The Compliance Checklist for an SME

The Compliance Checklist for an SME

If you have a business turnover of N100m – N500m  per annum,  total assets greater than N5m (not more than N500m), and/or more than 11 employees (not more than 200), you are  a Small & Medium-sized Enterprise (SME), by definition of the Bank of Industry.

An SME is vital to the growth and development of any economy (contribution to GDP, economic growth, job creation, and innovation), but only if it’s built on a foundation of ethics, compliance and sound financial planning.This post will focus on some compliance obligations for SMEs in Nigeria.

You would have registered your SME either as a business name or a private company limited by shares. Under the  Companies and Allied Matters Act 2004, there are minimum standards of compliance you are required to observe.

The compliance checklist for any Business Name includes:

  1. Publications: Business names are required to publish their registered name and registration number on official documents used for trading i.e. letterheads, business cards, and business letters.
  2. Annual Returns: Business names are required to file an annual return with the Corporate Affairs Commission (CAC), not later than 30 June of every year. Note: It is a common failing for Business Names, not to file their annual returns. This could result in the business being removed from the register of businesses in Nigeria.

The compliance checklist for any Private Company includes:

  1. Registers & Records: Records and registers are beneficial to the owners because it is primary proof of the decisions and activities of a business. These registers (which are required to be kept up to date) may include.
  • Register of Members (the records of owners or shareholders);
  • Register of Directors (the records and details of directors appointed by the company);
  • Register of Directors’ Shareholding (where applicable);
  • Register of Company Secretaries (the record and details of the company secretary appointed by the directors);
  • Register of Directors’ Interest in Shares;
  • Minutes & Resolutions Book (for general meetings, directors’ meetings & management meetings);
  • Register of Charges; and
  • Accounting records.
  1. Annual returns: A company is required  to file an annual return, at least once a year (not earlier than 30 June or later than 31 December), with the CAC, whether it is trading or not.
  2. Tax Returns: The Nigerian government is increasingly enforcing the obligation to pay business-related taxes. The failure to file tax returns and pay taxes could result in heavy fines and eventual closure of the business.
  3. Financial Reports: Companies are mandatorily required to keep financial records, prepare (audited or unaudited) financial reports, present the report to shareholders & debenture holders (where applicable), and file the report at the CAC accompanying the annual returns.
  4. Employment contracts: Companies that have employees are required to issue employment contracts to their employees within 3 months of the relevant employment date. The contract of employment should state the identity of the employer, date of employment, nature of employment, notice period, salary/wage, and method of calculating employee’s salary etc.

SMEs who observe these minimum compliance obligations will prove more attractive to potential employees, suppliers, investors, and standards agencies than their competitors. The failure to  build and maintain an effective compliance culture and process may result in an implosion of the business.

There are a variety of compliance obligations for different businesses based on the size and type of business, and business sector. A simple compliance health-check carried out by an experienced compliance service provider like JCS Client Services, is the starting point to assessing your compliance status.

If any of the matters raised in this post applies to you, and you would like to discuss them, you can contact   on 08054401612

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