Zoning & Federal Character
August 30, 2010
Our modest judges
September 15, 2010

Our uncharitable incorporation

Not all the fervor around the 2011 elections is because of the large amounts of money that will be spent or diverted. A lot of the excitement is from the civil society world and international organizations and donors who are certain that the elections are a turning point in our history. So everyone is here. From consultants who are advising political candidates on their campaigns to vendors of anything and everything related to elections and voter registration. There are also not for profit organizations that want to get involved, share their expertise and ideas, and want to help by partnering with and supporting local civil society organizations.

Do Good For All (DGFA), a charitable organization, was incorporated in New York by a few Nigerians who live in the US. Their aim is to execute charitable, public benefit projects in Nigeria as a legal entity which allows the principals of the organization and their donors to earn tax deductions for their generosity. Do Good for All are in Nigeria to help educate young adults about civic participation but they have little funds and want to be involved directly – not just donate money. They have partnered with a local organization and want to be able to control the spending and continue to receive funds from their bank in the US which continues to house the slow and steady donations to the Nigeria 2011 cause. However DGFA have hit a snag. They cannot open a bank account in Nigeria because they do not exist in Nigeria.

“We have our incorporation documents, tax identification number and other accompanying documents, shouldn’t that be enough to show that we are a legal entity?” Dele, the representative of DGFA in Nigeria asks mildly.

“I am afraid not”, replies the local partner dead pan but with silent bubbling glee. “I have spoken to a lawyer who says that DGFA has to be incorporated in Nigeria”.

After speaking to a lawyer, DGFA learns that the Companies and Allied Matters Act of Nigeria provides two options for incorporation as a charitable organization: to be a company limited by guarantee or to be incorporated trustees. What are the pros and cons?

According to counsel, the main advantage of the limited by guarantee entity was that the registration process was relatively easy and inexpensive in terms of requirements and registration fees. However, each company limited by guarantee requires the consent of the Attorney General to the Federation and this is the major problem because acquiring the consent could take anywhere from 2 to 6 months and the process puts the cost for such an entity to about N300,000 ($1973.68 at N152 to a dollar). Dele squeals in disgust before he can help himself. ‘What? That cannot be right. It cost us barely $50 to incorporate in the US and another $150 to get our tax exemption status, why is it so expensive?’ ‘It is because…’ begins counsel when he gets cut off. “Never mind, I really do not need to know; that option is impossible. How can it take us 6 months to get incorporated? The elections would be over by then. What about the second option?’ he asks hopefully.

“Well, with incorporated trustees we do not need the AG’s consent so the entire process can be completed in one month and costs only N150,000 ($986).” He ignores Dele’s rolling eyes and presses on. “The problem here is that there are many requirements including police clearance of each trustee, the publication of the name and objectives of the entity in 3 national daily newspapers and waiting 28 days to see if any member of the public objects.”

“I guess one month is not too long,” Dele says thoughtfully. “But are these really our only options? Are you telling me that every single foreign entity which comes into Nigeria must incorporate locally?”

“DGFA can get a waiver from the Minister of National Planning but this too is a lengthy onerous process which entails your having to prove that DGFA will provide technical assistance to Nigeria and if the NPC is convinced, DGFA will enter into a Cooperation Agreement with the Federal Government.” Dele shakes his head in dawning comprehension that, there is no way out. He thinks about the huge chunk the Nigerian incorporation process will take out of DGFA project funds and wonders silently how charities can be expected to pay so much to be legal.

This is the situation that many local and international organizations face when they want to work in Nigeria. What is absolutely amazing about Nigeria is that the convoluted and frustrating laws and processes, which are supposedly there to prevent fraud, actually serve as the foundation for the crime of extortion.

What is the point of decades of bilateral, bi-national commissions between the United States and Nigeria if an entity duly incorporated in the US cannot be accepted as a legal entity in Nigeria and vice versa? Why are Nigerian lawyers and the Corporate Affairs Commission happy to keep the mindless rote work of incorporation which many other countries have digitized and moved online? If we stop this ‘bread and butter work’ better left to computers to manage wouldn’t that free lawyers to spend more time thinking of creative ways how to develop our arcane laws?

Earlier this year, the US and Nigeria signed yet another agreement for a bi-national commission to “strengthen and deepen” the partnership between the two countries. This is the perfect opportunity for our government, especially the Ministers of Justice, Foreign Affairs and Trade and Commerce, to use this platform to iron out tiny issues like recognizing the legality of each other’s entities. In deference to transnational fraud it might be impossible to automatically accept the legal existence of a foreign entity from a friendly nation, but maybe we can design a quick, efficient and inexpensive process for providing legal status to legal entities eager to operate in Nigeria.

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