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New Legal Regime on Stamp Duty Charges

Stamp duty is a tax that is levied on single property purchases or documents (including, historically, the majority of legal documents such as cheques, receipts, military commissions, marriage licences and land transactions).

The Finance Act, 2019 amended some provisions of the Companies Income Tax Act, Petroleum Profit Tax Act, Personal Income Tax Act, Value Added Tax Act, Customs and Excise Tariff etc., Capital Gains Tax Act and Stamp Duty Act.

Sections 52 to 56 of the Finance Act, 2019 amended Sections 2, 4, 89 and the Schedule of the Stamp Duty Act, 2004. Section 55 of the Finance Act, 2019 deleted Section 90 of the Stamp Duty Act, 2004.

We shall discuss new trends in stamp duty charges under the Finance Act, 2019.

Modern innovations on stamp duty under the Finance Act, 2019

Section 52 of the Finance Act, 2019 amended Section 2 of the Stamp Duty Act, 2004 to extend the meaning of “stamp” to include “an electronic stamp or electronic acknowledgment” for denoting any duty or fee. Again, the provision extended the meaning of “stamped” to include “instruments and materially tagged with electronic stamp or national stamp on an electronic receipt”. The meaning of “instruments” is extended to “electronic documents”.

Similarly, Section 54 of the Finance Act, 2019 amended Section 89 of the Stamp Duty Act, 2004 to include “electronic inscription whereby any money” is paid within the meaning of “receipt” for the purpose of stamp duty payment. Section 89 is introduced to provide for “digital tag with electronic stamp or any acknowledgement of duty charged on an electronic transaction”.

Section 89 is also introduced to provide that “electronic receipt or electronic transfer for money deposited in any bank” of N10, 000 naira and above paid by the owner of the account shall be charged a one-off duty of N 50 naira.

Who is the competent charging authority?

Under Section 53 of the Finance Act, 2019 which amended Section 4 of the Stamp Duty Act, 2004, the Federal Inland Revenue Service is the competent authority to charge duties on instruments between a company and an individual, group or body of individuals.

The relevant tax authority in a State is the competent authority to charge duties on instruments between persons or individuals within the respective States of the Federation.

The FIRS is empowered to collect stamp duties on all banking transactions though its agents; Banks and other Financial Institutions.

How much is the duty on electronic receipt or electronic transfer?

By the provisions of Section 54 of the Finance Act, 2019, a one-off duty of N 50.00 shall accrue for amounts from N 10, 000 and above. Nevertheless, duty shall not accrue where a person pays or transfers money electronically between his accounts within the same Bank.

What are chargeable transactions?

Instruments such as agreements, contracts, receipts, memorandum of understanding, promissory notes, insurances policies and other transactions listed in the Schedule to the Stamp Duty Act, 2004 are subject to stamp duty.

Exempted transactions under the Finance Act, 2019

a) of the Finance Act, 2019 amended the Schedule of the Stamp Duty Act, 2004 to include exempt receipts as “receipts given by any person in a Regulated Securities Lending Transaction carried out under regulation issued by the Securities and Exchange Commission”.

b) of the Finance Act, 2019 amended the Schedule of the Stamp Duty Act, 2004 and provided that shares, stocks or securities returned or transferred by a lender to its approved agent or a borrower in furtherance of a Regulated Securities Lending Transaction as well as documents relating to regulated securities lending transactions carried out under regulations by the Securities and Exchange Commission are exempted from stamp duty.

The New Company Law and the Constitutional Rights

A constitutional right can be a prerogative or a duty, a power or a restraint of power, recognised and established by a sovereign state or union of states.

The Companies and Allied Matters Act, 2019 recently signed into law by the President of the Federal Republic of Nigeria is a welcome development to Nigerian businesses. It has addressed the bottlenecks in formation of business entities and improved Nigerian corporate governance.

It has also given leverage to small companies to thrive and incorporated technological innovations to the processes of the Corporate Affairs Commission to facilitate the ease of doing business in Nigeria.

However, the legislature in extending the powers of the Companies’ Registry to effectively regulate the activities of Churches, Islamic Religious Organisations, Charity and Non-Government Organisation which are registered as Incorporated Trustees has introduced some new provisions in the new CAMA which are capable of usurping the fundamental rights of citizens to their freedom of thoughts, conscience and religion, freedom of peaceful assembly and association and constitutional rights of access to Courts.

The Plaintiff contends that Section 839 of the new CAMA which gives power to the Companies’ Registry to remove trustees and appoint an interim manager to take over an association where it reasonably believes that there is misconduct, mismanagement, fraudulent practices, for protection of the property of the association and public interest; Section 842, Section 843, Section 844 of the new CAMA which gives the Companies’ Registry the powers to control the proceeds of a dormant account of an association and dissolve an association on account of its dormant account; Section 845, Section 846, Section 847 and Section 848 of the new CAMA which directs associations to keep and submit their statement of affairs and accounting records to the Companies’ Registry, infringes the Plaintiff’s freedom of thoughts, conscience and religion enshrined in Section 38 of the Constitution of the Federal Republic of Nigeria, 1999.

The Plaintiff opines that Churches, Islamic religious organisations, Charity and Non-Governmental Organisations give hope to the Plaintiff and the Nigerian people. The activities of associations augment the efforts of government. They act as watchdogs for the people and put the government in check.

It is unfortunate for the provisions of the new CAMA to put the activities of associations under the complete whims and caprices of the Companies’ Registry which is an agency of the Federal Government.

The law provides for every association to have a Constitution which regulates the affairs of the association and protect them against misconduct, mismanagement, fraudulent or other activities which are contrary to the objects of the association.

Hence, the Companies’ Registry has no business whatsoever in suspending trustees and appointing interim managers for them. This is a sure recipe for disaster. The activities of associations are not against public interest to warrant such draconian provisions.

The funds of associations are not public funds. They are contributions, offerings and freewill donations of members to carrying out their objectives. There is no legal justification for the Companies’ Registry to be interested in the dormant account of associations.

Associations are non-profit making organisations. They are not business ventures as such the Companies’ Registry cannot be ingrained in the affairs of associations by expecting them to submit statement of affairs or accounting records to the Registry.

The Plaintiff has a freedom to his thought, conscience and religion alone or in community with others. The Plaintiff has a right to propagate his religion, worship, teaching, practice and observance in public or private and does not even need to register same with the Companies’ Registry to propagate same.

Therefore, giving powers to the Companies’ Registry who is an outsider and complete stranger to determine the affairs of a place where the Plaintiff professes his thoughts, conscience and religion is an aberration which is in contravention of Section 38 of the Constitution.

Furthermore, the Plaintiff contends that Section 839, Section 843, Section 844, Section 845, Section 846, Section 847 and Section 848 of the new CAMA infringe his freedom to peaceful assembly and association. This is because the Companies’ Registry has a wide discretion to appoint interim managers to replace suspended trustees.

The interim managers to be appointed by the Companies’ Registry may have nothing in common with the members of the association and the members will not have a right to challenge such appointment.

This will impair the rights of members of associations to actively participate in activities of their associations and determine its direction. The enormous and dictatorial powers given to the Companies’ Registry to intrude and interfere with the operations and management of associations is not legally justifiable.

The use of phrases such as “is satisfied”, “reasonably believes”, “deem it necessary”, “public interests” in relation to the powers of the Companies’ Registry over associations are ambiguous phrases that can easily lead to an abuse of power by the Companies’ Registry and contravene the Plaintiff’s freedom to associate peacefully with other persons enshrined in Section 40 of the Constitution.

Again, the Plaintiff contends that the provisions of Section 851 of the new CAMA which gives powers to the Administrative Proceedings Committee to hear cases arising from the provisions of the new CAMA limits the Plaintiff’s constitutional rights of access to Courts. Section 6 and 6 of the Constitution confers judicial powers to the Courts. Section 36 of the Constitution gives citizens the right to access an independent and impartial Court to determine their civil rights and obligations.

Section 251 of the Constitution provides for the Federal High Court to hear any matter arising from the provisions of the new CAMA.

Hence, the provision of Section 851 of the new CAMA comes as a very huge surprise. The composition of the Administrative Proceedings Committee is made up mostly of employees of the Companies’ Registry who are involved or aware of the issue which caused the dispute in the first place.

It is against the principle of natural justice for a person to be a judge in his own case. In most disputes arising from the provisions of the company law or regulations, the Companies’ Registry is usually a party to the dispute.

The Companies’ Registry cannot independently and impartially determine a dispute which it is also a party. If this is allowed the Companies’ Registry will be a party and judge in its own case.

It is without doubt that Section 851 of the new CAMA is contrary to the Plaintiff’s rights of access to Courts enshrined in Section 6 6, Section 36 and Section 251 of the Constitution.

In conclusion, the Plaintiff contends that his freedom of conscience, thoughts and religion, freedom of peaceful assembly and right to access to Court are so serious and the only way to ensure that the rights are protected in the circumstance, is for the provisions of Section 839, Section 843, Section 844, Section 845, Section 846, Section 847 and Section 848 and Section 851 of the new CAMA to be expunge from the new CAMA.

The Plaintiff prays for an order of mandatory injunction of the Court directing the Defendants to expunge the offending provisions of the new CAMA.

The Essence of Civil Proceedings

The essence of civil proceedings is for the judgment creditor to enjoy the fruits of his Judgment. This may be achieved by the judgment creditor executing the Judgment by the attachment and sale of the moveable or immovable property of the judgment debtor, attachment of funds belonging to the judgment debtor in the possession of a third party under the garnishee proceedings or committal of the judgment debtor to prison for refusal to settle the judgment debt under the judgment summons proceedings.

However the following are the grounds upon which a Nigerian Court will set aside execution of a Judgment.

(i) If the judgment creditor executed the Judgment against a person other than the judgment debtor.

There are instances where a judgment creditor who is desperate to obtain payment of the judgment debt, attaches the movable property of a third party in the premises of the judgment debtor. Upon the application of the third party with proof that the property belongs to him and not the judgment debtor, the Court would set aside the execution of the Judgment.

(ii) If the person against whom the Judgment was executed, was never a party to the suit.

A judgment creditor cannot legally execute a Judgment against a person who was not a party to the suit upon which he obtained Judgment. This is so even if the person against whom the Judgment was executed is the judgment debtor’s successor-in-title.

For instance, if a defendant dies before Judgment is delivered, the judgment creditor ought to bring an application to substitute the defendant’s name with that of his successor-in-title and serve the successor-in-title with all the processes in the suit.

If the judgment creditor fails do so and the Judgment is delivered against the defendant, the judgment creditor cannot sustain an execution against the defendant’s successor in title. This is because the successor-in-title was not a party to the suit. In law, the defendant and his successor-in-title are distinct and different persons.

(iii) Lack of service of the processes on the judgment debtor.

If the judgment creditor failed to effect service of the processes in the suit on the judgment debtor in line with the provisions of the relevant statutes on service of processes, the Court would set aside the execution of the Judgment against the judgment debtor.

This is because service of processes on the judgment debtor goes to the root of the suit and affects the jurisdiction of the Court to validly enter Judgment against the judgment debtor. Lack of service is a clear breach of the judgment debtor’s fundamental right to fair hearing and makes the proceedings conducted a nullity and of no legal effect whatsoever.

(iv) Lack of jurisdiction of the Court who delivered the Judgment.

Jurisdiction of Court is a threshold issue. If the Court who delivered the Judgment which the judgment creditor executed against the judgment debtor had no jurisdiction in the first place over the subject matter of the suit or exceeded its statutory jurisdiction, the judgment debtor may apply to set aside the execution of the Judgment.

(v) Execution of a Judgment outside the stipulated statutory period.

Order IV Rules 8 and of the Judgment Enforcement Rules provides that a Judgment shall be executed against the property of a judgment debtor within 6 years and against the person of the judgment debtor within 2 years from the date in which the Judgment was delivered, failing which the judgment creditor must file an exparte application for leave of Court to execute the Judgment outside the stipulated statutory period.

If a judgment creditor, without leave of court, execute a Judgment outside the stipulated statutory period, the judgment debtor may apply to the Court to set aside the execution of the Judgment.