Nigeria: Relationships And Scrutinisations: The Companies And Allied Matters Act 2020 And Transfer Pricing In Nigeria

Introduction

Recently, as part of LeLaw's Nigerian country chapter contribution to Bloomberg's Winter 2020/Spring 2021: Transfer Pricing Forum,² (Bloomberg Publication), we used TP lenses to look closely at the Companies and Allied Matters Act 2020³(CAMA). It was an interesting exercise that revealed the complementariness of CAMA's provisions to that of the Income Tax (Transfer Pricing) Regulations 2018 (TPRs 2018), that is the bulwark of Nigeria's TP regime.⁴ It is saying the obvious that Nigeria's TP regime was until recently, stuck at its basic state – prompting calls by commentators for requisite regulatory actions.⁵ Happily, the TPRs 2012, Nigeria's inaugural TP focused instrument, was issued thereafter in August 2012, to much acclaim.⁶

Surely, heightened TP enforcement action is on the horizon of the Federal Inland Revenue Service (FIRS), and (to a lesser extent), FIRS' State counterparts. Also, taxpayers now neglect TP compliance at their great peril, not the least because of increased penalties for breaches.⁷ Indeed, the implications of the Tax Appeal Tribunal (TAT) decision in Prime Plastichem Nigeria Ltd. v. FIRS,⁸ Nigeria's first TP case, further impel compliance as prudent risk averse strategy on TP issues in Nigeria.⁹ It is saying the obvious that there is likely to be an upswing in TP litigation as the FIRS and taxpayers take differing viewpoints which they are unable to resolve at the Dispute Resolution Panel (DRP) level, envisaged by Reg. 21 TPRs 2018.¹⁰

Has CAMA's predecessors (CAMAs 2004 and1990) always been this TP-disclosure prescriptive? What role can CAC play as the agency with regulatory oversight over CAMA in enforcing CAMA's TP relevant provisions? How can the provisions further provide ammunition for the efficacy of FIRS' TP enforcement functions? This article discusses these and related issues and concludes that the 'searchlight' legislative intent behind it, is a welcome one.

CAMA TP Documentation Requirement Provisions

In my view, CAMA's TP interventions are either indirect or direct, and this article will discuss them accordingly. The former is exemplified by where an external regulatory instrument references CAMA's provisions for TP purposes, whilst the latter is seen when CAMA makes a direct provision which could then be relevant for TP purposes.

1. CAMA's Indirect TP Intervention

Section 13(2)(c) and(e) CITA and the Companies Income Tax (Significant Economic Presence) Order 2020 (SEPO)

I will, with permission, quote and otherwise leverage from the Bloomberg Publication¹¹ as follows:

"Section 4 FA1 2020 amended section 13 CITA's fixed base/permanent establishment rules for taxation of non-resident companies in respect of their Nigerian source profits. The new section 13(2)(c) CITA taxes such non-residents who engage in digital transactions "to the extent that the company has significant economic presence in Nigeria and profit can be attributed to such activity". Meanwhile section 13(2)(e) targets offshore service providers (of technical, management, consultancy, professional services) to residents, 'to the extent that the company has significant economic presence in Nigeria'. Pursuant to enabling powers in that regard (per section 13(4) CITA), the Minister of Finance issued the SEPO in February 2020.¹²

The SEPO is applicable to non-residents deriving gross turnover/income of at least N25 million from a combination of the listed digital activities/transactions, provided that for purposes of the turnover threshold, 'activities carried out by connected persons in that accounting year shall be aggregated.'¹³ Connected persons include 'associates' as defined in the [CAMA] or business associates (being direct or indirect participant in the management, control or capital of the other or both enterprises are subject to such management, control or capital by the same person (Para 1(6) SEPO))."¹⁴

SEPO's reference to "associates" as defined in CAMA, coupled with the fact that CAMA in turn does not directly define it, makes resort to other CAMA provisions to get the full purport of "associates", inescapable.¹⁵ Instructively, instead of the SEPO referring to CAMA's definition, it could have, linked it to the "connected person" test in section 23 CGTA.¹⁶ Or better still, given the comprehensive definition of connected person in Reg 12 TPRs 2018 (which included the CGTA definition), state that "associates" includes connected persons as defined in TPRs 2018.¹⁷ In any event, CAMA's connected person test in section 312(8) for purposes of giving effect to provisions in respect of property transactions involving directors also become relevant (discussed further below).

2. CAMA's Direct TP Interventions

Even if not originally intended for as TP compliance requirements, many CAMA provisions, without the prompting of the tax law, prescribe what turns out to be TP relevant requirements. Ready examples can be found in group financial statements reporting, and in transactions with directors; these are discussed below.

Sections 378-384 CAMA 2020 covers the "Form and Content of Company, Individual and Group Financial Statements". Section 379 (Group financial statements of holding company) obligates directors in 379(1), in addition to preparing individual accounts for each subsidiary, to "prepare group financial statements ...which deal with the state of affairs and profit or loss of the entire company and the subsidiaries." Section 380 provides for the "form and content of group financial statements", referencing the First Schedule.¹⁸

Part 1, First Schedule CAMA 2020 lists under Section A (General Information to be Disclosed), in Para 2(e) "its relationship with its significant local and overseas suppliers (if any) including the immediate and ultimate parent, associated or affiliated company." Para 4 mandates the disclosure of "financial implication of inter-company transfer and technical management agreements between the company and its significant local and overseas suppliers (if any), including its immediate and ultimate, associated, affiliated company".¹⁹ Emphasis supplied.

Part IV, First Schedule CAMA, Para 58 provides that "where a company is a holding company or a subsidiary of another body corporate and any item required by Part I of this Schedule to be shown in the company's balance sheet in relation to group companies includes - (a) amounts attributable to dealings with or interests in any holding company or fellow subsidiary of the company; or (b) amounts attributable to dealings with or interests in any subsidiary of the company, the aggregate amounts within paragraphs (a) and (b) respectively shall be shown as separate items, either by way of sub-division of the relevant item in the balance sheet or in a note to the company's accounts."

Section 381(1) CAMA 2020 deems a company as a subsidiary of another company if the company – "(a) is a member of the company and controls the composition of its board of directors; (b) holds more than 50% in nominal value of its equity share capital; or (c) the first-mentioned company is a subsidiary of any company which is that other's subsidiary."²⁰ Section 868(1) CAMA 2020 also defines persons with significant control.²¹

Section 382 whose side note is captioned"Additional disclosure required in notes to financial statements" references theSecond Schedule.²² By section 382(4) and(5), any current or past director/officer required to give notice to the company for purposes of Part V, Second Schedule but fails to do so is liable to penalty as may be specified by the CAC. Section 383 focuses on disclosure of loans in favour of directors and connected persons and references the Third Schedule. According to section 383(1), "the group financial statements of a holding company for a year shall comply with Part I of the Third Schedule (so far as applicable) as regards the disclosure of transactions, arrangements and agreements mentioned therein, including loans, quasi loans and other dealings in favour of directors." Emphasis supplied. These same requirements are also applicable to shadow directors: section 383(3).

Section 384 also mandates disclosure of loans to officers of the company and statements of amounts outstanding. By section 384(1): they are to comply with Part II, Third Schedule, "so far as applicable, as regards transactions, arrangements and agreements made by the company or its subsidiary for persons who at any time during that year were officers of the company but not directors." These particulars which are meant to be given by way of notes to the accounts, do not apply to officers of banks or of bank holding companies (section 384(3) and (4).

In furtherance of good corporate governance and particularly to prevent conflicts of interest, CAMA has provisions regulating transactions between the company and its directors and officers. These in turn have pro-TP effect by either preventing sweetheart deals or spotlighting them, potentially incentivising arm's length terms where such transactions happen at all. The common underlying theme is that the company is likely to be prejudiced by related party transactions, hence the need to pay extra attention to them. We will discuss under relevant subheadings below.

The subheading of CAMA's section 293-300 is as above. Essentially, remuneration of directors is determined by the company in general meeting (section 293(1)); tax free remuneration is forbidden (unless same was due or was for a period before CAMA came into effect (section 295) a frontal attack against TP type (related party) grossing-up;²³ section 296 forbids grant of loan, security or guarantee to directors, provided that where loan is to be provided to enable a director discharge the duties of his office, same must be with the prior approval of the general meeting with requisite disclosures as to purpose, amount of the loan or the extent of the guarantee and security.²⁴ Furthermore, where approval is not given, the directors authorising the loan, the entering into the guarantee, or provision of the security shall be jointly and severally liable to indemnify the company against any loss arising therefrom (section 296(3)).

Compensation for loss of office can only be made pursuant to prior approval of shareholders, and upon disclosure of full particulars of the proposed payment (section 297). Similarly, such compensation arising from an M&A transaction is illegal unless the proposal has been disclosed and approved by shareholders. However, where such illegal payment is made to a director, then he is deemed to have received the amount in trust for the company; it is recoverable from such director (section 298).²⁵

Part V (Paras 22-34), Second Schedule contains detailed provisions on "Chairman and Directors' Emoluments, Pensions and Compensation for Loss of Office Emoluments". Para 22(3) states that "For the purposes of this paragraph, 'emolument' in relation to a director, includes fees and percentages, any sums paid by way of expenses, allowances, (in so far as those sum are charged to Nigerian income tax), any contribution paid in respect of him under any pensions scheme and estimated money value of any other benefit received by him otherwise than in cash."²⁶

Flowing from the duty of every company to keep a register of directors' interests, and for which directors are required to give notice to the company in that regard (sections 301 and 302), section 303 further mandates directors with direct or indirect interest in contracts to immediately notify the Board, specifying relevant particulars. The declaration of interest must be specific, and failure to comply is an offence which exposes the director to a fine as may be specified by the CAC. Sections 305 and 306 emphasizes the fiduciary duties of directors and proscribes conflicts of interests and duties, with liability to account for secret profits resulting thereby. Finally section 309 affirms that directors are trustees of the company's moneys, properties and their powers, further underlining the duty of care and obligation to exercise their powers in the interests of the company and its shareholders.

Directors or controlling members²⁷ of subsidiary or parent companies or connected persons are precluded from engaging in property transactions with the company unless there is a shareholders' resolution supporting same, after disclosure of material facts relating to the transaction (section 310). The exceptions are in section 311 – for example, no approval is required for wholly owned subsidiaries of parent companies, or if the transaction is done in the counterpart's capacity as a member, rather than director of the company (ss. 311(1) and (3)).²⁸ The consequence of "an arrangement entered into by a company in contravention of section 310 ...and any transaction entered into in pursuance of the arrangement ... is voidable at the instance of the company or voidable by a court on its decision on a claim by members, unless..." restitution or indemnification happens, rights acquired for value and without notice would be affected by the avoidance, or the arrangement is within a reasonable period ratified and affirmed in full (section 312(1) and (2)).

By section 312(3) "If an arrangement is entered into with a company by a director of the company or its holding company or a person connected with him in contravention of section 310 of this Act, that director, controlling member and person so connected, and any other director of the company who authorises the arrangement or any transaction entered into in pursuance of such an arrangement, commits an offence and liable - (a) to account to the company for any gain which he has made and any loss or damage suffered by the company, directly or indirectly by the arrangement or transaction, (b) directly and derivatively to members of the company for any loss or damage suffered by them, (c) jointly and severally with any other person liable under this subsection, to indemnify the company for any loss or damage resulting from the arrangement or transaction, where found guilty and convicted of an offence guilty of the office, disqualified to serve as a director of the company."²⁹

According to section 312(8): "A person is connected with another person if he is - (a) that other person's spouse, child or step-child, including illegitimate child; (b) a body corporate with which the person is associated; or (c) a person acting in his capacity as trustee of any trust, the beneficiaries of which include - (i) the director, his spouse, any children or step-children, or (ii) a body corporate with which he is associated, or of a trust whose terms confer a power on the trustees that may be exercised for the benefit of the person, his spouse or any children or step-children of his, or any such body corporate; or (d) a person acting in his capacity as partner of that director or of any person who, by virtue of paragraphs (a), (b) or (c), is connected with that director."³⁰

Another body of provisions of interest is Third Schedule CAMA 2020 (Particulars in Company Financial Statements of Loan and Other Transactions Favouring Directors and Officers).³¹ Its Part I relates to "Matters to be disclosed under section 383". Paras 1-3(1) states that:

"Group financial statements shall contain the particulars required by this Schedule of - (a) any transaction or arrangement of a kind described in section 296 of this Act entered into by the company or by a subsidiary of the company for a person who at any time during the year was a director of the company or its holding company, or was connected with such a director; (b) an agreement by the company or by a subsidiary of the company to enter into any such transaction or arrangement for a person who was at any time during the year a director of the company or its holding company, or was connected with such a director; and (c) any other transaction or arrangement with the company or subsidiary of it in which a person who at any time during the year was a director of the company or its holding company had, directly or indirectly, a material interest. 2. The accounts prepared by a company other than a holding company shall contain the particulars required by this Schedule of - (a) any transaction or arrangement of a kind described in section 296 ...entered into by the company for a person who at any time during the year was a director of it or of its holding company or was connected with such a director; (b) an agreement by the company to enter into any such transaction or arrangement for a person who at any time during the year was a director of the company or its holding company or was connected with such a director; and (c) any other transaction or arrangement with the company in which a person who, at any time during the year, was a director of the company or of its holding company had, directly or indirectly, a material interest. 3.(1) For purposes of paragraphs 1(c) and 2(c), a transaction or arrangement between a company and a director of it or of its holding company, or a person connected with such a director, is to be treated, as a transaction arrangement or agreement in which that director is interested."³²

Interestingly, Para 7 disapplies Paras 1(c) and 2(c) if the related party transaction or arrangement was entered into "in the ordinary course of business"; or "(b) the terms of the transaction or arrangement are not less favourable to any such party than it would be reasonable to expect if the interest mentioned in that subparagraph had not been an interest of a person who was a director of the company or of its holding company." This is a more frontal attempt to invoke arm's length principle, akin to statutory tax provisions.³³

Part II, Third Schedule is captioned "Matters to be disclosed under Section 384". Thereunder, Para 13 provides that: "This Part of this Schedule shall apply in relation to the following classes of transactions, arrangements and agreements - (a) loans, guarantees and securities relating to loans, arrangements of a kind described under section 296 ... relating to loans and agreements to enter into any of the foregoing transactions and agreements; (b) quasi-loans, guarantees and securities relating to quasi-loans, arrangements of a kind described in either of those subsections relating to quasi-loans and agreements to enter into any of the foregoing transactions and arrangements; (c) credit transactions, guarantees and securities relating to credit transactions and arrangements of a kind described in either of those subsections relating to credit transactions and agreements to enter into any of the foregoing transactions and arrangements."

Meanwhile, Para 14 states: "(1) To comply with this Part of this Schedule, the accounts must contain a statement, in relation to transactions, arrangements and agreements, made as mentioned in section 296(1) of this Act - (a) the aggregate amounts outstanding at the end of the financial year under transactions, arrangements and agreements within subparagraphs 13(a), (b) and (c); and (b) the number of officers for whom the transactions, arrangements and agreements falling within each of those sub-paragraphs, were made. (2) This paragraph does not apply to transactions, arrangements and agreements made by the company or any of its subsidiaries for an officer of the company if the aggregate amount outstanding at the end of the year under such transactions, arrangements, and agreements do not exceed N5,000."

Conclusion

Incidentally, the "connected person" definition in Reg. 12 TPRs 2018 does not include CAMA's definitions, but only those in substantive Nigerian tax legislation and two TP related international instruments.³⁴ However, the omission is not fatal and will not prevent the FIRS from using CAMA provisions to come to a decision whether a company's financial statements comply with CAMA requirements, albeit for FIRS' tax audit/enforcement purposes. This does not detract from the CAC's regulatory oversight regarding CAMA's provisions, pursuant to which for example, it insists that to be accepted for filing, the Annual Returns (ARs) of active companies must be accompanied by audited financial statements, not even statement of affairs (acceptable for dormant companies), not to talk of ARs being field without financials at all.³⁵

And it is well known that the CAC will refuse to accept for filing or process, any other filing evidencing corporate changes such as changes in composition of the board or of shareholding, registered address, company secretaries, etc; if their ARs of such companies are not up to date. Thus, the first step required of such companies intending to notify CAC of corporate changes is that they regularise their AR status.³⁶ In doing so, they will pay accrued penalties as may be prescribed by the CAC (section 425).³⁷

The above analysis has attempted to show how CAMA's transparency and good corporate governance objectives (enshrined in its mandatory provisions some of which have been highlighted herein), can also help further the Revenue's TP enforcement strategy. This writer firmly believes that the legislature's has effectively, even if unwittingly, interposed the CAMA as part of Nigeria's TP compliance architecture.³⁸ Incidentally, CAMA seemed to have even blazed the trail, when Nigeria's GAAR regime was stuck in obsolescence before the issuance of TPRs 2012.³⁹

Even the Nigerian Code of Corporate Governance 2018 (NCCG) made pursuant to the Financial Reporting Council of Nigeria Act⁴⁰ has also come in to lend its weight, vide 'CAMA reinforcing' provisions that also indirectly advance TP compliance. Ultimately, it is a case of "all's well that ends well", as FIRS' toolbox is now sufficiently sophisticated and adaptable to its TP enforcement focus, with potential for prompt regulatory action (exemplified by the promised annual enactment of Finance Acts and revisions to the TPRs), in line with macro-economic and business realities.

Footnote

1. Quote also often (but reportedly erroneously), ascribed to William O. Douglas, former US SEC Chairman and later Supreme Court Justice. See Martin Fridson, 'Supreme Court Judge's Aphorism Moves into the Sunlight', Financial Times, 21.04.2013: https://www.ft.com/content/4d70e542-a770-11e2-bfcd-00144feabdc0 (accessed 03. 04.2021).

2. Bloomberg Tax & Accounting, 'Winter 2020/Spring 2021: Transfer Pricing Forum (Transfer Pricing for the International Practitioner)', Vol. 12, Issue 1, (April 2021), pp 116 -129. Available at: pro.bloombergtax.com.

3. Act No. 3 2020, signed into law on 7^th August 2020. A brief recent historical footprint of Nigerian companies' legislation is as follows: TheCompanies Decree (later Act) No.51 of 1968 (CD 1968) was repealed and succeeded by the Companies and Allied Matters Decree No. 1 of 1990 (CAMD), which was in turn consolidated into the Laws of the Federation of Nigeria (LFN) 1990 as Companies and Allied Matters Act, Cap. 59, LFN 1990 (CAMA 1990). Cap. 59 (as amended) was further consolidated as Companies and Allied Matters Act, Cap. C20, LFN 2004 (CAMA 2004), which has been repealed and succeeded by CAMA 2020.

4. The TPRs 2018 was issued on 12^th March 2018 and gazetted as S.I.No.10 of 2018. Per its explanatory note, it was issued pursuant to section 61 FIRS (Establishment) Act, Cap. F34, LFN 2004 (FIRSEA). Its Reg.1 stated that the TPRs "shall give effect to the relevant provisions of the" therein listed substantive tax legislation: Personal Income Tax Act, Cap. P8, LFN 2004 (PITA); Companies Income Tax Act, Cap. C21, LFN 2004 (CITA); Petroleum Profits Tax Act, Cap. P13, LFN 2004 (PPTA); Capital Gains Tax Act, Cap. C1, LFN 2004 (CGTA); and Value Added Tax Act, Cap. V1, LFN 2004 (VATA).

5. This writer was one of such commentators. In 'Why Our Anti-Avoidance Provisions Need Review', 'Taxspectives', ThisDay Lawyer, 07.02.2012, p.12; (also available at: https://lelawlegal.com/add111pdfs/Why-Nigerian-Tax-Avoidance-Provisions-Need-Review1.pdf, accessed 09.04.2021), he stated: "Case for Nigerian GAAR? In a January 2007 seminar paper, 'Protecting the Public Fisc: A Comparative Review of South Africa (SA)'s Proposed General Anti Avoidance Rules (GAAR)', I noted: Nigeria does not have a well-developed GAAR provision, apparently based on current level of sophistication of its 'emerging' capital market. ...Pending tax bills before the National Assembly do not contain comprehensive GAAR. SA may well be the only African with developed GAAR provisions, given the relative sophistication of its economy." "It would seem that currently, the Nigerian anti-avoidance regime is panoply of disparate provisions..." "Despite this panoply, our anti-avoidance provisions when compared with other jurisdictions seem to be elementary, and may require comprehensive review: Nigeria needs its own 'modernised' GAAR." "Postscript [at p.2, LeLaw branded version]: After the original publication of this article in February 2012, the Income Tax (Transfer Pricing) Regulations No. 1, 2012 was issued by FIRS, with a commencement date of 1^st August 2012."

6. See Afolabi Elebiju, 'TP Regulations: Stay Awake Issues and Litigation', 'Taxspectives', ThisDay Lawyer, 02.04. 2013, p.12; also available at: https://lelawlegal.com/add111pdfs/TP-Compliance-Issues-and-Litigation1.pdf (accessed 09.04.2021) which discussed the TPRs 2012. See also Afolabi Elebiju, 'Transfer Pricing in Nigeria: The New Reality', Templars' Tax Training, 11.12.2012: https://www.templars-law.com/wp-content/uploads/2015/05/ Transfer -Pricing-in-Nigeria-the-new-reality-.pdf (accessed 09.04.2021). " 'Pre-TP Regs: Regulatory Regime:' Nigeria's GAAR (General Anti-Avoidance Rules) embodied in s.22 CITA; replicated in pari materia as ss. 20 CGTA; 15 PPTA & 17 PITA; - S.22(1) : 'where the Board is of opinion that any disposition is not in fact given effect to or that any transaction which reduces or would reduce the amount of any tax payable is artificial or fictitious, it may disregard any such disposition or direct that such adjustments shall be made as respects liability to tax as it considers appropriate so as to counteract the reduction of liability to tax affected, or reduction which would otherwise be affected, by the transaction and any company concerned shall be assessable accordingly' " (Slide 8); "S.22(2)(b) seeks to catch related party transactions: 'transactions between persons one of whom either has control over the other or, in the case of individuals, who are related to each other or between persons both of whom are controlled by some other person, shall be deemed to be artificial or fictitious if in the opinion of the Board those transactions have not been made on terms which might have been expected to have been made by persons engaged in the same or similar activities dealing with one another at arm's length. Taxspectives' Artificial Transactions article (Feb 2012, reiterated 2007 view): Nigerian GAAR 'basic' vis a vis increasing sophistication of transactions; risk of 'equity varying according to the size of Chancellor's foot'. TP Regs 2012 a welcome attempt to provide clarity, play 'catch up' with the market." (Slide 9). "Comprehensive documentation and disclosure requirements (Reg 6). Q: whether TP Regs didn't take too long in coming - given TP's reported jostling with corruption as capital flight leader out of emerging economies;" (Slide 17).

7.Cf. for example, Reg. 13 TPRs 2012 (Offences and Penalties) and Reg. 20 TPRs 2018 (Offences and Administrative Penalties).

8. (2020) 51 TLRN 1.

9. The basis for some of the conclusions reached by the TAT has been widely criticised by some commentators; however, the decision remains binding until set aside on appeal, if at all.

10. Cf. with Reg. 14 TPRs 2012 also titled "Dispute Resolution".

11. At pp.117-118.

12. The SEPO is contained the Federal Government of Nigeria (FGN) Official Gazette No. 21, Vol. 107 of 10^th February 2020, although the Gazette itself was published in May 2020. The SEPO's effective date is 3^rd February 2020. Note also section 25 FA2 2020's insertion of a new section 6A(1) PITA: "...where an individual, executor, or trustee outside Nigeria carries on a trade or business that comprises the furnishing of technical, management, consultancy or professional services to a person resident in Nigeria, the gains or profits of the trade or business shall be deemed to be derived from and taxable in Nigeria to the extent that the individual, executor or trustee has significant economic presence in Nigeria..." The newsection 6A(2) PITA also authorises the Minister to issue the related SEPO. This does not appear to have been done, albeit it has been noted that: "presumably, this will, with necessary modifications, tow the lines of the CIT Significant Economic Presence Order 2020 issued pursuant to FA1 2020 CITA amendments." See Afolabi Elebiju, 'Rendezvous': Implications of Tax Provisions of Nigeria's Finance Act (No.2) 2020 for Non-Residents, LeLaw Thought Leadership Reflections, January 2021, p.5: https://lelawlegal.com/ add111pdfs/TLR_AE_-_FA2_2020.pdf (accessed 09.04.2021).

13. See Para 1(1) and (5) SEPO.

14. Emphasis supplied. The SEPO refers to CAMA, Cap. C20 LFN 2004 as amended, making the provisions of CAMA 2020 (enacted subsequent to the SEPO), applicable.

15. Whilst CAMA 2020 does not directly define "associates" (whether in its interpretation section 868 or elsewhere), this can be pieced together vide provisions like section 312(7) (or section 312(8) for "connected" person). CAMA uses "associate", "associates" "associated" or "associated with" severally, such as in sections 162(6), 312(8), 321(7) 753, Paras 2(2) and 4, Part I, Section A, First Schedule, Para 64, Part IV, First Schedule, Paras 8(c), (d) and 10(c), Part I Third Schedule, Para 4 Fifth Schedule; "controlling", "control", "controlled" in sections 310, 312(3) and(7), 381(2), 852(e), and Para 86(1) First Schedule.

16. Section 23 CGTA, captioned "Meaning of 'connected persons'" prescribes in 23(1) that "any question whether a person is connected with another shall for purposes of the [CGTA] be determined in accordance with this section..." By subsection (2), "A person is connected with an individual if that person is the individual's husband or wife, or is a relative, or the husband or wife of a relative, of the individual or of the individual's husband or wife." Other subsections are as follows: "(3) A person, in his capacity as trustee of a settlement, is connected with any individual who in relation to the settlement is a settlor, and with any person who is connected with such an individual. (4) A person is connected with any person with whom he is in partnership, and with the husband or wife or a relative of any individual with whom he is in partnership. (5) A company is connected with another company- (a) if the same person has control of both, or a person has control of one and persons connected with him, or he and persons connected with him, have control of the other; or (b) if a group of two or more persons has control of each company, and the groups either consist of the same persons or could be regarded as consisting of the same persons by treating (in one or more cases) a member of either group as replaced by a person with whom he is connected. (6) A company is connected with another person, if that person has control of it or if that person and persons connected with him together have control of it. (7) Any two or more persons acting together to secure or exercise control of a company shall be treated in relation to that company as connected with one another and with any person acting on the directions of any of them to secure or exercise control of the company. (8) In this section, 'relative' means brother, sister, ancestor or lineal descendant". Emphasis supplied. See also section 20 (Artificial or fictitious transactions), especially section 20(3)(b) on transactions otherwise than at arm's length; section 22 (Transactions between connected persons) and section 46 (Interpretation and supplementary provisions).

17. See Reg.12 TRPs 2018 reproduced at footnote 30 below. Or was the SEPO trying to 'cover the field', in case there are still some persons who would not have been caught, unless by incorporating CAMA's definitions? This is moreso as the substantive tax legislation would, depending on context, always be considered relevant for purposes of interpreting SEPO or giving effect to it.

18. By section 380(2) CAMA 2020, "Group financial statements together with any notes thereon shall give a true and fair view of the state of affairs and profit or loss of the company and the subsidiaries dealt with by those statements as a whole." The First Schedule (Form and Content of Company's Financial Statements) was made pursuant to sections 378 and 380 CAMA 2020.

19. This essentially the same as the Second Schedule in CAMA 1990 and CAMA 2004. Most of the CAMA 2020 provisions considered in this article are a rehash of earlier version CAMA provisions, in many cases, the only difference being the numbering. For example, Schedules 2 and3 CAMA 2020 were Schedules 3 and 4 in CAMA 1990 and CAMA 2004. Section 381 CAMA 2020 is an exact reproduction of section 338 CAMA 1990 and CAMA 2004 down to the side note. These and many other examples support this writer's hypothesis that CAMA had always had TP relevant provisions prior to CAMA 2020.

20. By section 381(2) CAMA 2020, the composition of the board of a company is deemed to be controlled by another company if the latter is able to solely procure the appointment or removal of the majority or all of the former's directors. See also Paras 74 and75 Part V, First Schedule CAMA 2020 which defines "fellow subsidiary" and "group companies" as follows: "A body corporate is treated as a fellow subsidiary of another body corporate if both are subsidiaries of the same body corporate but neither is the other's"; and "'Group company' in relation to any company, means any body corporate which is that company's subsidiary or holding company, or a subsidiary of that company's holding company." Meanwhile, "related company" is defined in Para 86, Part V, First Schedule, "(1) in relation to any company, means any body corporate (other than one which is a group company in relation to that company) in which that company holds on a long-term basis a qualifying capital interest for the purpose of securing a contribution to that company's own activities by the exercise of any control or influence arising from that interest. (2) ... 'qualifying capital interest' means, in relation to any body corporate, an interest in shares comprised in the equity share capital of that body corporate of a class carrying rights to vote in all circumstances at general meetings of that body corporate. (3) Where - (a) a company holds a qualifying capital interest in a body corporate; (b) a company exercises material influence in matters relating to dividends, commercial and financial policies; and (c) the nominal value of any relevant shares in that body corporate held by that company is equal to twenty per cent or more of the nominal value of all relevant shares in that body corporate, it shall be presumed to hold that interest on the basis and for the purpose mentioned in subparagraph (1), unless the contrary is shown. (4) In subparagraph (3) 'relevant shares' means, in relation to anybody corporate, any such shares in that body corporate as are mentioned in subparagraph (c).

21. " 'Person with significant control' means any person - (a) directly or indirectly holding at least 5% of the shares or interest in a company or limited liability partnership; (b) directly or indirectly holding at least 5% of the voting rights in a company or limited liability partnership; (c) directly or indirectly holding the right to appoint or remove a majority of the directors or partners in a company or limited liability partnership; (d) otherwise having the right to exercise or actually exercising significant influence or control over a company or limited liability partnership; or (e) having the right to exercise, or actually exercising significant influence or control over the activities of a trust or firm whether or not it is a legal entity, but would itself satisfy any of the first four conditions if it were an individual".

22. For example, Parts III, IV and V, Second Schedule deals with disclosure of subsidiaries financial information; disclosure of a subsidiary to disclose its ultimate holding company; and emoluments of directors including pensions and compensation for loss of office to current and past directors respectively. Part II, Second Schedule (Shareholding in Companies Other than Subsidiaries) has stipulations in its Paras 7-13. For example, by Paras 7 and8: "7. If, at the end of a year, the company holds shares of any class comprised in the equity share capital of another body corporate (not being its subsidiary) exceeding ...20% of the nominal value of the allotted shares of that class, there shall be stated - (a) the name of that other body corporate, if it is incorporated - (i) in Nigeria and if it is registered in Nigeria, the part of Nigeria in which it is registered; and (ii) outside Nigeria, the country in which it is incorporated; (b) the identity of the class and the proportion of the nominal value of the allotted shares of that class represented by the shares held; (c) if the company also holds shares in that other body corporate or another class (whether or not comprised in its equity share capital), or of other classes (whether or not so comprised), the like particulars as respects that other class or (as the case may be) those other classes ; and (d) the accounting treatment, (the equity or costs). 8. If, at the end of its year, the company holds shares comprised in the share capital of another body corporate (not being its subsidiary) exceeding in nominal value [10%] of the allotted share capital of that other body, there shall be stated - (a) with respect to that other body corporate, the same information as is required by paragraph 7(a); and (b) the identity of each class of such shares held and the proportion of the nominal value of the allotted shares of that class represented by the shares of that class held by the company." See also Parts III and IV, Second Schedule captioned, "Financial information about subsidiaries" and "Identification of ultimate holding company" respectively.

23.This was a clear example of CAMA joining the TP fight early, as section 295 CAMA 2020 had been part of Nigerian law at least since 1990 (if not before), being sections 269 CAMD, CAMA 1990 and CAMA 2004 respectively. Section 295(1) and (2) provides: "(1) It is not lawful for a company to pay a director remuneration (whether as director or otherwise) free of income tax, or calculated by reference to or varying with the amount of his income tax, or at or with the rate or standard rate of income tax, except under a contract which was in effect at the commencement of this Act, and provides expressly, and not by reference to the articles, for payment or remuneration. (2) Any provision contained in a company's articles or in any contract other than such a contract as mentioned in subsection (1), or in any resolution of a company or of a company's directors for payment to a director of remuneration as mentioned in subsection (1), shall have effect as if it provided for payment, as a gross sum subject to income tax, of the net sum for which it actually provides." Emphasis supplied. Section 295(3) provision that "this section does not apply to remuneration due before this Act comes into effect or in respect of a period before it comes into effect" is now moot because it will hardly apply today, given the age of the provision (it was section 269(3) in CAMA 1990). Cf. with Reg.2, CIT (...WHT) Regulations 1997's "lame" provision (without penalty), that: "a deduction made from a payment shall not be regarded as an additional cost to the contract price as tax due on the payment". Section 81 CITA (for example), could have hosted a more robust subsection along these lines. It was only with effect from January 2020 that section 11 FA1 2020 amended section 27(1) CITA (Deductions not allowed) by inserting a new 27(1)(1)(l), that: "any tax or penalty borne by a company on behalf of another person", expressly disallowing same. In this way, CITA apparently came late to the party (but better late than never!), by trying to do what section 295 CAMA did regarding directors' remuneration, to discourage gross-up generally for all transactions, sort of "covering the field". Nonetheless, it is worth noting that whilst CAMA forbids, CITA merely discourages, because disallowing an expense does not go to the validity of the expense, but to its tax deductibility. Thus, whilst grossing up of directors remuneration is illegal, some others may still be valid, albeit now frowned upon by tax legislation. In sum, the structuring of the gross-up (as ascertained from its phraseology) and whether there is specific prohibition is what determines the legality of a particular gross-up transaction. Irrespective, it remains very striking that CAMA took a more aggressive stance, (and early too) against this type of TP, rather than tax legislation that ought to have led the charge. Section 295 CAMA is a provision that researchers would be forgiven for not adverting their minds to, because they searched for same in the tax statute books (presumably proper location), rather than CAMA (the actual location).

24. Per section 296(2)(b), if the approval of the company is not given at or before the next annual general meeting (AGM), the loan shall be repaid or the guarantee discharged within six months from the date of the meeting.

25. See also section 299 requiring directors to disclose and get shareholders' approval of any payment for loss of office incidental to transfer or acquisition of shares, especially which could result in subsidiary/parent company relationship or involve control or exercise of 1/3 voting power at any general meeting of the company; otherwise the payment will also be deemed as received in trust, etc. See also section 300 for supplemental provisions to sections 298 and 299.

26. Part V was so prescriptive that it had its Para 33 devoted to interpreting Paras 22-32. Thus by 33(2): "A reference to the company's subsidiary - (a) in relation to a person who is or was, while a director of the company, a director also, by virtue of the company's nomination (direct or indirect) or any other body corporate includes, (subject to subparagraph (2) that body corporate, whether or not it is or was in fact the company's subsidiary ; and (b) for the purposes of paragraphs 22-28 (including any provision of this Part referring to paragraph 22) is to a subsidiary at the time the services were rendered, and for the purposes of paragraph 29, to a subsidiary immediately before the loss of office as director."

27.By section 310(3), "A person is a controlling member of a company if that person, either alone or in an understanding with other persons, has more than 50% of the voting power to elect or remove directors of the company."

28. Section 311(2) also recognises two exceptions when section 309 will not apply.

29. Emphasis supplied. Section 312(5) states that section 312 "is without prejudice to any liability imposed" other than by it, "and is subject to subsections (6)-(7) and the liability under subsection (3) arises whether or not the arrangement or transaction entered into has been avoided under subsection (1) of this section." Furthermore, section 312(6) provides: "If an arrangement is entered into by a company and a person connected with a director of the company or its holding company in contravention of section 310 of this Act, that director is not liable under subsection (3) if he shows that he took all reasonable steps to secure the company's compliance with that section." Subsection (7) affirms that "This section has effect with respect to references in sections 310, 311 and 312 of this Act to a person being 'connected' with a director of a company, and to a director being 'associated with' or 'controlling' a body corporate."

30. Compared with the connected person test in section 23(8) CGTA, CAMA's test seems narrower, focusing essentially on the nuclear family (person, spouse, children including step-children and illegitimate children); whereas the former (in addition to spousal relationship) speaks in terms of relative of the individual or spouse or the spouse of a relative. The CGTA however omits children.

31. This provision's in pari materia predecessor was Fourth Schedule CAMA 2004, pursuant to sections 340 and 341 CAMA 2004.

32. Para 3(2) clarifies that "an interest in such a transaction or arrangement is not material for purposes of subparagraph (1) and this subparagraph if, in the board's opinion it is not so, but this shall be without prejudice to the question whether or not such an interest is material in a case where the board has not considered the matter." Para 4 excludes banks and their holding companies from the requirements of Paras 1 and 2, and Para 5 in part states that same shall not to (executive) directors' contracts of service, etc; whilst Para 6 insists application of Paras 1 and2 shall apply whether or not, amongst others "(a) the transaction or arrangement was prohibited by section 296 of this Act".

33. See also Paras 9 and 10 (Particulars required by this Part): "9. (1) ... the particulars required by this Part are those of the principal terms of the transaction, arrangement or agreement. (2) ...the following particulars are required - (a) a statement of the fact either that the transaction, arrangement or agreement was made or subsisted ... during the year; (b) the name of the person for whom it was made and, where that person is or was connected with a director of the company or of its holding company, the name of that director; (c) in a case where paragraph 1(c) or 2(c) applies, the name of the director with the material interest and the nature of that interest; (d) in the case of a loan or an agreement for a loan or an arrangement within section 296 of this Act relating to a loan - (i) the amount of the liability of the person to whom the loan was or was agreed to be made, in respect of principal and interest, at the beginning and at the end of the year, (ii) the maximum amount of that liability during that year, (iii) the amount of any interest which, having fallen due, has not been paid, and (iv) the amount of any provision (within the meaning of the First Schedule to this Act), made in respect of any failure or anticipated failure by the borrower to repay the whole or part of the loan or to pay the whole or part of any interest on it; (e) in the case of a guarantee, security or an arrangement within section 296 ... relating to a guarantee or security - (i) the amount for which the company (or its subsidiary) was liable under the guarantee or in respect of the security both at the beginning and at the end of the year, (ii) the maximum amount for which the company (or its subsidiary) may become so liable, and (iii) any amount paid and any liability incurred by the company (or its subsidiary) for the purpose of fulfilling the guarantee or discharging the security (including any loss incurred by reason of the enforcement of the guarantee or security); and (f) in the case of any transaction, arrangement or agreement other than those mentioned in paragraphs 11(2)." Para 11 excludes Para 9(2)(c)-(f), " if the first-mentioned body corporate had not been associated with a director of that company at any time during the relevant period."

34. Reg. 12 TPRs 2018 provides: "Connected person. (1) Generally, persons are deemed connected where one person has the ability to control or influence the other person in making financial, commercial or operational decisions, or there is a third person who has the ability to control or influence both persons in making financial, commercial, or operational decisions. (2) In these Regulations, 'connected persons' includes persons who are related, associated, or connected to one another as defined in – (a) the Companies Income Tax Act...; (b) the Petroleum Profit Tax Act...; (c) the Personal Income Tax Act...; (d) the Capital Gains Tax Act...; (e) Article 9 of the OECD and UN Model Tax Conventions and the Agreements for the Avoidance of Double Taxation between Nigeria and other countries; and (f) the OECD TP guidelines and UN TP Manual." (Emphasis supplied).

35. Chapter 16 (sections 417 – 433) CAMA 2020 enshrines provisions on ARs (although only sections 417-425 has direct bearing on ARs). Section 422 CAMA 2020 (section 375 CAMA 1990 and CAMA 2004) is the statutory basis for attaching audited financials to ARs. Section 423 CAMA 2020 (376 CAMA 2004), provides for compliance certificates to be attached to ARs by "private companies" and "small companies". By virtue of provisions such as sections 484 and 485 CAMA 2020, it appears that Statement of Affairs will now be submitted in respect of companies under administration.

36. It is noteworthy though that typically, the same audited financials accompany the ARs and tax returns that companies file with the CAC and FIRS respectively – any variance will effectively be 'a smoking gun'. This requirement ensures the integrity of filings since the the CAC will not audit financials (that is a role for FIRS), its insistence is only that they conform with CAMA's requirements and they must be filed with ARs.

37. Cf. section 378 CAMA 2004. In practice, penalties are payable on a per year basis.

38. See for example, earlier discussion on section 295 CAMA 2020 (section 269 CAMA 1990 and 2004) prohibiting tax free remuneration to directors. 'Without mentioning TP', compliance with CAMA provisions on related party transactions forces companies to indirectly make TP relevant documentation; if they conflict with TP documentation or disclosures under the TPRs 2018, same could trigger exposure for such companies. They could potentially become far more visible target for TP audits which could result in significant TP liability as outcomes of such exercise. Thus, ensuring consistency/integrative relationship between that CAMA and TP Documentation under the TPRs 2018 is helpful.

39. Cf. CAMA's provisions on remuneration and other payments to directors(sections 267-274 CAMA 1990 andCAMA 2004 vis a vis CAMA 2020); property transactions by directors (sections 284-287 CAMA 1990 andCAMA 2004 vis a vis CAMA 2020); sections 337 CAMA 1990 and CAMA 2004 referencing Second Schedule which is substantially 378 CAMA 2020 and its First Schedule; other new provisions in CAMA 2020 etc withsection 22 CITA's basic TP provision (and equivalents in other tax legislation), until the entry of the TPRs 2012, followed by TPRs 2018 and allied, cum subsequent instruments. There was no significant substantive TP focused amendments in 2007 when the Nigerian tax landscape witnessed wholesale amendments of the CITA, PITA, PPTA, CGTA, VATA and the enactment of the FIRSEA.

40. No. 6 of 2011 (the FRCN Act), which is administered by the FRCN. The NCCG is available at: https://nambnigeria.org/Nig_Code_of_Corp._Governance_2018.pdf (accessed 19.04.2021).

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