When Kanu Nwankwo was projected as “Papilo” in the “Peak Milk” advert after Nigeria’s tremendous victory at the historic 1994 Olympic football match, Nigerians were moved by that sentiment/psychology and almost every local footballer, nay, every home touched by love for this footballer took to drinking no other milk but Peak Milk. The huge sales recorded by the company after that advert is not in doubt.

If we are faced with the doubt of venturing into an investment with a company, and we are shown some documents proving that the owner or perhaps one of the company’s director is the eminent Nigerian industrialist, Aliko Dangote, perhaps our doubts will cease and we will thrust into the business confident that it will succeed. I am sure every country has such reputable individuals with such driving force.

The perception that induces members of the public to repose confidence in products, services or entities in which a particular person or group of persons is/are associated with is what I refer to as “human/personal goodwill”. In this case, it is not the company or its brand per se that brought in the sales, subscribers or goodwill et al, but the person or persons in the advert or company. As such, that person’s voice, name, signature, presence, image, etc, culminates into what has been called – human goodwill. My principal partner, Mr. Afam Nwokedi, whose opinions have been extensively captured in this paper prefers the term “personality rights” and defines it as: Indeed, the driving force of a company’s success does not only depend on its own brand but sometimes it is largely based on the reputation and goodwill of the human person seen to be associated with the company or brand. Simply put, if the reputation or goodwill of the hands and legs of a business entity is in doubt, that business will undoubtedly face economic challenges, its brand notwithstanding. An example that easily comes to mind is the AOL case.¹

It is the human behind the veil that promotes the company through its altitude to customers, its reputation, its impeccable services, et al. While we do not disagree that brands/trademarks can also promote the company, we are saying that even so, reputable humans are used to promote the brand recognition. And let us not forget that a company’s goodwill may come to ruin through the reputation of its director.²

Unfortunately, there is no law that protects the economic benefits of this hard-earned human reputation and goodwill. Directors, who are part of the company management and policy makers do not engage in direct advert, but the personalities they bring to bear in the company by way of their reputation somewhat constitute a measure of an indirect advertisement, and such reputation translates goodwill to the company in transactional terms. The irony of the above scenario is that while most director’s tenure is often transient (i.e resignation, retirement etc), the company may for a long while post say, the director’s resignation, continue to benefit from the goodwill brought in by that director; albeit the director in question if employed, is most unlikely to receive any remuneration thereafter. An unfair situation, to say the least.

Human reputation and goodwill or personality rights, whatever you may choose to call it, is not strictly speaking, recognized in Nigerian or in practice as an intellectual property right. It does not surface in valuations during mergers, acquisitions, take-overs, etc. No, it is unknown to the jurisprudence of many countries, not even Georgia whose laws seem to prefer the use of reputation to goodwill on trademark matters, thereby confusing the distinction of both terms. In Nigeria, what is recognized is the company’s goodwill not the personality right. Indeed, a recognition of personality right as an intellectual property would allow for the exploration and actualization of sustainable corporate governance, moral and economic growth of the company/country, and create more employment opportunities.

As much as I appreciate that certain questions may come into our minds, such as – Is the director or promoter not being paid remuneration for the job done? (of course, what we are saying is outside the scope of employment). Should the salary not be taken as commensurate with whatever reputation or goodwill his person may bring to the firm/company? (This cannot be as salary is for work done. Goodwill should be paid for as adverts are paid for). Should the company continue to pay the personality used in the promotion for life? (Surely if the company continues to enjoy the goodwill and make sales, after all, trademarks are renewed and royalties are paid for copyrights on continuous basis).

What law recognizes personality right as an intellectual property? How do we value and calculate such right? How do we distinguish and subtract the benefits accruing from such right from that which a company acquires through its trademark? Is reputation synonymous with goodwill? We shall attempt to answer these questions but first let us examine the meaning, scope and distinction or relationship between intellectual property, reputation and goodwill.

Intellectual Property, Human Goodwill and Reputation: Explication of Terms

Intellectual property has never been satisfactorily defined. Nigeria laws did not attempt to define it. However, it has been described to include the rights relating to literary, artistic and scientific works; performances and performing artists, photographs and broadcasts, inventions in all fields of human endeavor; scientific discoveries, industrial designs, trademarks, service marks, commercial names and designations, protection against unfair competition and all other rights resulting from intellectual activity in the industrial, scientific, literary or artistic fields.³

The laws on the above subject therefore, is what is referred to as intellectual property laws. Like many other countries, Nigeria intellectual property related laws include Copyright Act, Trade Marks Act and Patents & Design Act. Mention of intellectual property rights are also made in passing in other laws. While the Copyright attaches importance to the content of the created work, Trademark focuses on the reputation and goodwill attached to the products and services which must be distinctive to the company alone. But as we shall see, the courts have always confused reputation and goodwill as if they are the same. Patents and Designs concerns itself with the created or improved inventions or designs. These laws do not provide expressly for the recognition of the reputation and and goodwill of the man qua man to be an intellectual property. Reputation on the other hand, has been described as:

“the common opinion that people have about someone or something: the way in which people think of someone or something”.⁴

Thus, one may have reputation but not goodwill. But to have goodwill, one must first possess reputation. It follows that we can refer to reputation in terms of a company or a human being. However, the English meaning of the term reputation appears to be different from the legal meaning. Goodwill on the other hand means:

“business: the amount of value that a company’s good reputation adds to its overall value”.⁵

It is obvious that goodwill is what is to be used when we think of monetary value. Hence, a reputation that does not bring money to the table has no goodwill. Buckley tried to explain this when he stated that: A man who engages in commercial activities may acquire a valuable reputation in respect of the goods in which he deals, or of the services which he performs, or of his business as an entity. The law regards such a reputation as an incorporeal piece of property, the integrity of which it is entitled to protect. He wished to confirm that the property right is not a right in the name, mark, or get-up itself but that it is a right in the reputation or goodwill, of which the name, mark, or get-up is the badge or vehicle. The words ‘reputation’ and ‘goodwill’ are often used interchangeably, but it is really in connection with goodwill that passing-off is applied. It is possible after all to have a reputation without goodwill.⁶ However, it was Gvantsa Gugeshashvili who embarked on a deep analysis of the distinction between “goodwill” and “reputation” while considering Georgia laws on trademark. She said:

“Judging from the above-mentioned, one readily concludes that the meanings of goodwill and reputation should not be identified with each other. Goodwill is a priority or benefit, which can be acquired by an enterprise or its product, or any means of identification (in the above-mentioned case, geographical indication) as a result of entrepreneurship. As to reputation, we can discuss the concept as a priority, which comes from the specific characteristics of the particular place. While acquisition of goodwill is impossible without taking measures leading to success in the market, the reputation of a certain place emanates from that very place. It is impossible to identify goodwill with reputation when the case concerns a specific geographical place. This place may definitely have a good reputation, but goodwill can be acquired by the enterprise and its means of identification and not by the place. An analysis of goodwill would not be complete without discussion of the issue of the relationship between goodwill and trademarks.
Trademarks, whether registered or not, symbolize goodwill. A trademark is a name or symbol used to denote the commercial origin of a product. Moreover, a distinctive mark embodies the goodwill of the trader, which enables the trader’s enterprise to draw customers. This capacity of an enterprise is based on its commercial status established through carrying on business and using the trademark for particular goods and services”.⁷

The above distinction by Gvantsa helps us to understand the distinction between reputation and goodwill, but the context of usage may not be taken as a general rule since her (Gvantsa) focus was on Georgia’s law which used the word ‘reputation’. Interestingly, she had recommended that ‘reputation’ as used in the law should be changed to ‘goodwill’. In Nigeria, which is a common-law country, Reputation sometimes is used interchangeably when what is meant is goodwill. For instance, in I.T (Nig) Ltd v B.A.T (Nig) Ltd ⁸ ., the court held that in a passing-off proceeding, what the company must prove is:

a. That it has acquired a reputation in respect of the trademark, in other words, that the mark has become distinctive of his product and his customers and public have come to associate the mark with their business.

b. That the defendant had engaged in acts which are capable of misleading the plaintiff’s customers or members
of the public into believing that the defendant’s business and that of the plaintiff are connected.

c. Likelihood of deceit.

A full reading of the above judgement would show that the court dismissed the appeal and upheld the respondents position because the respondent, Benson and Hedges where able to show evidence that apart from the fact that they were No. 1 tobacco company, they had 75% share of the tobacco market in Nigeria and have generated huge sales of which part of the proceeds have been used to improve the Nigerian Economy. It is doubtful if reputation without proof of goodwill will succeed in a passing-off action. In an infringement action, however, the registered proprietor may evade that burden of proof by simply showing that the brand was registered. If the opposing party raises the issue of non-use or lack of distinctiveness that the proprietor may then need to lead evidence showing goodwill. In the above cited case, the court affirming and citing the reasoning of the trial judge went on to say at p. 621, that: “this evidence of goodwill of exhibit G is unchallenged. Thus it can be seen that there is more than sufficient acquired distinctiveness resulting from sales and heavy advertising throughout Nigeria since 1973 going by exhibit E3…” Accordingly, we can safely conclude that while reputation and goodwill are different, reputation is necessary to have goodwill. Reputation is the fame (standing still) without the commercial value or returns, while goodwill (in motion) is the commercial values or returns acquired through that fame.

Goodwill and the Law

The Companies & Allied Matters Act, Cap C20, Laws of the Federation of Nigeria, 2004 recognizes ‘considerations other than cash to be one of the various means by which a person or any legal entity may acquire shares in a company, provided that the articles of the company allows for it and such consideration must be valued. ⁹ The implication of the above is that intellectual properties, once recognized by the articles and valued, can be taken as payment for the shares in a company which will then give the subscriber the benefits of earning dividends from the company. The question we must now answer is this – does intellectual property include human reputation and goodwill or only goodwill as it attaches to companies or businesses and their brands? It is no longer in doubt that Intellectual property protects and recognizes the goodwill associated in businesses via their tradenames, brands etc. ¹⁰ It is also not in doubt that Intellectual property protects the copyrightable works of a person. What is not settled or perhaps what has not been brought to bear is the recognition and protection of the “personality” when it brings in goodwill. In the latter instance, two perspectives come to play. The famous personality used directly for advert promotion and a reputable director or person working in a managerial capacity in an organisation. With regards to famous persons used for adverts, many writers have approached the issue under the caption ‘Image rights’ and ‘right to privacy’. Unfortunately, majority of those writers have explored the terms in narrow perspectives. When the image, sound recording, etc of a famous person is used for commercial gains without consent, surely, that person can sue for damages and for an injunction or can sue or negotiate for royalties.

Most lawyers unfortunately make it a ‘pay-and-go’ contract while the advert remains on air generating goodwill for the company from time to time. This is most unfortunate for the person who may not know better or have been ill-advised. When the works of famous personalities are being used for advert to obtain or promote goodwill, the law expressly made provisions for the protection of same i.e cinematograph film, sound recording, literary works, broadcasts, musical and artistic works under Copyright Act.¹¹ Also, image rights can be enforced under Common Law.¹² The Trade Marks Act (Registering the image) and the Cyber Security and Information Protection Act can be explored in protecting image rights.¹³ At least the first aspect is covered. Most foreign states i.e Washington, sees these rights under a single umbrella of ‘personality rights’ which focuses on name, voice, signature, photograph or likeness.¹⁴ The distinction between the person’s image, privacy or name seem to be relaxed. Some other countries recognize personality rights but with different variations.¹⁵ With regards to personality rights as it concerns association and goodwill, i.e, famous reputable persons working for an organisation in a managerial capacity, there seem to be no law protecting that conceivable right. The Trade Marks Act which is the most appropriate law that should provide a form of protection for such rights is lacking in content and substance. It focuses more on commercially exploitative brand based issues. Surely, a person cannot say ‘I am the brand’. But why not? Is the presence of Dangote himself in a new company, not a goodwill on its own? We can begin to call names. Really, why not? The laws of tort in various states provides an example of the possibilities and potentials in developing “personality right” as it were. While the tort is more concerned with the protection of a person’s reputation from a social perspective, capturing such protection under the umbrella of Defamation, which invariably is concerned with injury to reputation resulting from written or spoken words by others;¹⁶ “personality right” on the other hand will place more thrust in the economic utilization of the goodwill attached to the person’s reputation through daily business associations. This is the goodwill that association brings in managerial capacity and not a “sign post” arrangement. It is important to note that a statement is defamatory where it tends to lower the person in the estimation of right-thinking members of the society; to expose him to hatred or ridicule; to cause other persons to shun or avoid the person; to discredit the person in his office or trade; or to injure his financial credit. The foregoing instances are the limited length the law of Torts could cover. If the reputation of a person is jealously guided by law and damages can be recovered therefrom, why can’t the law protect the economic benefits that is attached to reputation i.e goodwill, where of course it is proven that a commercial economic benefit is derived from that goodwill/reputation? The realities of the need for such laws is reinforced by an increasingly global trend that requires moral purity and transparency as part of the prerequisite for determining good business managers.

“Personality right” on the other hand will place more thrust in the economic utilization of the goodwill attached to the person’s reputation through daily business associations. This is the goodwill that association brings in managerial capacity and not a “sign post” arrangement.

Personality rights in most jurisdictions, have been defined to be the right of an individual to control the commercial use of his or her name, image, voice, likeness, or other unequivocal aspects of one’s identity. It is generally considered a property right as opposed to a personal right. Personality right, has we have seen, also captures what writers call image rights and right to privacy. However, the focus of image right is on advertorials in the manner of “your face” setting. Moreover, image right does not particularly relate to competence in the area where the image is portrayed. What it feeds on is basically a reputation devoid of notoriety. Also, persons with certain advertorial qualities, although not famous, may also sue under image rights for the use of their image without consent notwithstanding that they are not famous. Personality right as it relates to name (human goodwill) on the other hand comes with the image and competence. It follows therefore that any beneficiary of personality right must be shown to have more than average competence in the field in which the right is sought to be exploited.

Applying the Aliko Dangote example to this case, there is a consensus of opinion that Aliko Dangote is an astute businessman, it may even be suggested that he is keen football follower, but imagine him, on the basis of his popularity/reputation, requesting to play for the Super Eagles in a World Cup Qualifier, love of country aside, your opinion on this is as good as mine. Also, privacy rights is a term used often to argue image rights. It is a constitutional right in Nigeria which has not enjoyed its full interpretation. The right protects the person, homes, conversation, telegraphic communication, et al, from publicity and to be left alone.¹⁷ Thus, neither does the term ‘image rights’ or the term ‘privacy rights’ fully captures the vast area of personality rights especially as it relates to the reputation and goodwill attached to a person’s name.

Recognition of Human Reputation/Goodwill as an Intellectual Property: Importance and Benefits

Should reputation and goodwill attached to a name be recognized as an intellectual property, the ethics and morals of the society will be greatly enhanced. Thus, citizens knowing that good conduct and name can put food to the table would conform to social standards. Furthermore, there will be a positive competition amongst business person or persons interested in capitalizing on the financial variables offered by this “right” to create an accountable and transparent business platforms in all areas of endeavor. Undoubtedly, employment opportunities will increase. The rate of crime will decrease.

We see great potentials and new selling points in the development and marketability of the concept of “personality right”. Boundless opportunities in the areas of equity investment through consideration. Person without the finance for buying shares in a company, will have opportunity of investing in the company through well determined channels of valuating the measure and value that the goodwill in the reputation of such person may bring to bear in that specific industry that he seeks to manage and invest in. Invariably and Ultimately, the end result will be such that the right derivable from the valuation of goodwill in a reputation can be assignable or transmissible, when such right has been translated into equity investment in any entity. As such, such personality right investor can pass on the legacies of the goodwill in his reputation to his beneficiaries who can continue to earn dividend in the company. The moral justification of recognizing such right will be that youths will have no reason to blame their fathers/mothers for being honest and noble without material gain. Directors or other managers of repute in the company, whose presence brings in goodwill for the company can be duly paid valued royalty apart from their normal remunerations for the work done. Another ripple effect will be a more pronounced appreciation of the quantum of damages awarded in the common law of tort as it relates to defamation. The paltry sums awarded by the court in defamation cases will be reviewed.

During take-overs, mergers, acquisitions, etc, greater appreciation and value added measures will be taken by prospective owners to retain and compensate employees/directors whose reputation and goodwill have sustained the company. Also, false adverts can be regulated as no one would want to destroy his/her reputation and goodwill by subscribing to be associated with deceptive adverts.

Challenges in the Valuation of Personality Rights

I understand that one of our fears or question would be – how do we calculate such a complex, capricious and abstract thing as human reputation/goodwill? This was the same questioned put forward all over the world that slowed down the embrace of intellectual property. However, some climes have gotten far ahead in resolving problems inherent in IP valuation. For a start, goodwill can be valued based on the acceptable formula of valuation for each country, organization or market. The first caution we must make here, given the distinction between reputation and goodwill in the beginning of this article, is that human reputation is not the subject of valuation. Rather the goodwill that comes from such reputation is what should be valued.

We can also appreciate this stand when we know that goodwill is now being valued by professional valuers in other jurisdictions where standard methods for Intellectual During take-overs, mergers, acquisitions, etc, greater appreciation and value added measures will be taken by prospective owners to retain and compensate employees/directors whose reputation and goodwill have sustained the company. Also, false adverts can be regulated as no one would want to destroy his/her reputation and goodwill by subscribing to be associated with deceptive adverts. property valuation has been established.¹⁸ Nigeria IP law firms and valuers, it appears, are still crawling.

Conclusion

Intellectual property must not be stretched to an irreconcilable or incomprehensible right. However, Intellectual property rights are so far away from being duly recognized and appreciated in Nigeria. Personality rights should and ought to be an intellectual property right capable of economic-cum-financial benefits.

1. The 10 Best (and 10 Worst) Companies for Customer Service, http://www.comparebusinessproducts.com/fyi/10-best-and-10-worstcompanies-customer-service
2. Susan Adams, ‘The World Most Reputable Companies’, in Forbes, http://www.forbes.com/sites/susanadams/2014/04/08/the-worlds-most-reputable-companies/#2a43d3da58c6
3. WIPO Convention (1967), Art 2.
4. http://www.merriam-webster.com/dictionary/reputation
5. ibid
6. H P Bulmer Ltd. v. Bollinger SA. See D. Bainbridge. Intellectual property. 4th edition. Financial Times Management. London, San Francisco, Kuala Lumpur, Johannesburg, First published in Great Britain 1999, p.59
7. Gvantsa Gugeshashvili, ‘Is goodwill synonymous with reputation?’ http://www.juridicainternational.eu/public/pdf/ji_2009_1_126.pdf
8. I.T (Nig) Ltd v B.A.T (Nig) Ltd (2009) 6 NWLR (Pt 1138) at p.647-648
9. Sections 135, 136 and 137 (1)-(6)
10. Trade Marks Act, 1965
11. Copyright Act, 1988 (same is currently under review in Nigeria)
12. Prince-Alex Iwu, ‘Photo Privacy and Media/Image Rights in Nigeria’ Linkedin, https://www.linkedin.com/pulse/legal-regime-enforcement-image-rights-nigerian-question-iwu?trk=mp-reader-card
13. Ayokunle Adetula “Image Rights and IP in Nigeria” http://barcode.stillwaterslaw.com/1.1/2015/12/21/image-rights-and-ip-in-nigeria/
14. Washington State Legislature, RCW Chapter 63.60. https://app.leg.wa.gov/rcw/default.aspx?cite=63.60&full=true
15. https://en.wikipedia.org/wiki/Personality_rights
16. Kodilinye & Aluko, ‘The Nigerian Law of Torts’ (Rev. edn: 1996), Spectrum Books Ltd, Ibadan. At p. 136.
17. 1999 Constitution of the Federal Republic of Nigeria, section 37.
18. Weston Anson, ‘Alternate Approaches to the Valuation of Intellectual Property’ http://www.ipwatchdog.com/2015/02/11/alternate-approaches-to-the-valuation-of-intellectual-property/id=54651/; WIPO, ‘List of Documents on IP Valuation’ http://www.wipo.int/sme/en/documents/valuationdocs/index.htm;
19. Fortunately, Stillwaters Law practitioners are constantly undergoing training on IP valuation and appears to be the only firm in Nigeria with the technical and analytical skill thereto. However, it does not value human goodwill.

The abuse of the role and status of an Alternate Director and its stultifying effects on the Corporate Governance practices in Nigeria forms the bedrock of this work. An alternate director in Nigeria is no more than a director created pursuant to the Memorandum and Articles of Association (the MeMart) of a Limited Liability Company. The provisions of the Companies and Allied Matters Act (the CAMA), cap C20, LFN, 2004 on an alternate director is copiously missing. The Companies Regulation 2012, made pursuant to S. 16, 585 and 609 of the CAMA, LFN 2004 also makes no reference to alternate directorship. An alternate director by law and regulations are not permitted to execute statutory forms of the Corporate Affairs Commission (CAC) since they are not recognized by the CAC. For instance, FORM CAC 7A (Notice of Change of Directors or in the name, residential address or postal address of director) makes no provision for the position of an alternate director. We doubt therefore if an alternate director can execute a form CAC 7A or any other statutory or official documents without being queried by the statutory body. This is indeed a limitation to the performance of his role(s) as an alternate. The paper therefore seeks to evaluate the scope of his roles and status as a director within the practice of its usage in our corporate governance. In discussing this further, we will attempt to reflect a multi-jurisdiction view of its art and practice.

Discourse

All companies in Nigeria are required under the law to have at least two directors.¹³ By virtue of the CAMA, a director includes any person occupying the position of director by whatever name called, and includes any person in accordance with whose directions or instructions the directors of the company are accustomed to act.¹⁴ A director may be a shadow director, ¹⁵ alternate director ¹⁶, executive,¹⁷ and non-executive. ¹⁸ Singapore’s Companies Act ¹⁹ defines a ‘director’ to include alternate director. This is not so in Nigeria. Nevertheless, the right to appoint an alternate director in Singapore is subject to the articles of association of the company.

The rationale behind the evolution of alternate directorship in Nigeria is quite important. There is little or no copious literature on this. However some writers have indicated that prior to the coming into force of the CAMA in 1968 (and subsequent amendments), multi-national companies which had local subsidiaries whose directors were non-residents as a matter of business expediency and convenience established a mechanism through which they were represented in the meetings of the companies in order to ensure that the activities of the Companies were not shut down on the altar of their unavailability to attend meetings. They achieved this by giving notice to the company of an appointment of another director or other persons to act in their stead at the meeting(s).²⁰

The practice of alternate directorship is also consistent with other corporate jurisdictions outside Nigeria ²¹. However, the power of a director to appoint an alternate director must be provided for in the MeMart, otherwise, any appointment in the absence of such provision in the MeMart may not be recognized.²²

In Nigeria, the creation of the position of an alternate director is indeed meant to serve some urgent administrative needs. Customarily, an executive director is not allowed to appoint an alternate. This is because, as an executive director he is expected to be actively involved in the day-to-day activities of the company ²³. Alternative Director is not proxy but a substantive position. ²⁴ The Alternate ceases to hold office whenever the substantive Director ceases to hold office. The role of an alternate director in practice is typically limited to receiving notices, attending meetings and voting as a director at any meeting where the director appointing him is not personally present.

In the United Kingdom ²⁵, subject to the provision of the MeMart of the company, alternates are deemed for all purposes to be directors and they have fiduciary duties to the company. One notable limitation placed on his powers and duties is that he is only permitted to sign a written resolution of a meeting provided that his appointor did not sign. ²⁶

The provision of Article 82 of the Standard Table A, Fourth Schedule to the Singapore Companies Act on the rights, duties and powers of an alternate director is significantly consistent with the prevalent practice of it in Nigeria. However, regardless of its merits, its potential for abuse is indeed critical.

Evidence abounds in Nigeria where Limited Liability Companies would clearly evade legal obligations using alternates. For instance, the Financial Reporting Council of Nigeria Act, 2011 provides that the Financial Statements of a company must be signed by officers of the company who have been licensed and paid their registration fees. However, to evade such legal obligations, companies now, utilize the option of scouting for or unethically recruiting such professionals that have registered with the Financial Reporting Council of Nigeria by appointing them alternate directors to their own company’s directors who may not have registered ²⁷.

For the purpose of this work, the MeMart of more than ten limited liability companies in Nigeria were examined and they all restricted the role of an alternate director to receiving notices, attending meetings and voting at such meeting(s) where the director appointing them is not physically present. We doubt if an alternate, for instance, would be granted the powers to execute official documents for and on behalf of the company considering the fact that he is not usually listed as a director on CAC form 7A being the statutory returns usually made to the CAC on the names and addresses of all Directors of a Company.²⁸

Furthermore, in Nigeria, by virtue of the Companies Regulations, 2012, made pursuant to sections 16, 585, and 609 of the CAMA an alternate director is not recognized as a director of a limited liability company even though it could be inferred from the CAMA in section 567 that an alternate director is for the purposes of the CAMA a director. Nevertheless, an alternate director might still not be able to execute statutory forms and documents that are required to be filed with statutory bodies in Nigeria, because, in practice, if he does, such documents will not be accepted for filing and will undoubtedly be queried.

It appears that there is an implied non-recognition of this practice by the CAMA and the Companies Regulation 2012. Be that as it may, we advocate the outright prohibition of the practice of alternate directorship by the next review of the CAMA and the Companies Regulations 2012, as it was recommended in the Report on the Reform of the Nigerian Company Law issued by the Nigerian Law Reform Commission in 1991 which culminated in the promulgation of the Companies and Allied Matters Decree 1990 (now known as the CAMA, (Cap. 20, LFN 2004). In the justification of the prohibition, it is our contention that both executive and non-executive directors may not be able to justify the appointment of an alternate director for any reason. An executive director by virtue of the Code of Corporate Governance for Public Companies, 2011 being an officer that is involved in the day-to-day management of the company cannot abdicate such responsibilities. Abdicating his responsibilities will indeed erode the foundation of his corporate governance obligation of accountability and transparency.²⁹ On the other hand, a non-executive director is an independent director who is usually appointed based on expertise, experience, and integrity. Given that understanding therefore, he cannot transfer such responsibilities to an alternate, who in most cases may not possess the requisite qualification, expertise, integrity and experience on the basis of which the substantive director was himself subjected to before his appointment as a non-executive director. ³⁰

Flowing from the foregoing therefore, it is our view that the practice of alternate directorship be expressly prohibited by the CAMA or the Companies Regulations, 2012 to abate the stultifying effects it may portend for the corporate governance system in Nigeria.

12. This Article is co-authored by Innocent Abidoye and Aniebiet-Abasi Ubon.
13. S. 245 of CAMA, LFN 2004
14. S. 567 of CAMA
15. S. 245 of CAMA
16. No provision for alternate director is provided for under the CAMA and the Companies Regulation, 2012 made pursuant to S. 16, 585 and 609 of CAMA. However in the UK, the Model Articles for public Companies by virtue of paragraphs 15, 25, 26 and 27 provides for appointment, removal, rights and responsibilities as well as termination of an alternate directorship.
17. Executive directors are directors involved in the day-to-day running of the Company. An executive director’s position is usually created in practice for administrative convenience. His appointment is usually by service contract wherein his schedules of roles and obligations are stipulated. For further reading, see B. Hannigan, ‘Company Law’ (Oxford University Press, Second Edition, United States, 2009) p. 116; The case of Harold Holdsworth & Co (Wakefield) Ltd v. Caddies (1955) 1 ALL EK 725N. See N. C. S. Ogbuanya,’ Essentials of Corporate Law Practice in Nigeria’ (Novena Publishers Ltd, Lagos, Nigeria, 2010) p. 32.
18. Non-executive directors are directors that are not usually involved in the day-to-day management of the company but by virtue of their participation in board meetings, they tend to play managerial and strategic roles to the company. For further reference, see Sweeney-Bawd ‘The Role of the Non-Executive Directors in Modern Corporate Governance’ (2006) 27 Co Law 67; B. Hannigan ‘Company Law’ supra note 5 and N.C.S. Ogbuanya supra Note 5.
19. section 4(1)
20. N. Ofo, “Companies and Allied Matters Act: The fate of alternate directors” posted online 29th of January 2013 at http://thecorporateprof.com/companies-and-allied-matters-act-the-fate assessed on 9th of March 2015.
21. In the United Kingdom, there is provision for appointment, removal, rights and responsibilities of an alternate directorship under paragraphs 25 – 27 thereof; Model Articles for public companies in UK. Similar provision is recognized under S. 4(1) of the Singapore Companies Act. No similar provision is made for alternate directorship under our law in Nigeria.
22. J. O Orojo, ‘Company Law and Practice in Nigeria’ (Lexis Nexis, Butterworths, 2008) p. 248.
23. We doubt if the CEO/MD who is an executive director may appoint an alternate. In practice, our experiences with the multinational companies indeed reassure us that such is highly unlikely.
24. See, N.C.S. Ogbuanya (supra note 5) p. 327.
25. Schedule 3 (Regulation 4) – Model Articles for public companies made pursuant to the Companies Act 2006
26. See Paragraph 26(3) (b) of the UK Schedule 3 (Regulation 4) Model Articles for public companies made pursuant to the Companies Act 2006.
27. See generally, sections 58, 59 and 62 of the Financial Reporting Council of Nigeria, Act 2011
28. Alternate Directors are usually appointed through mechanism whereby the principal director nominates another person as his or her alternate. The notice is presented to the board for approval. The approval is usually by way of board resolution which is not filed with the CAC, being the only repository authority lawfully mandated to have all corporate information on all limited liability companies in Nigeria.
29. The primary objective of corporate governance is to ensure accountability. This implies that all those charged with the duty and responsibility of directing, managing or controlling the affairs of companies are fully held accountable for their actions or inactions at all times. Meetings of Board are usually one of the avenues where each director, especially the executive directors render accounts and give a rundown of their activities and are held accountable for their actions and inactions. Where an alternate is appointed to fulfill this purpose, the whole essence of corporate governance which is built on accountability would have been eroded.
See, paragraph 5.4 of the Code of Corporate Governance for Public Companies, 2011. In most cases, during such board meetings where an alternate stands in for the substantive director of the company one finds that he is constantly on the phone, because he is completely oblivious as to what role he has to play, this, to us, is a contravention of the core principles of good corporate governance standards as provided for in the code which are required of a non-executive director and a clear negation of his primary duty to the company, since his alternate might lack the expertise, integrity, experience and independence which are the prerequisites for his appointment as a non-executive director.

The mass of economic activities can be categorized into formal and informal sectors. The Informal sector, which is the focus of this paper is also known as the “grey economy”. The sector widely acclaimed for its wealth creation function, as well as its personal income generation capacity, through a variety of small-scale/entrepreneurial activities is a largely unstructured interface among/between unincorporated entities in any economy. To this end, the informal sector can be explained as the sum total of income generating activities outside of a government regulated contractual relationship of production.¹

The informal sector may be subdivided into Productive, Service and Financial sectors. ²

The Informal Productive subsector involves economic activities relating to production of tangible goods such as agricultural production, small scale manufacturing, building & construction, furniture & garment making, wielding etc. The economic activities in the Informal financial sub-sector include the Ajo/Esusu, informal money lenders among others. Activities in the Informal Service sub-sector include traditional birth attendants, menial labour, traditional healers etc.

Hence the National Tax Policy (“NTP”) recognised the potential of this sector vis a vis revenue generation for government and this would be disclosed below.

The National Tax Policy

The NTP, an initiative of the Federal Government driven by the Federal Ministry of Finance sought to set the direction for Nigeria’s tax system as well as provide the basis for tax legislation and administration in Nigeria. ³

The NTP in recognizing the different stakeholders in the Nigerian tax system, identifies the taxpayers as the single most important group while reiterating the need to ensure strict compliance with the tax laws at all times. In this wise, it envisages frequent interactions and engagements between the various stakeholders to ensure seamless administration of tax regimes.

The NTP encourages through innovative policy directions i.e a shift from direct taxation to indirect taxation, reduced direct tax rates (Personal Income Taxes and Companies Income Taxes alike) & increased indirect tax rates. This is all in a bid to stimulate economic growth and create an enabling environment for more investment. Regardless of the form of taxation i.e direct or indirect, a good tax system is founded on equality, certainty, convenience and economy; these are still largely relevant in today’s economy.

Application of Tax Policies to Businesses in the Informal Sector

a. Should businesses in the Informal Sector be taxed?
It is important to note that the informal sector has emerged to absorb the shortfalls of the formal sector, unemployment as well as provide a means of livelihood for the semi-skilled and unskilled unlike. The sheer size of the sector makes it practically difficult to ascertain the actual membership and activities of the sector. However, a recent study by Chatham House Royal Institute of International Affairs indicated that the Nigerian informal sector constitutes as much as 64% of Gross Domestic Product (GDP). This puts Nigeria in a class of its own as the United Nations assessments suggest that for developing economies the average percentage composition of GDP by informal sector ought to be 41% and for countries in transition; 38%. The effect of this information is two-fold. In the first place, it would appear that it means an increase in per-capita income as well as improved standards of living. On the other hand, it would appear that government is losing potential income which would otherwise be revenue for it. The latter effect which is the focus of this paper is worthy of note.

Government support are of three categories, some of them are interwoven in concept and operation. ⁴ These are: credit policies and strategies, management and technical training, and enabling environment strategies.

Government on its part has over the years attempted to implement programs which are designed to support the operation of this sector. The establishment of the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) to primarily assist, promote the growth and development of micro, small and medium scale enterprises. In partnership with the United Nations Industrial Development Organization, it birthed the Sub–contracting and Partnership Exchange (SPX) to link domestic enterprises in developing countries to the supply chains of large domestic or international companies 5 with the grant of credit and investment facilities in 1999. Government support are of three categories, some of them are interwoven in concept and operation. Agencies have also been established to administer government assistance. An example of such support is the N1.6 billion special intervention fund – National Women Empowerment Fund aimed at supporting grassroots women operating informal businesses by providing start up and scale-up credit for them. ⁷ This fund is expected to target 10,000 women per state. Also, established in recent times is the MarketMoni – the Government Enterprise and Empowerment Programme (GEEP) established through the Bank of Industry (BOI), a parastatal of the Ministry of Industry, Trade and Investment is a no interest loan scheme, which is accessible provided there is confirmation of membership of accredited market associations and the provision of Bank Verification Numbers (BVNs).⁸

It is noteworthy that government efforts would appear albeit minimal given the robustness of the informal sector, it would appear that quite a number of businesses are left out of these schemes thereby creating two germane difficulties for government;

i. Government is unable to capture the existence of these businesses and cannot therefore include them in its tax dragnet.
ii. These businesses do not benefit directly from government support program but survive and grow solely due to the persistence and ingenuity of their owners. There is therefore little or no incentive to voluntarily remit or pay taxes to government.

The above remain germane points in the ongoing debate on government’s morality in taxing or levying businesses in the informal sector or the implementation of tax holidays for such businesses. It is however not the focus of this paper.

b. Challenges for tax collection in the Informal Sector
Basically, effective tax collection is a function of accurate information. Given the operations of the informal sector, information gathering would be a herculean task. Some of the issues plaguing the proper taxation of these businesses include:

• Some of these businesses are operated by liquid cash;
• Absence or inadequate accounting/book keeping records;
• Absence of a database in view of the non-registration of businesses within the informal sector;
• Difficulty in identifying the appropriate tax base;
• Our tax operations are more suited for the direct sector further necessitating the need for a system which makes voluntary compliance easy;
• Tax payer’s defiance to tax remittance in the face of what they consider to be failed government support.
• The average business person within the informal sector does not consider himself a taxable person.

c. How should they be assessed for taxation?
In response to these challenges, government must develop smart solutions unique to this sector and the Lagos State Internal Revenue Service (“LIRS”) 9 offers a good reference point because of its approach. Upon recognizing the huge revenue stream in the informal sector, the LIRS had earlier in the year classified the tax payers in the informal sector to be: market men/women and artisans; micro, small and medium scale enterprises (including professionals); and household domestic staff. The LIRS stated that it has begun the process of overhauling its informal sector operations to ease voluntary compliance by tax payers.

Prior to this, Section 6 of the Personal Income Tax Act (Amendment) 2011 (hereinafter referred to as “PITA”) provides for a new sub-section (6) to Section 36 of the Principal Act which states:

“(6) notwithstanding any of the provisions of this Act, where for all practically purposes the income of the taxpayer cannot be ascertained or records are not kept in such a manner as would enable proper assessment or income, then such a tax payer shall be assessed on such terms and conditions as would be prescribed by the Minister in regulations by order of gazette under it prescriptive tax regime”.

In essence, the above provision mandates that the income of a taxpayer from the informal sector shall be taxed in accordance with the prescriptive tax regime.

While PITA relies on the Prescriptive tax regime as means of taxing on the informal sector, the NTP on the hand relies on the Presumptive Income Tax Assessment and it is apparent that these tax regimes have the same intent. According to the NTP, “the Presumptive Income Tax Assessment will require less documentation from the tax payer and also result in a quick and effective method of providing an assessment”. It would appear that the intent of both tax regimes is to develop a flexible plan to enhance voluntary compliance and minimize tax evasion. It is based on a taxpayer’s supposed income given the fact that most participants in the sector do not keep proper records of account. Unlike the self-assessment system of tax wherein a taxpayer prepares and submits its audited account and tax computations which is subject to acceptance or rejection by the relevant tax authorities upon review, the presumptive tax regime assesses a tax payer on perceived income in view of its lack of documentation. It would appear that this assessment can be determined based on best judgement. While voluntary compliance is a benefit of this tax regime, the “imprecise” nature of the tax assessment could pose hardship to the business owner.
Income under this tax regime may be estimated by: ¹⁰

• A standard assessment i.e apportioning an aggregate sum to tax payers doing the same kind of business
  (this is general and may not take into consideration the tax payers specific condition);
• An estimated assessment of the tax payers’ income based on indicators specific to a given business;
• Net worth and assets of the tax payer (this does not take into consideration intangible assets)

It is however advisable that a massive tax enlightenment for participants of the informal sector be embarked upon to reiterate that tax payment is part of their civic duties. The enlightenment must also seek to demystify the process leading up to taxation which is needlessly shrouded in complex financial jargons.

Given the fact that to access government support, business owners are required to undertake some form of registration with it, inter-agency collaboration would even helpful to at least identify these potential taxpayers. It remains incontestable that the law mandates tax payers to pay their taxes regardless of whether or not government provides infrastructure to support economic activities, it would however be a moral victory for government to fulfill its duty to its citizens, in order to motivate/demand the citizens to fulfil their civic duties. The need for government to capture the informal sector into the tax net has never been more urgent. Commodity prices have remained volatile globally, diversification into other better paying natural resources require massive investment income which government does not have readily. Taxation is a viable and long-lasting solution to government revenue shortfalls. Therefore, the effort of all players should be to evolve a tax system that works well for all parties and the economy.

1. Ugochukwu U. Ikeije, LekanAkomolafe & Chinwe O. Onuba, Labour Practices in the Informal Sector of Nigerian Economy: A Critical Analysis (published by European Centre for Research Training and Development UK www.eajournals.org)
2. I.A.H. Ekpo and O.J. Umoh, The Informal Sector, www.onlinenigeria.com
3. The National Tax Policy.
4. G.T. Arosanyin and G. T Ijaiya: Government Assistance for Informal Sector Enterprises in Nigeria. www.ajol.info
5. www.smedan.gov.ng.
6. G.T. Arosanyin and G. T Ijaiya: Government Assistance for Informal Sector Enterprises in Nigeria. www.ajol.info
7. Aisha Alhassan, Former Minister of Women Affairs and Social Development showcases President Buhari’s government’s empowerment programmes at UN event www.businessdayonline.com
8. Affordable Credit for Grassroots Businesses www.nationonlineng.net
9. “Lagos Tax Agency To Go After Informal Sector Tax Payers” on Nigeria Real Estate Hub; www.nigeriarealestatehub.com
10. Embuka Anna, Presumptive Tax: Equalizing the Distribution of Tax Burden www.vanguardngr.com

The term ‘knowledge economy/knowledge based economy’ was formulated in the 1960s to describe a shift from traditional economies which majorly focused on land, labour and capital as factors of production to ones which are based on information and innovation (Intellectual Assets). An innovation could either be in a product or a process i.e. the creation of new products/services or the adoption of new ways of creating existing products/services. As such, technical advances with respect to how products are manufactured or changes in approaches on how products and services are created, advertised and sold to the public could suffice as innovations.

According to World Bank, a knowledge based economy is primarily supported by four core pillars namely, an adequate:

• “Economic Incentive and Institutional Regime (EIR)”- this substantially entails the availability of sufficient incentives to encourage entrepreneurship, investments and innovations (such as an effective intellectual property regime)
• “Innovation and Technological Adoption” System- this relates to having a functional and vibrant innovation system comprising of competent firms, consultants, academies, research centres, and other similar organizations capable of harnessing the increasing availability of global knowledge, by adapting them to indigenous needs, and inventing new technological solutions.
• “Education and Training” Structure- this entails the availability of adequate education systems and skilled man-power capable of creating, applying and sharing knowledge. And
• Information and Communications Technologies (ICT) Infrastructure and access- this requires the availability of effective communication channels for the processing and dissemination of information ^11.

Intellectual Property and Knowledge Economy

In a knowledge based economy, information, innovation and a credible reputation are considered the most valuable assets of any company and are usually very expensive achieve. As a result, one of the most important issues considered by investors seeking to invest in the Research and Development (R&D) sector is the extent to which their investments could be recuperated and profits be gained, should the R&D venture result in an innovation. Investors will therefore be unwilling to invest in researches which even when successful, are unlikely to be profitable. As a result, establishing a reliable management structure for adequate protection and enforcement of the rights conferred upon by these innovations on the rights holders are fundamentally important and indispensable to the growth of a knowledge based economy. Management of Intellectual Assets basically relates to the way(s) in which these assets are protected or exploited by their owners and/or the investors (the rights holders). Intellectual Property Laws addresses this problem by conferring enforceable Intellectual Property rights (IP Rights- such as trademarks, patents and copyrights) on the innovators and/or investors (as the case may be) with respect to the innovations.

IP rights (IPRs) are basically exclusive rights conferred by the State on the rights holders to the commercial exploitation of a trademark, design, invention, literary and artistic work or any other innovation. These IPRs are used as leverage by the rights holders to enter negotiations with third parties who intend to use or exploit the innovation. These negotiations are usually in form of licenses permitting the use of the invention in exchange for valid considerations. As a result of these IPRs, investors and/or right holders are capable of exercising ownership on the inventions and enforcing their rights should there be a breach.

The relevance of IP rights, both to the rights holders and consumers, has been clearly understood with coming of the internet. The advent of the internet like never before brought globalization of economies and easy accessibility and replicability of data and information. Companies are now faced with various threats -from fraudsters; cyber squatters; counterfeiters and/or competitors trying to freeride on their investments, goodwill and/or inventions – which attack their reputation, creating potential dangers to consumers (e.g. counterfeit medicines) and liabilities on them. As such, companies are now committing significant resources for the protection of their intellectual assets.

The Future of Intellectual Property Rights (Conclusion)

Previously, exploitation of natural resources and adequate man power were the primary engines of economic growth. However, the world is going digital and so are the economies. Information is now widely believed to be the future source of prosperity significantly representing raw materials which are transformed using human intelligence and technology, into innovations that lead to economic growth.

However, for a knowledge-based economy to succeed the creation of inventions as well as effective management and enforcement of IP rights must be all present, working side by side. As pointed out in preceding paragraphs, any economy reliant on innovations will not thrive if there are no reliable incentives for potential inventors and investors. IP laws and rights create a reliable legal structure for the investment and commercialisation of IP and accordingly is an indispensable tool in this economy.

Up until fairly recently, IP laws, especially in Africa was a specialised and dehydrated sector of law, made up of a small group of legal experts and hardly ever contentious. However, in recent times and with the development of an economy based on data and innovations (IP) this status quo has changed significantly.

We are now faced with a new reality where Intellectual Property are created, encountered and used daily. Furthermore, the continuous advancement in the use of social networking platforms and Internet presents an emerging IP market and new challenges for IP regimes.

11. Knowledge Economy Index (KEI) 2012 Rankings