Legal Issues Small Businesses face in Nigeria

Starting a small business in Nigeria can be tasking and demanding at the same time. Tasking in the sense that all your time and resources will be geared towards making the business a success. Demanding on the other hand is that money and or finance is a major tool in getting a business rolling. As a small business, the bulk of the funds comes from the owner of the business or loan from the financial institution which must be sourced by the owner of the company or business. It is not always easy for small business thriving well in the face of tight competition from well-known and established companies.

Once you start running a business, the world gets a lot more complicated. You will find yourself faced with a plethora of issues and decisions that most people never have to consider, and legal inconveniences may be an unfortunate side effect.

This blog is meant to list out some of the problems small businesses face in Nigeria and to give small tips to small business owner on the way to overcome or avert these challenges.

Licensing

Licensing is one of the most common legal issues small businesses encounters. Make sure you’re in accordance with your local government’s requirements for business licensing. Otherwise, you will likely find yourself facing fees that could easily have been avoided.

In Nigeria, the first and foremost license is CAC. This is obtained when your business is duly registered with the Corporate Affairs Commission (CAC), you need an accredited CAC agent to get that done for you

. When that is gotten, next is TIN (Tax Identification Number). You can get that by yourself or you use the services of an agent., These are used to open a corporate account with the bank in Nigeria. These 2 are the basic requirements for a growing business in Nigeria and cannot be waved aside.

Read also: How to Register a Limited Liability Company in Nigeria

Trademarks

Trademarks are another surprisingly common legal issue faced by small businesses. Be sure to do plenty of research ahead of naming or re-naming your business or launching any new products or services. If you can think of a name, there’s always a chance someone else has as well, and it’s entirely possible that the other business already owns the trademark. Infringing on someone’s trademark is not the kind of legal hot water you want to find yourself in, even if that infringement was an honest mistake. “Ignorance of the law is not an excuse”.

As a small business, once the due diligence search has been conducted and you find out you are not infringing on anyone’s Trade mark it is advisable to secure your name and logo by registering your Trade Mark.

Read also: Procedure for Registration of Trademark in Nigeria

Employee Termination

It happens to many businesses. You hire someone you believe to be more qualified than they really are, and soon realize you’ll be losing money by keeping them around. Or you find out that they just don’t fit in with the rest of your employees and are affecting productivity and morale for the entire team. You can lessen your chances of legal repercussions if you take the right precautions before terminating anyone. This starts with spelling out the terms of employment in an employee manual and documenting any disciplinary actions involving the employee. If there’s any doubt about what you should do, it would be worth your while to consult your lawyer.

In Nigeria, the law guiding employer/employees’ relationship is spelt out in the Labour Law of various states of Nigeria. The court in Nigeria leans more on the Terms of employment signed by both parties, its only in the absence of the Terms or the Terms are contrary to equity and natural justice that the court will resort to Labour Laws.

As a small business owner, it is advisable to issue Letter of Employment to your employees stating clearly the Terms of employment and Termination of work, this is to save you from the hassles of litigation.

4. Shareholders’ Agreement

If your business has more than one shareholder, an agreement is strongly encouraged. One day, the business may split up or be sold, and if no agreement exists, legal battles can and likely will ensue. Even if current shareholders are on the best of terms, things can always turn sour, and it’s not a good idea to leave any grey area when it comes to who gets what. It is strongly advised that the agreement be drafted, or at the very least, overseen by a lawyer with experience in such matters.

In Nigeria, this is applicable to a Private Limited Liability Company. No matter how the going is good, there will always be a time of disagreement. Having a shareholders Agreement is very important to a small business owner as this will save you from the heart ache that comes with Shareholders disagreement. If you have an enterprise popularly called ‘one man business’ you don’t need this Agreement. if the business is a Partnership business, then you need Partnership Agreement which must be drafted by a lawyer.