An overview of the Nigerian Persons with significant control regulation 2022

On November 23, 2022, the Minister of Industry, Trade, and Investment exercised its power under Section 867 of the Companies and Allied Matters Act, 2020 (“CAMA” or the “Act”) to approve the Persons with Significant Control Regulations, 2022 (the “PSC Regulations”).

The PSC Regulations aim to establish a structured and efficient procedure for acquiring and reporting pertinent information about individuals with significant control or beneficial ownership of various types of entities, including limited liability companies, Limited Liability Partnerships (LLPs), foreign-exempted companies, foreign-exempted limited LLPs, and government-owned companies. This framework aims to improve transparency and accountability in the corporate sector. 

Background and purpose of the Nigerian PSC regulation 2022

The Nigerian Persons with Significant Control (PSC) Regulation 2022 is a regulatory framework that was introduced by the Corporate Affairs Commission (CAC) of Nigeria. The regulation requires companies in Nigeria to disclose information about their beneficial owners and those with significant control over the company. This is in line with global efforts to combat money laundering, terrorist financing, and other illegal activities.

The Nigerian PSC Regulation 2022 is a response to Nigeria’s commitment to implementing the Financial Action Task Force (FATF) recommendations on beneficial ownership transparency. Nigeria’s inclusion in the FATF’s ‘grey list’ in 2020 was a wake-up call for the government and businesses in Nigeria to take action to improve their anti-money laundering and counter-terrorist financing frameworks.

The  PSC Regulation 2022 aims to increase transparency and accountability in corporate governance in Nigeria by requiring companies to disclose information about their beneficial owners and those with significant control over the company. The regulation seeks to prevent the use of companies for illegal activities such as money laundering, terrorist financing, and tax evasion.

Key features of the Nigerian PSC Regulation 2022

The Nigerian PSC Regulation 2022 requires companies to disclose information about their beneficial owners and those with significant control over the company. The regulation defines beneficial owners as individuals who own or control at least 25% of the shares or voting rights in a company or who otherwise exercise significant control over the company. This includes individuals who have the power to appoint or remove directors, or who otherwise exercise control over the company’s management.

Under the Nigerian PSC Regulation 2022, companies are required to maintain a register of their beneficial owners and those with significant control over the company. The register must contain the following information:

1. Name, address, and date of birth of the beneficial owner or person with significant control
2. Nature and extent of the beneficial owner’s or person with significant control’s interest in the company
3. Date on which the individual became a beneficial owner or person with significant control
4. Date on which the individual ceased to be a beneficial owner or person with significant control
5. Companies are also required to update their register within 14 days of any changes in the information contained in the register.

Non-compliance with the Nigerian PSC Regulation 2022 can result in significant fines and penalties. Companies that fail to comply with the regulation may be subject to fines of up to ₦10 million ($25,000) and their officers may be subject to fines of up to ₦1 million ($2,500) or imprisonment for a term of up to two years.

Implications of the Nigerian PSC  regulation for businesses in Nigeria

The Nigerian PSC Regulation 2022 has significant implications for businesses operating in Nigeria. Companies are now required to maintain a register of their beneficial owners and those with significant control over the company, which must be updated regularly. This means that companies will need to dedicate resources to collecting and verifying the necessary information about their beneficial owners and those with significant control over the company.

The implementation of the Nigerian PSC Regulation 2022 will also require companies to review and update their existing compliance frameworks to ensure that they are in line with the new regulatory requirements. Companies that fail to comply with the regulation may face significant fines and penalties, which can have a negative impact on their reputation and financial stability.

On the other hand, compliance with the Nigerian PSC Regulation 2022 can also have positive implications for businesses. Companies that are seen to be transparent and accountable are likely to attract more investors and customers, which can lead to increased revenue and growth opportunities. The regulation can also help to build trust and confidence in Nigeria’s business environment, which can encourage foreign investment and promote economic development.

Compliance requirements under the Nigerian PSC regulation 2022

To comply with the Nigerian PSC Regulation 2022, companies in Nigeria are required to maintain a register of their beneficial owners and those with significant control over the company. The register must contain the required information about each beneficial owner or person with significant control, and must be updated within 14 days of any changes.

Companies are also required to file annual returns with the Corporate Affairs Commission (CAC), which must include a declaration of compliance with the Nigerian PSC Regulation 2022. The declaration must confirm that the company has maintained a register of its beneficial owners and those with significant control over the company, and that the information contained in the register is accurate and up-to-date.

The Nigerian PSC Regulation 2022 applies to all companies registered in Nigeria, including private and public companies, as well as foreign companies operating in Nigeria. Companies that fail to comply with the regulation may face significant fines and penalties, which can have a negative impact on their reputation and financial stability.

Ultimately, the future of beneficial ownership disclosure in Nigeria will depend on a range of factors, including developments in technology, changes in the regulatory environment, and the effectiveness of the Nigerian PSC Regulation 2022 in preventing money laundering and other illegal activities.

Conclusion

To sum up, the implementation of the Nigerian PSC Regulation 2022 signifies a substantial development towards enhancing transparency and accountability in the corporate governance landscape of Nigeria.

This new regulation mandates companies to divulge information about their beneficial owners and persons with significant control, which will help curtail money laundering, terrorist financing, and other illicit activities. Although the implementation of the regulation may pose some difficulties for companies, it is an essential step towards creating a more transparent and responsible corporate culture in Nigeria.

The Nigerian PSC Regulation 2022 has significant implications for businesses in Nigeria, including the need to collect and verify information about beneficial owners and persons with significant control, update compliance frameworks, and file annual returns with the Corporate Affairs Commission.