Focus on the Implications Of Force Majeure and the Stamp Duties

Saturday, August 01, 2020 / 2.00PM / Ottoabasi Abasiekong for WebTV / Header Image Credit: WebTV

Stakeholders at a recent Accion Microfinance Bank forum explored the
implications of “Force Majeure & Stamp Duties Act” on the financial market
especially the Micro-Finance Institutions (MFIs).

Giving his opening remarks, the MD/CEO of Accion Microfinance Bank, Mr.
Taiwo Joda believed the Virtual webinar was an opportunity to get more
clarification on how Microfinance banks can navigate the challenges of the
Force Majeure clause and the application of the Stamp Duties Act.

Delivering the first presentation, Mr. Ngo-Martins Okonmah, Senior
Associate, Aluko and Oyebode Legal firm described the Force Majeure clause as a
contract-based term that is determined by courts. According to him contract
terms are critical to the invocation of force majeure in contractual agreements
in the country.

He stated that under the Force Majeure clause there is the “Closed list” which has a specified range of events to determine its inclusion and the “Non-Exhaustive list” which is broader in terms of events that can be
accommodated for declaring it.

Considering the COVID 19 Pandemic, Mr. Okonmah, pointed out that in the
financial market a borrower who declares force majeure on his/her loan will be
breaching the contract, as the documentation did not capture it. He said going
forward Microfinance Banks should adopt the “Force Majeure” clause in future
contracts and service agreements between Microfinance Banks and Vendors.

Looking at the Stamp Duties Act in Nigeria, Nike James. Partner, Tax,
Regulatory and People Services, KPMG Professional Services, asserted that
the banking industry including Microfinance Institutions had the highest risk
in terms of exposure.

According to her the current administration had a big drive to recover
stamp duties which will have wide implications for the financial market and
economy.

She cited the fact that the Federal Inland Revenue Service, FIRS which
is the government agency at the forefront of SDA collections achieved a 1,000%
growth in stamp duties collection, realizing N66bn in H1, 2020 compared to N6bn
in the corresponding quarter; while a Inter-Ministerial Committee was recently
set up to coordinate and ensure the increase in revenue from stamp duties, with
an annual target of N1trn annually.

Nike James highlighted the following as the burning issues to be
addressed: the introduction of extraneous rates/instruments, Audit of
stamp duty collected on electronic transfer pre-finance Act and Demand of Stamp
Duties by State tax authorities.

On the steps that has to be taken by stakeholders in the industry like
the National Association of Microfinance Banks, three areas were identified
namely;

The Advocacy drive at the FIRS, Presidency,
Ministry of Finance and Central Bank of Nigeria to prevent retroactive
application of stamp duties rates not provided in the SDA e.g. Stamp
duties of 1% on all contracts.

Collaboration of all banks to collectively resist
State Government’s demand for stamp duties on electronic transactions
purportedly between individuals.

Mount Advocacy or legal action to prevent stamp
duties audit of electronic transfers prior to the Finance Act to protect
vulnerable banks.

For individuals, Nike James also harped on the need for them to review
core banking application for proper deduction of stamp duties, prepare for
stamp duties audits by FIRS for 2015 to 2019 FY and the need to proactively
conduct a stamp duty check and diagnostic review on physical documents.

She called for a clear definition of force majeure and its implications
and collaboration amongst the microfinance institutions to address the issues
and concerns.

Also contributing to the discourse, Oghogho Makinde, Partner, Aluko
& Oyebode said another area of consideration will be the approach on
Stamp Duty treatment of electronic documents received.