The certification requirement is the central obligation in the Investment Promotion Act 1992.
The two questions
1. Is the enterprise a foreign enterprise? That is, not a national enterprise or a citizen — taking account of control as well as ownership — or declared to be one by the Minister under section 25A.
2. Is it carrying on business in the country? Applying the six inclusions and ten exclusions in section 3.
Section 28(1) provides that a foreign enterprise may apply to the Authority for a certificate. The obligation is expressed elsewhere: section 6(d) makes it a function of the Authority “to require that a foreign enterprise may only carry on business if so certified”, and section 41(1)(a) makes carrying on business without one an offence.
Three consequences of operating without one
A fine not exceeding K100,000, with a default penalty of K10,000 for each day the offence continues.
The offence is committed by the foreign enterprise and an officer or owner (however described) of it. Directors and shareholders are personally exposed.
And under section 41(3), the burden of proof that the enterprise was not carrying on business lies on the enterprise, not the prosecution.
Where a contract, agreement or understanding is entered into between a foreign enterprise and another enterprise, and the foreign enterprise had no certificate at the time — or the subject matter falls outside the activities for which it is certified — the court may, on the application of the other enterprise or of the Authority, declare the contract unlawful and void.
The commercial risk is obvious. An uncertified foreign enterprise may find its contracts unenforceable at the election of its counterparty.
Because section 3(1)(a) makes applying for a permit, licence, lease or authority carrying on business, an uncitrified enterprise that applied for a tenement, permit or lease was carrying on business at the moment of application.
The regularity of what followed is then open to question.
The certificate is not company registration
| IPA certificate | Overseas company registration | |
|---|---|---|
| Statute | Investment Promotion Act 1992, Part IV | Companies Act 1997 |
| Authorises | The activity, at a stated location | Recognition of the company and its capacity to be on the register |
| Applies to | Any foreign enterprise — not only companies | Overseas companies |
| Ongoing duties | Comply with terms; notify changes; reapply on change of ownership | Filing and disclosure duties |
A foreign company operating here will normally need both. Note also that the Investment Promotion Act reaches beyond companies: an enterprise is “any person, corporation, body or association of persons”. An individual foreign consultant maintaining an office here is an enterprise.
Section 26 — exemption
Where in the opinion of the Authority the activity a foreign enterprise intends to engage in, or is engaged in, is intended —
(a) primarily for religious, charitable, educational or some other socially useful purpose; or
(b) for a non-profit purpose that is socially desirable and to be encouraged; or
(c) a combination of both,
the Authority may, by written notice, exempt that enterprise from any of the provisions of this Act.
- Section 26(2). Before granting an exemption, the Authority shall give notice in a newspaper circulating throughout the country that at the expiration of 30 days from publication it proposes to grant one.
- Section 26(3). Any person may object within 10 working days of publication, by written notice in the prescribed form.
- Section 26(4). The Authority shall consider any objection and determine whether to grant the exemption within 30 working days of the expiry of the objection period.
This is the route for churches, aid organisations, schools and non-profit bodies. Note the breadth of the power: exemption may be from any of the provisions of the Act, not merely from certification.
Note too that section 27(4), which prevents a certificate being granted for a reserved activity, is expressed to be subject to sections 26(1) and (2).
Practical steps
- Determine status first, taking control into account — see who is a foreign enterprise.
- Check whether the activity is reserved. If it is, a certificate cannot be granted.
- Apply before doing anything — including before applying for any other permit or licence.
- Get the activity description right. Operating outside the certified activity breaches the certificate and exposes contracts to section 41A.
- Register under the Companies Act as well, where the enterprise is an overseas company.
Sources
- Investment Promotion Act 1992 — ss 3, 6, 25A, 26, 27, 28, 41, 41A
- Companies Act 1997
Before relying on anything here, read the current text of the Companies Act 1997 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.