Abstract

The Persons with Significant Control Regulations, 2022 ("PSC Regulations") aims to address concerns about the impervious nature of business ownership, where only the legal and not necessarily, the beneficial owners of an entity's shares are recorded, or disclosed to the public. The PSC Regulations requires all corporate entities to give detailed, timely and accurate information of their ultimate owner and/or controller, to the Corporate Affairs Commission (CAC). It is aimed at promoting transparency and accountability in corporate governance, as well as supporting law enforcement agencies in investigating cases of money laundering and other financial crimes. Utilising the doctrinal research method, this paper examines the impact of the PSC Regulations on transparency and accountability in corporate governance, and on the fight against corruption and money laundering in Nigeria. The paper finds that the aims of the PSC Regulations will easily be attained, if appropriate implementation mechanisms are put in place. The paper concludes by proffering some recommendations on how best to implement the PSC Regulations in Nigeria.

Introduction

The PSC Regulations and other similar legislations, such as the Central Bank of Nigeria (CBN) Guidance on Ultimate Beneficial Owners of Legal Persons and Legal Arrangements, 2023, are part of the measures put in place, to combat money laundering and terrorism financing in Nigeria, in accordance with the Financial Action Task Force (FATF)'s Guidelines1, which demands that countries "ensure that adequate, accurate and timely information" on beneficial ownership of corporate entities is "accessible, to check corporate vehicles from being abused in the financial system".2

The PSC Regulations apply only to Companies and Limited Liability Partnerships (LLPs) registered under Parts B and C, respectively, of the Companies and Allied Matters Act, 2020 (CAMA), and any other relevant entity specified under the PSC Regulations. The aforesaid entities are required to give detailed and accurate information of all natural persons, who ultimately own and control them to the CAC.3

In compliance with the PSC Regulations and Section 119(3) of CAMA 2020, which mandates the CAC to maintain a register of PSCs, known as the Beneficial Ownership Register ("the Register"), the CAC, in May 2023, launched an online Register, accessible online at "https://bor.cac.gov.ng/". Through the Register, members of the public and government agencies can access, and generate reports on the information of PSCs. This is very commendable and the first of its kind in Africa.4

Who is a PSC (Beneficial Owner)?

According to Regulation 14 of the PSC Regulations and Section 868 of CAMA, a PSC, also known as a beneficial owner, means:

"The natural person(s) who ultimately owns or controls a company or limited liability partnership or the natural person on whose behalf a transaction is being conducted, and includes those natural persons who exercise ultimate effective control over a legal person or arrangement or, be a person who meets any of the following conditions in relation to a company or limited liability partnership –

(i) holds at least 5% of the issued shares in a company or interest in a LLP either directly or indirectly,

(ii) exercises at least 5% of the voting rights in a company or LLP directly or indirectly;

(iii) holds a right directly or indirectly, to appoint or remove majority of the directors of the company or partners of the LLP;

(iv) exercises significant influence or control, directly or indirectly, over the company or LLP; or

(v) having the right to exercise, or actually exercises 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.5 "

Once any natural person meets the above criteria, he/she automatically qualifies as a PSC. In simple terms, a PSC is a "natural person, who has ultimate (actual) ownership and control over a corporate entity, and not necessarily the legal owner (artificial person), or the person(s) entitled on paper to do so".6 The implication of this is that only natural persons (i.e. individuals), who ultimately own or control corporate entities, are required to be disclosed to the CAC as PSCs.

Furthermore, where some, or all of a company's shareholders, or ultimate beneficial owners are corporate entity(ies), such corporate entity(ies) will also be required to present for filing as PSC in the company, the details of individual(s)/natural person(s), who ultimately control/or own the corporate entity, at the CAC.

It is pertinent to note that, the PSC Regulations allows corporate entities to present for filing as PSC, details of persons who are not members of the Company.7

The implication of the foregoing is that, Companies or LLPs may nominate individuals who are not beneficial owners, solely for the purpose of filing at the CAC, and the particulars of such nominated persons shall be inscribed in a separate register maintained for that purpose.

Obligations of PSCs, Companies and Limited Liability Partnerships under the PSC Regulations

By Sections 119 and 791 of CAMA, and Regulation 5 of the PSC Regulations, a PSC is obligated to formally notify the company or LLP in writing, within seven (7) days of becoming a PSC, and the company or LLP (including foreign owned companies and LLPs) are then required to disclose the information to the CAC, within one (1) month from the date of receipt of the information, from the concerned individual. Also, Companies or LLPs are required to "inscribe against the name of every member in the register of members, the information received from the PSC". 8

Where a company or LLP has reasonable cause to believe that a person is its PSC, it shall serve notice to disclose PSC information (the notice) on the person, requiring the person to provide the particulars set out in Regulation 4 of the PSC Regulations, and the "person shall comply with the requirements of the notice to disclose PSC information, not later than seven days from the date of receipt of the notice". 9 If the person fails to disclose the information required, the Company or LLP shall issue a warning notice to the person, and keep a copy of the warning notice in its register of members.10 If not complied with in seven days, the Company or LLP can restrict the interest, and note it in the register of members - the restriction voids transfers, rights, shares, and payments. However, if the Person complies within 14 days, the Company or LLP shall withdraw the restriction.11

Furthermore, by Regulation 3 of the PSC Regulations, Companies and LLPs are obligated to submit PSC information to the CAC, during incorporation, filing of annual returns, amendments, or in any other case the CAC may determine. In the case of a foreign exempted company (i.e. a foreign company exempted from incorporation under section 80 of CAMA 2020), it shall submit PSC information to the CAC, at the point of notification of exemption, filing of annual report, and/or any change that may occur from time to time.

Where a government-owned entity is incorporated or established by other enactments, and owns or exercises significant control over any company or LLP, the company or LLP, wherein it has reportable shares or control, shall be required to submit to the CAC, information in respect of the Chief Executive Officer (CEO), or any other government official authorised, or designated by law to manage the government-owned entity.

Lastly, the entities must ensure that the PSC information is timeously disclosed, accurate and complete.12

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Footnotes

1. Financial Action Taskforce (FATF) Guidelines, Transparency and Beneficial Ownership (2014), Paragraph 3, pg.3; See also Recommendation 24, Transparency and Beneficial Ownership of Legal Persons and Arrangement, FATF (2012-2022); International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation, FATF, Paris, France.

2. CBN Guidelines on Ultimate Beneficial Owners of Legal Persons and Legal Arrangements, 2023.

3. Ibid, Regulation 2.

4. "Building Trust by Combating Corruption in Western and Central Africa" < https://www.worldbank.org/en/news/feature/2023/12/13/building-trust-by-combating-corruption-in-western-and-central-africa > Accessed 3 January 2024.

5. PSC Regulations 14.

6. CBN Guidelines, Paragraph 4.0.

7. PSC Regulations, 4(3).

8. PSC Regulations 2022, Regulation 4(1).

9. Ibid, Regulation 6(1).

10. Ibid, Regulation 6 (3) and 8.

11. Ibid, Regulation 7.

12. Ibid, Regulation 11

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