reduced as the court will assist in the resolution of such disputes.

Secondly, these sections promote economic growth, economic inclusion and development. By easing the way of business for foreign companies, foreign investors are attracted to Nigeria and more jobs are also created.

In the same vein, it promotes innovation and technology transfer because foreign companies often bring new technologies and innovations. This is usually easier whenever there is ease in doing business in the receiving country (Nigeria in this case).

The aforementioned sections also protect the rights and interests of consumers and businesses in Nigeria. These sections allow consumers and foreign companies to seek legal redress whenever the need arises.

Perhaps, the most relevant importance of these sections (78 and 84(b)) is that it creates a level playing field between domestic companies and foreign companies.

This ensures that the law is not tilted towards the advantage of domestic companies or the disadvantage of foreign companies not incorporated in Nigeria. Indeed, the Court followed this logic in the case of Nigria Bank ForCommerce And Industry Ltd V. Europa Traders(uk) Ltd (1990) 6 NWLR (PT.154) 36:

“In as much as a Nigerian goes to Harrods to buy goods on credit can be sued by Harrods in Nigerian courts, so also can a British company from whom a Nigerian has bought goods and has not paid be sued in Nigerian courts. There is basis for reciprocity in international relations and no nationalistic feelings or thoughts should destroy this fundamental rules of international relations.”

Moreover, it makes it impossible for domestic companies to hide under illegal contract unenforceability to shy away from their contractual obligations with a foreign company not incorporated in Nigeria. Indeed, the court followed this reasoning in the case of BCE Consulting Engineers v. NNPC (2021) All FWLR (Pt. 1083) 359.

The effectiveness of these sections can be improved. The Nigerian Government should increase the awareness of these sections among foreign businesses and domestic companies.

The court should also ensure strict adherence to these sections and apply same where necessary. The court should shift from technical justice and ensure that foreign companies maintain their power to sue and be sued.

A reduction of the exemptions contained in Section 80 CAMA 2020 will greatly increase the effectiveness of Section 78.

Section 80 of the CAMA 2020 provides for the exemptions to Section 78 wherein a company may not seek a separate registration in Nigeria. It includes;

  • Foreign companies invited to Nigeria by or with the approval of the Federal Government to execute any specified individual project
  • Foreign companies which are in Nigeria for the execution of specific individual loan projects on behalf of a donor country or international organization.
  • Foreign government-owned companies engaged solely in export promotion activities.
  • Engineering consultants and technical experts engaged in any individual specialist project, under contract with any of the governments in the federation or any of their agencies or with any other body, where such contract has been approved by the Federal Government.

 

Conclusion

In conclusion, CAMA 2020 strikes a balance between regulating foreign companies’ activities and ensuring their access to the Nigerian legal system. Section 78 encourages compliance with registration procedures, while Section 84(B) safeguards the legal rights of foreign companies, even if they are not formally registered. This approach promotes a fair and predictable legal environment for foreign businesses operating in Nigeria.

 

About the Author

Bwala Stephen Amos is undergraduate law student at the prestigious Ahmadu Bello University, Zaria. He is an enthusiastic reader, researcher and legal writer. His interest in the legal sphere includes (but not limited to), Corporate law, Contract law, Arbitration and Tech law.

Bwala Stephen Amos can be contacted via the following:

LinkedIn profile: https://www.linkedin.com/in/amos-stephen-bwala-2160061b8

Phone number: 07066334459

Email address: [email protected]

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