Business Essential October Edition

Dear Esteemed Member,

 

Welcome to October 2018 edition of the Business Essentials. Nigeria clocked 58 years and the milestone was celebrated with fanfare. In this edition, we reviewed Macro-economic indices and how far the country has achieved or stalled in economic development.

Regulatory Compliance remains a vital part of Business and in this edition, we took a look at the over regulated Nigerian business environment. We examined some of the challenges encountered by Businesses as it relates to compliance and the different proactive measures to be adopted to manage regulatory compliance.

Going by the report of the Global Transaction Report, it has been predicted that there will be a rise in the value of Merger and Acquisition (M&A) transactions in African nations, including Nigeria. In this edition, we presented an overview of some of the pitfalls that comes with some M&A transactions and how they can be avoided.

Our regular Law Report Review, Upcoming Learning & Development programmes and other activities at the Secretariat were not left out. 

 

Have a pleasant reading.

 

Timothy Olawale

Editor

 

 

In this Issue:

 

• Nigeria @ 58: Macro-Economic Review
• Regulatory Compliance: What does this mean for Business
• Potential Tax Traps that could bedevil a share deal Business Acquisition
• Pictorial: NECA’s courtesy visit to NSITF and Pencom
• Law Report Review / Legal Opinion

MACROECONOMIC REVIEW (NIGERIA @ 58, CBN MONETARY POLICY, GLOBAL COMPETITIVE REPORT AND ECONOMIC INDICATORS)

After 58 years of independence, the Nigerian Economy is still groaning under the weight of various challenges and dependence on crude oil. Recent data released by the World Bank shows that Nigeria is ranked below Lesotho, Namibia, Malawi, Uganda & Seychelles in the ease of doing business rating.

The Infrastructure decay after almost six decade of independence is abysmal. Power has remained epileptic with generation lower than 7,000MW and distribution between 3000MW-3500MW. Road network is in a state of comatose. These have resulted in high cost of operations and low capacity utilization for business, which in turn undermine the competiveness of Nigerian goods and services in the Global market.

Forbes Africa, a major global research firm recently rated Nigeria’s economy as the best in Africa in 2018, ahead of the likes of South Africa, Egypt and Algeria. This rating was against the backdrop of sluggish economic growth projected by IMF in 2018 and 2019. The Fund stated that Nigeria will grow from 1.9% in 2018 to 2.3% in 2019. The IMF projection coupled with the Forbes Africa rating has not translated to an improvement in the standard of living of an average Nigerian or enough to create jobs for the growing population.

Global Competitive Report

The recently released data on the Global Competitiveness of the landscape of 140 country’s economies provides unique insight into the drivers of their productivity and prosperity. The indicators of the report organized into twelve pillars to rank each country’s economy were: institutions, infrastructures, macroeconomic environment, health & primary education, higher education, goods market efficiency, labour market efficiency, financial market readiness, market size, business sophistication, and innovation.

Sub-Saharan Africa, with an average score of 46.2, has the lowest GCI score among all regions and demonstrates the weakest average regional performance on 10 out of the 12 pillars. In only five pillars does the average score exceed 50, including in Labour market (53.8), Product market (50.4) and Business dynamism (51.1). The report also showed that Southern African countries have achieved a relatively higher competitiveness performance (48.0) compared to East Africa (46.8) and West Africa (44.5).

Nigeria suffered a slump by three places to 115 in the GCI behind Mauritius – the best in Africa at 49 followed by Tunisia, Kenya, Ghana, Senegal & Cote D’Ivoire at 87, 93, 106, 113 & 114 respectively. A closer look at the report shows that Nigeria performed poorly in about a dozen indices including tourism 139, quality of roads 132, reliability of water supply 137 and availability of fixed broadband internet at 136. Nigeria also recorded its worst showing in inflation 133, vocational training 135, critical thinking in teaching 131, domestic credit to private sector 132, financing SME’s 132 and the availability of venture capital 138.

In a sharp contrast, the Central Bank of Nigeria Business Expectations Survey report for the month of September showed an increase in the respondents overall Confidence Index(CI) on macro-economy. According to the report, the CI climbed to 24.8 index points relative to 21.5 points in August. The CBN stated that the businesses outlook for September 2018 also showed greater confidence in the macro economy at 64.5 index compare to 61.6 points previously

Foreign Direct Investment

The Global financial picture looks gloomy as the Foreign Direct Investment (FDI) drooped 40% year on year although the $470 million decline is happening mainly in wealthy, industrialized nations, especially in North America and Western Europe.

The FDI in Africa dropped by 3% at an estimated $18billion on a year on year basis in the first half (H1) of 2018 according to the Investment Trends Monitor report by the United Nations Conference on Trade and Development. Egypt remains Africa’s largest recipient of foreign investment on the Continent with $3.4billion in H1 2018 from $1.1billion in H1 2017.

In Western Africa, the data indicates a 17% fall in investment in the H1 of the year, from $5.2billion to 4.3billion. This is blamed partly on the volatile global economic environment and mixed commodity prices and it could be turned around by advances in regional integration, including an African Continental Free Trade Agreement.
According to the Q2 report from the National Bureau Statistics (NBS), investment inflows dropped by 12.53 per cent to $5.51bn from the first quarter. The NBS attributed the decline recorded in the second quarter of this year to a reduction in portfolio and other investments, which declined by 9.76 per cent and 24.07 per cent, respectively.

NBS report stated that the service sector became the leading recipient of foreign capital inflow into Nigeria, attracting $479.85m while banking sector followed with $294.96m in the second quarter of the year.

Monetary Policy Committee (MPC)

At the Monetary Policy Committee (MPC) meeting in September, 2018, the Committee retained all monetary parameters, despite calls to reduce the MPR, which is the rate at which CBN lends money to Deposit Money Banks. The Committee also retained Cash Reserve Ratio (CRR) at 22.5 percent and the Liquidity Ratio at 30 percent, among others. The Committee had claimed that a decision to hold all policy parameters constant would sustain gradual improvements in output growth, maintain the current monetary policy stance and await a clearer understanding of the quantum and timing of liquidity injections into the economy before deciding on possible adjustments.
While we do not see any reason for the committee to still hold to the 14 per cent monetary policy rate for the 12th consecutive time since July 2016, because of its negative multiplier effect on the economy, we welcome the MPC advice to the Federal Government to increase the external reserves in the last quarter of 2018, with crude oil price remaining above the budget benchmark price of US$51.00 per barrel and oil production increasing to 2.3 million barrels per day.

Macroeconomic Outlook

– Naira depreciated across most market segment in October. At the Official window, it retreated by 5 kobo to settle at N306.45. Similarly, at the interbank market, the local currencies weaken by 60kobo to close at N362.29/$. Meanwhile, at the parallel market, the currency close at flat N361.68/$.

– The inflation rate in the country rose to 11.23% in October

– External reserves fell to US$43.35

– Oil Price (US$/Barrel): 85.83

– Monetary Policy Rate: 14%
​
Macroeconomic Forecast (November-December)
Variables.                              November 2018.       December, 2018
Exchange rate(Official). N/$.      365.                          365
Inflation Rate (%).                         11.32.                        11.45
Crude Oil Price(US$/Barrel).       77.00.                      78.00

Conclusion

Nigeria’s unemployment rate is at a six-year high of 18.8 percent in October, 2018. In an ambitious economic plan to curtail the rising of unemployment in Nigeria, the Federal Government unveiled the plan to create 15 million jobs in four years at an average of 3.75 million yearly. The plan targets unemployment rate of 14.5 percent in 2018, 12.9 percent in 2019 and 11.23 percent by 2020.

It is hoped that the upcoming elections and the political activities leading to 2019 will not compromise the fragile gains made in the post-recession economy.

REGULATORY COMPLIANCE: WHAT DOES THIS MEAN FOR BUSINESS?
Over the years, the issue of regulatory infraction has become more worrisome as companies continue to dole out billions of naira to settle fines for various regulatory breaches. In 2015, the Nigerian Communications Commission (NCC) imposed a fine of $5.2 billion (albeit negotiated downwards) on a foremost telecommunications company. This sanction led to the replacement of some key members of the Board of Directors of the company. Similarly, the Central Bank of Nigeria (CBN) fined four banks for various regulatory breaches in November 2016- one of the banks was fined N4 billion. The global terrain is also not spared in this tsunami of regulatory sanctions. Since 2008 to date, banks globally have paid over $321 billion in fines according to data from Boston Consulting Group.
It is exacerbating where cash that should have been employed as capital to run the business is paid out in penalties or fines. This can lead to value erosion and loss of investors’ confidence in the business. Keeping track of compliance requirements is therefore essential for companies in other to avoid penalties that could affect their business operations.

This article considers the effect of non-compliance with statutory regulations and explains the need for companies to take proactive steps to comply with laws and regulations relevant to their businesses.

The Need for Regulatory Compliance
The business environment in Nigeria is highly regulated with many permits and applications required in order to carry out business operations. Some of these permits need to be obtained prior to the commencement of business operations and others in the course of operations. For example, a start-up outsourcing recruitment company with foreign shareholders which provides services to companies in the oil & gas industry would require a number of regulatory registrations/approvals in order to get started with its business.

Apart from incorporation at the Corporate Affairs Commission (CAC) and the attendant requirement to file annual returns at the CAC, the company would be required to register with the Nigerian Investment Promotion Commission (NIPC), obtain a business permit from the Ministry of Interior, obtain a recruiters’ license from the Federal Ministry of Labour and Productivity and obtain a permit from the Department of Petroleum Resources (DPR). For taxes, there would also be a requirement to register with the Federal Inland Revenue Service (FIRS) and the State Internal Revenue Service (SIRS) for tax remittances. In order to repatriate interest on loans and dividends, the company would need to have obtained a Certificate of Capital Importation (CCI). Failure to obtain a CCI at initial capital inflow can be detrimental as the ability to obtain a CCI retrospectively may be impossible. Similarly, assuming that there is a technology transfer agreement with a foreign partner, there is a requirement to register the agreement with the National Office for Technology Acquisition and Promotion (NOTAP) in order to repatriate service fees via the official foreign exchange market.

Due to the sheer number of regulatory agencies and various compliance obligation in Nigeria, many companies are not aware of all obligations and, in many cases, view regulatory compliance as an administrative or operational task which is distracting and time consuming. In some other cases, the process of compliance appears to be quite cumbersome. For instances, the process for obtaining a Tax Clearance Certificate (TCC) is still quite manual, even though FIRS advocates that it can be done online. This is because in practice, a company is still required to follow up manually for the issuance of the TCC after the online application.

Furthermore, companies are also faced with various administrative bottle necks with respect to regulatory approvals or applications. In most cases, the reason for this bottleneck is the lack of adequate information as most websites of regulatory agencies do not contain a comprehensive list of information/documents required in obtaining the permits or approval.

Accordingly, most companies do not put measures in place to meet regulatory obligations and only take reactive steps when a regulatory deadline looms or a specific task or worse still when the regulator comes knocking with the attendant penalties and interests for non-compliance.

Effects of Non-Compliance
Sanctions are the most visible impact of non-compliance. However, these sanctions usually have a ripple effect that impacts other areas of business. Consider the following points:

1. Loss of Revenue
Non-compliance with regulatory requirements could lead to sanctions in the form of heavy fines and penalties, which in turn leads to reduced revenue. In 2016, nine Nigerian banks paid over N600 million for various regulatory infractions. Similarly, in 2017, the National Insurance Commission imposed fines amount to about $4 million for non-compliance with various rules and guidelines. The sums paid by these companies as fines impact on revenue and reduced the profitability of the companies; ultimately reducing the profits that should have been distributed to the shareholders.

2. Impact on Cash Flow
A regulatory fine or penalty would often have a negative impact on the cash flow of a company as the monies paid in fines would not have been budgeted. Thus, regulatory infractions would affect the cash flows of the affected company. In the case of the telecommunications company that was fined by the NCC in 2016, the company was able to negotiate to pay the fine in instalments. If this agreement had not been reached, the impact of this fine would have been devastating on the cash flow of the company and the company may not have survived.

3. Tax Deductibility Fines
Fines and penalties are generally not tax deductible. Thus, monies paid as fines may not be allowable for tax purposes and will impact the profits of the company. Where the company is already in a loss-making position, a huge fine may even erode the capital of the company.

4. Disruption of Business Activities
In some instances, a regulatory sanction may also lead to locking up the premises of the defaulting company, thus, disrupting the normal business activities of the company. Recently, the National Agency for Food and Drug Administration (NAFDAC) shut down three pharmaceutical companies for regulatory breaches. The premises were opened after a few days, but the companies were charged with penalties. The few days of being shut down would have obviously affected the operations of the companies in addition to penalties already paid out for the offence.

5. Bad Publicity/ Brand Impairment
Regulatory sanctions may also affect the brand of the erring company and may ultimately affect the sales and profitability of the company, as consumers may avoid products from a company that has been sanctioned by a regulator. In 2015, a fast-moving consumer goods (FMCG) company was fined almost $1 million for airing a commercial which the regulator claimed could mislead the public. That year, the global net profit of the company declined by almost 40%. China had been its second largest market in terms of sales and profit.

6. Withdrawal of License/Criminal Prosecution
The consequence of a regulatory sanction could be dire as it could lead to withdrawal of the license of the erring company and/or criminal prosecution of the company and its principal officials.
In February 2018, the Supreme Court of Nigeria gave judgment against two employees of a pharmaceutical company that manufactured a drug with a contaminated chemical. The employees were each sentenced to seven years’ imprisonment. The Federal High Court had also ordered that the company be wound up and its assets forfeited to the government. Had the company complied with NAFDAC’s regulatory requirements with respect to the composition of the drug, this would not have happened.

Strategic Approach to Regulatory Compliance
Given the fact that most regulators are beginning to enforce strict compliance with the provisions of the applicable laws, there is need for businesses to improve their risk management and compliance structures. That said, regulatory compliance matters do not have to be a stay awake issue for compliance managers if handed in a systematic manner. Regulatory compliance should therefore form part of the strategic discussions at senor management levels. Companies should apply a proactive, rather than a reactive approach to the issue of regulatory compliance framework. Taking a proactive approach means developing measures to identify and manage regulatory risks by doing the following:
• Identifying compliance requirements through analysis of relevant laws and regulations. This may involve visiting regulatory authorities in order to map out compliance obligations/requirements of a company and get a clear understanding of the expectations of the regulator;
• Conducting a compliance health check to assess and identify compliance breaches and lapses within the organisation and putting in place measures to rectify the breaches. This will include quantifying potential liabilities where possible and measuring these against cost of compliance;
• Developing a bespoke compliance Dashboard indicating compliance obligations, personnel responsible, timeframe and penalties for non-compliance.
• Creating awareness in compliance obligations as well as developing checks and balances to ensure internal goal congruence within the operating units.
• Periodic evaluation of internal processes and provision of timely update to relevant personnel.

Conclusion
Regulatory compliance should be seen as a strategic function which must form an integral part of the business operating model. For companies that seek to conduct their business in an ethical, transparent and seamless manner, compliance with laws and regulations (as and when due) is non-negotiable. The issue is therefore how to simplify the process.

As developing the initial framework is the major task, management should consider the assistance of professional consultants in the process of institutionalizing a compliance framework in their business in order to ensure that operations are carried out with minimal regulatory hurdles.

Culled from Andersen Tax (Tax

POTENTIAL TAX TRAPS THAT COULD BEDEVIL A SHARE DEAL BUSINESS ACQUISITION
The Global Transaction Report obtained by Sweet crude Report has predicted that the value of merger and acquisition (M & A) transactions in Nigeria and other African nations will rise to $4.5 billion in 2018, and $5.2 billion in 2019, compared to the $4.4 billion value in 2017. One of the most conventional investment options for acquiring a business is through the purchase of the entire or part of the shares of the target company. For example, Actis and its investment partners announced the sale of Ikeja City Mall to South African firms, Hyprop Investments and Attacq Limited in 2015. Hyprop acquired 75% interest in the Mall whilst Attacq acquired the remaining 25%. More recently, Zinox Technologies Limited also completed the acquisition of Konga, one of Nigeria’s foremost e-commerce companies in February 2018.

The obvious implication of such share deals is that the investor steps into the shoes of the seller and takes on the ownership of the target company. This comes with the attendant benefit of preserving the reputation, goodwill and customer base of the target company. A share deal is also ordinarily the most tax efficient method of acquisition. However, the share deal could easily become the buyer’s worst nightmare where proper due diligence is not done particularly to identify any historical tax liabilities of the target company or any regulatory compliance obligations that have not been fulfilled. The tax base of the target company could easily be eroded with such latent liabilities. It thus becomes imperative for investors to review the overall affairs of the target company before concluding a transaction.
This piece examines the importance of conducting a comprehensive due diligence exercise before concluding a share deal and highlights instances where an asset deal may be preferred over a share deal.

Why Share Deals?
When acquiring interests in a business, the investor has a choice to purchase the shares of the business or purchase the assets. An investor can have various reasons for preferring one type of deal/transaction over the other. However, a major reason why share deals are preferred is that it is generally simple and more straightforward to execute in comparison to an asset deal which could require several legal processes to complete the transaction. For instance, there is no need for change in ownership/title of the target company’s assets under a share deal since the legal status of the target company would remain the same. In that regard, the investor would not be required to file any document or pay consent fees at the Lands Registry in respect of any of the target company’s landed properties.

A share deal also guarantees seamless transition of the business from the seller to the investor as the investor would generally not need to re-negotiate existing commercial contracts with vendors/suppliers, customers or re-negotiate employment contracts with employees of the company. Furthermore, the investor can typically assume the immediate benefit of existing regulatory licenses, approvals or permits without going through the hurdles/administrative bottlenecks involved in obtaining the regulatory approvals. In similar manner, by executing a share deal, an investor becomes automatically clothed with various incentives or waivers like Pioneer Status Incentives, Import Duty Exemptions, etc. granted to the target company.

Share deals also provide lots of tax benefits not only for the investor but also for the seller. For example, the seller is not required to pay Capital Gains Tax (CGT) even if it makes gain on the transaction. This could be a major incentive for the seller in closing the transaction. In similar manner, the investor would not be liable to Value Added Tax (VAT) as share deals do not attract VAT. In addition, the Stamp Duties Act exempts instruments for the transfer of shares from the payment of stamp duties. Beyond the tax exemptions, share deals also preserve existing loss reliefs, tax incentives and applicable allowances of the target company thus allowing the investor to enjoy some of these tax assets after the acquisition of the business.

On the other hand, business acquisition via asset deals are generally not tax efficient given that CGT, VAT and Stamp Duties would be payable on the transaction. In addition to this, income tax may also be applicable by the seller where there is a balancing adjustment (charge) arising from the disposal of assets. Asset deals could also be onerous when determining the valuation of intangible assets to be transferred by the seller particularly where the intangibles were internally generated rather than acquired. Licenses and permits are generally not transferable so the seller would be required to obtain new permits/approval or consent from relevant government departments for business operations.

Notwithstanding the above, the benefits of share deals over asset deals could easily be neutralized where the target company has huge tax liabilities or where the target company has whether inadvertently or not, failed to comply with relevant regulatory compliance requirements relating to its operations. Such infractions are rarely visible by merely looking at the market reputation of a target company. Proper tax and regulatory due diligence is therefore required in order to ascertain the level of risks compliance of the target company.

Why should you look before you leap?
There are several issues to consider before executing a share deal. A proper, legal and financial review of the overall affairs of the target company is necessary. In particular, as tax balances could be a significant item in the financial statements, it is important for the buyer to ascertain the value of the tax assets of the target company. Generally, tax assets (such as un-utilized withholding tax credit notes, losses carried forward or amounts if Input Value Added Tax recoverable) are useful considerations for the buyer in reviewing the transaction price. Assuming that a tax audit has been done and concluded prior to the completion date, the tax assets may be validly considered in the transaction price, but where a tax audit has not been conducted or the audit is still open, it is always advisable that a review be carried out to confirm the existence and possible utilization of the tax assets.

Furthermore, a review could lead to a discovery of uncertain tax positions that could increase the tax risks for the investor, particularly as the tax authority may have a position on a tax issue different from the position of the target company. For example, consider the case where the target company holds a view that the excess dividend tax provision does not apply to income it receives from bonds and treasury bills when there are conflicting legislation and cases on the matter.

The buyer would have to take a position on the potential excess dividend tax exposure and factor the risk element in the negotiations.
Similarly, there could be other tax liabilities that would only be discovered where a proper due diligence is carried out by the investor. This risk is heightened given the fact that the tax authorities are empowered to conduct investigations and back audit within 6 years from the date the tax was due and may go back indefinitely in cases of fraud, wilful default or neglect. The potential risk of penalties at 10% and interest at 19% (compounded from year to year in some cases) on resulting tax liabilities could outweigh the benefits of the share deal.

It is therefore imperative that a tax due diligence be conducted before the conclusion of a share deal. The result of the tax due diligence will enable investor consider a possible adjustment of transaction prices with respect to undisputed tax liabilities of the seller. In some instances, it may be necessary to include relevant provisions in the Share Purchase Agreement that provides a timeline within which the seller would settle all its outstanding liabilities before completion date. Better still, the purchase price could be put in an escrow account till all the outstanding liabilities are defrayed.

Do Asset Deals Provide Better Alternatives?
Despite the tax and regulatory disadvantages of the asset deal, a target company with huge historical liabilities that are capable of eroding the value of the company in future could make an asset deal attractive to an investor. Tax liabilities of the seller would generally not be transferred to the buyer where the seller and buyer are not related parties. Furthermore, the asset deal enables the buyer pick and choose the liabilities to assume and the assets to acquire thereby providing greater flexibility.

An asset deal could also be attractive where there are legal risks such as lingering litigation that has not been resolved as the investor could simply pick the assets of the target company without the pending litigation.

Furthermore, the asset deal may also provide better alternative to a share deal where the investor is only interested in a line of business of the target company. In such instance, the investor could purchase all the assets associated with a specific line of business as opposed to purchasing the entire business.

Concluding Remarks
Buying a business is rarely a straightforward decision as investors need to evaluate whether a share deal or an asset deal best suits their investment requirements. Use of a share deal can often be productive where the investor generally prefers a simple and seamless transaction as opposed to an asset deal which could be onerous. However, it may be difficult to identify latent historical tax and other liabilities of the target company under a share deal without a proper review of the affairs of the target company.

Consequently, it is imperative for investors to consult their professional advisers to determine what investment options are most appropriate and the tax considerations of same.

Culled from Andersen Tax (Tax Alert)

https://news.neca.org.ng/index.php/2018/10/27/pictorial-necas-courtesy-visit-to-nsitf-pencom/

Law Report Review / Legal Opinion:

THE RIGHT OF AN EMPLOYEE TO BE REINSTATED

Food, Beverages and Tobacco Senior Staff Association (FOBTOB) vs. Grand Cereals Nigeria Limited & 1 Or, Unreported Suit No: NICN/ABJ/325/2016

FACTS

The case is an appeal against Awards made on 14th June 2016 by the Industrial Arbitration Panel (IAP), in the matter of trade dispute between the Food, Beverages and Tobacco Senior Staff Association (FOBTOB) and Grand Cereals Nigeria Ltd & Spring Waters Nigeria Ltd. The dispute was referred to the IAP for arbitration by the Honourable Minister of Labour and Productivity on 29th February 2016. After hearing the parties, the IAP made two distinct awards in the arbitration:

1. That the appellant is the appropriate trade union to organise members of the staff in the employment of the Respondents. The Respondents were accordingly directed to accord unfettered and unconditional recognition to the Appellant.

2. That all Members of the Appellant whose employments were terminated or who were retired from the employment of the Respondents be reinstated immediately without loss of seniority, salary and other emoluments due to them.
Dissatisfied with part of the award made by the IAP, the Appellant, by a Notice of Objection to the Minister of Labour and Productivity dated 26th July 2016, objected to the award on the following grounds:

i. When the IAP listed in the award, the names of members of the Appellant who lost their employment with the Respondents, it left out some of the Appellant’s members in the employment of the Respondents whose names were mentioned in the list of affected members presented to the IAP.
ii. The award listed members of the Appellant in the 1st Respondent to be reinstated but it left out the members of the Appellant affected in the 2nd Respondent’s employment on 23rd October 2017.
The Respondents also filed a cross appeal to the Awards made by the IAP and raised issues for determination.

ISSUES FOR DETERMINATION

1. Whether the UAC Senior Staff Association (within the Group) should be denied the right to be recognized and allowed to operate as a trade union in the Respondents’ employment
2. Whether all members of the appellant in the Respondents employment who were affected by retirement or termination of employment are entitled to reinstatement
3. Whether the Appellant is entitled to the check-off dues of all its members in the employment of the Respondents

JUDGMENT

• On the first issue, the Court held that, from the facts, it was obvious that the workers freely decided to join the Appellant in the exercise of their constitutional right of Freedom of Association. In such an instance where the workers decided to join the Appellant union notwithstanding the existence of UAC Senior Staff Association (UAC SSA), it is not for the Respondents to complain.

In view of the foregoing, the court held that it cannot accede to the request of the Respondents to declare that the UAC SSA has the constitutional right to exist and function as a trade union in the Respondents’ companies. The court found no reason to make such a pronouncement or to tamper with the finding of the IAP on the subject. It, accordingly, resolved Issue One against the Respondent/cross appellant.

• On the second issue, the court held that the employments of the affected senior staff of the Respondents were terminated or retired by the Respondents because they took up membership of the Appellant union. In order words, it was on account of union activities that the Respondents terminated the employment of members of the Appellant. Section 40 of the Constitution of the Federal Republic of Nigeria, 1999 (as amended) guarantees the citizens Freedom of Association. Thus, every worker is entitled to belong to or join a trade union of his or her choice. Accordingly, a worker ought not to be victimised in any way by the employer for the reason that the worker decided to join a trade union not liked or recognised by the employer. Similarly, Section 12 (4) of the Trade Unions Act 2004 provides thus: ‘Notwithstanding anything to the contrary in this Act, membership of a trade union by employees shall be voluntary and no employee shall be forced to join any trade union or be victimised for refusing to join or remain a member.

The court expressed that the import of the above legislations was to clearly prohibit against the termination of the employment of an employee on account of trade union membership. It is in view of these statutory provisions that the courts have taken the position that when an employee’s employment is terminated as a result of his involvement in trade union activities or membership of trade union, such an employee is entitled to be reinstated. This court was of that view in Management of Dangote Industries Ltd vs. NUFBTE (2009) 14 NLLR (Pt. 37) 25 at 48 when it held that an employee is entitled to be reinstated where his or her employment has been terminated because of union activities. See also National Union of Food Beverages and Tobacco Employees vs. Cocoa Industries Limited Ikeja [2005) 3 NLLR (Pt. 8) 206 at 218. Where an employer interferes in the employment of its worker by terminating the employment because the worker decided to join a trade union of his choice or to participate in union activities, the act of the employer amounts to an interference with the worker’s constitutional right of association. The worker who was so punished by the employer is entitled to reinstatement. Thus, the right to be reinstated is a consequence of the interference with the constitutional right of Freedom of Association of the worker.

• On the third issue, the court held that the Appellant was entitled to the check-off dues of all its members in the employment of the Respondents. It resolved the issue in favour of the Appellant.

Furthermore, the Court found that the appeal has merit and accordingly, allowed it. For the cross appeal, it was found to be unmeritorious and accordingly, dismissed.

The Respondents were ordered by the Court to pay the arrears of salary and allowances to the affected employees from the date of termination of their employment to the date of the judgment less the amount of the redundancy or terminal benefits paid to them.

The Respondents were equally ordered to compute and remit to the Appellant the check-off dues of the Appellant’s members in the employment of the Respondents starting from the respective dates the Appellant introduced the union to the Respondents, to the date of the judgment.

OPINION

All the parties in the workplace have rights, duties and responsibilities. Some of which are provided for by Legislations, etc. Thus, Employers of labour are urged to recognise the inherent rights of workers in order to avoid unwarranted and unnecessary litigation.