The Manufacturers Association of Nigeria (MAN) has expressed concerns over the implementation of certain provisions of the Financial Reporting Council of Nigeria (Amendment) act, particularly those relating to charges on non-listed entities, like most members of MAN.
Director General of MAN, Segun Ajayi-Kadir, said that these provisions, as currently implemented, pose significant challenges to the manufacturing companies, majority of whom are non-listed entities and are categorised under current definition of Public Interest Entities (PIEs) of the said Act.
For instance, it said a new section 33 introduced under FRCN Amendment Act, 2023 mandates annual charges for non-listed entities, calculated as a percentage of their annual turnover (maximum being 0.05 per cent of the annual turnover for companies with turnover of more than N10 billion).
For publicly quoted companies, it explained that the maximum payment earlier was N1 million per annum. Now, that amount is hiked to N25 million, which is quite incredible, for non-listed companies, who were previously excluded, there is no cap and it is linked to the turnover, irrespective if the company is profitable or not.
He stated that the FRCN Amendment Act, 2023, Section 33 Clause 3, imposes heavy penalties on a person or an entity failing to pay annual dues with 10 per cent of the annual due for every month of default cumulatively until payment, liable to sanctions prescribed by the Council for any default of its agents, officer or personnel engaged in the financial reporting process for failure to comply with the provision of the act and in case of chief executive officer to a penalty as may be prescribed by the Council, or on conviction to imprisonment for a term not exceeding 6 months.
The DG of MAN pointed out that the strict penalties and possible conviction to imprisonment could be construed as having the nature of a criminal law.
Generally, he said non-payment of fees/dues typically results in other penalties or fines and imprisonment provisions are applicable only in cases where non-payment is seen as an act of defiance or fraud.
The Section 34 of the Principal Act stipulates that the proceeds of the Fund established under Section 33 of the Act is to be applied for the expenditures of the Council, which incentivises excessive generation of revenue and makes collection of the fees purely for administrative purposes.
Criminalising non-payment of dues/fees, the utilization of which is more administrative in nature, makes the FRNC Amendment Act, 2023 a draconian law with no choice left for the entities to contest the charge, but to comply and pay the dues.