The Court of Appeal (CoA) delivered a judgement in an appeal against the decision of the Federal High Court (FHC) in the case of Stanbic IBTC Holding Plc (‘Stanbic IBTC’ or the ‘Appellant’) v. the Financial Reporting Council of Nigeria (‘FRCN’) and National Office for Technology Acquisition and Promotion (‘NOTAP’). The CoA ruled that failure to register an agreement with NOTAP does not render it illegal, null and void.
Prior to the ruling of the CoA, the FRCN had issued the Rule 4 - Transactions requiring registration from statutory bodies such as the National Office for Technology Acquisition and Promotion in 2016. The implication of the rule was that businesses were mandated to obtain regulatory approval before recognizing certain expenses in their financial statements.
Facts of the case and issues for determination
Stanbic IBTC entered into an agreement to sell a locally developed/enhanced software to its majority shareholder, Standard Bank of South Africa (‘SBSA’). It was agreed between both parties that Stanbic IBTC would license the same software from SBSA, after the sale had been completed. The terms of the sale and licensing transactions were contained in a Sale, Purchase and Assignment (the ‘First Agreement’) signed in 2012.
Stanbic IBTC submitted the First Agreement to NOTAP for approval and registration. NOTAP did not approve the agreement on the basis that it does not have regulatory oversight over such agreements. NOTAP separately advised that Stanbic IBTC license the software to SBSA rather than sell it. Stanbic IBTC, however, disregarded NOTAP’s advice and proceeded with the transaction as planned. It is noteworthy that NOTAP’s advice was not legally binding on Stanbic IBTC.
After NOTAP’s initial response, Stanbic IBTC submitted a Software License Agreement (the ‘Second Agreement’) to NOTAP for approval and registration. The Second Agreement was for the licensing of the same software from SBSA to Stanbic IBTC. NOTAP approved and registered the Second Agreement in 2013. The period covered by NOTAP’s approval was 2012 to 2015 financial years.
The FRCN reviewed Stanbic IBTC’s financial records for 2013 and 2014 and directed that the company withdraw and re-issue its financial statements for the respective years. In addition, the FRCN levied Stanbic IBTC with a fine. The directive to withdraw and reissue its financial statements and pay a fine was premised on the facts that the Sale Purchase and Assignment Agreement (the First Agreement) was not approved and registered by NOTAP. Furthermore, FRCN took the view that the Software Licensing Agreement was illegal since the First Agreement was not approved by NOTAP.
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