3 Levels of Compliance that project developers cannot ignore.

Don’t ignore Missing permits, lapsed licenses, and compliance gaps - Because investors won’t.

The three notes written in June focused on risk identification, allocation, and mitigation, the three major steps taken to define a risk management strategy for an infrastructure project.

The completion of a detailed risk management strategy, using the risk matrix tool, is the start of the Mid-stage of Project preparation.

I realise I didn’t mention it in any of the notes that discussed risk management, so before I proceed, I want to let you know that the core theme of the mid-stage is to

Protect your project with Contracts, Compliance, and Insurance.

This means protecting your project with the right type and quality of documents that secure the project and its owners far into the future.

By completing the risk matrix before negotiating contracts, the developer (and sponsors) gets a fuller and detailed view of what must be worked into the contracts with the various counter-parties on the different aspects of the project.

It also helps with identifying risks that cannot be fully allocated or mitigated, which could then be covered under insurance policies.

Compliance, however, involves adherence to existing laws and regulations by obtaining and maintaining necessary registrations, licenses, and permits from relevant authorities.

The Critical Role of compliance in project legitimacy

For investors, these registrations, filings, permits, and licenses are not mere formalities; they are considered among the primary "assets" of the project company, representing the inherent rights for the project and the project company to exist and operate.

Without them, a project is in a heightened state of uncertainty, making it unfinanceable. The process of obtaining and maintaining these governmental approvals is an essential aspect of project development and is meticulously reviewed by all parties involved, particularly lenders and investors.

The consequences of failing to secure or keep updated these regulatory protections can be severe. Issues with omitted or lapsed licenses can damage even commercially and technically viable projects. Failure to obtain or maintain a crucial permit means the project may be unable to operate, leading to revenue shortfalls, defaults on debt instruments, and potential payments of damages or even complete termination of contracts. Investors will not look the other way.

Before I carry on, I want to remind you that I am not a lawyer.

I share this note from experience gained from two previous roles:

• A project manager who has led a team of specialist advisers, including lawyers, to complete the project development for various projects.

• A project development manager in a financial institution, with the job of reviewing due diligence reports (including legal DDs) for their clients’ projects, then drafting and executing a project development plan to close gaps preventing financial close.

As someone who has had to know enough to explain these issues to developers (and sponsors), I recognized and explained three broad categories of corporate compliance. They are:

• General Corporate compliance – Evidence of adherence to regulations on Incorporation, employee-related, and tax filing.

• Corporate compliance at Industry level – Certification & Evidence of adherence of the company to requirements and standards from Industry regulators & government-approved industry associations.

• Corporate compliance at the project level– Project site-specific permits, licenses, rights of way, E&S regulations.

General Corporate Compliance

These are industry- and project-agnostic requirements that are relevant to all companies in the country. If the entity is a newly incorporated project company (SPV), the main sponsor must provide incorporation details for the SPV, along with evidence that the sponsor’s existing corporate entity complies with these standards.

Using the Nigerian context as a reference, general corporate compliance will cover:

• Evidence of Company Registration and Filings

  • Certified True Copy of Certificate of Incorporation, Memorandum and Articles of Association from the Corporate Affairs Commission (CAC)

  • Most recent CAC documents - CAC 7 (Directors); CAC 2.1 (Secretary); CAC 3 (Change of Address); CAC 1 (Status Report)

  • Evidence of up-to-date filing of annual returns with CAC.

  • Board authorization/Company Resolution for approving entry into and undertaking the project.

  • Business Permit and Expatriate Quota (where the company has foreign shareholding).

  • Filings on consequential changes with the CAC.

• Evidence of Taxation and Audit Compliance:

  • Tax Identification Number (TIN).

  • Tax Clearance Certificates for the last 3 – 5 years from the Federal Inland Revenue Service (FIRS)

  • Evidence of up-to-date filing for all applicable federal/state tax returns, including Companies Income Tax (CIT), Stamp Duties, Value Added Tax (VAT), Employee Personal Income Tax (PAYE) Remittances, and Withholding Tax.

  • Audited financial statements for the past 3-5 years

  • Details of any tax concessions, incentives, or waivers (e.g., Pioneer Status, VAT Exemption, Import Duties Exemption).

• Evidence of Labour and Social Compliance:

  • Contribution to the Industrial Training Fund and National Housing Fund.

  • Evidence of contributions to employees’ pension schemes according to National Pension Commission (PENCOM) regulations.

  • Providing evidence of maintaining a Group Life Insurance in accordance with the law.

  • HR manual, policies, and procedures, including those against child and forced labour, employee grievance procedures, and employee retrenchment plans.

  • Occupational Health and Safety (OHS) programs and procedures.

  • Company policy statements on Environmental & Social (E&S), Health, Safety, and Environment (HSE).

Corporate Compliance at Industry level

These are regulatory compliance requirements that necessitate registration with the industry regulator or the government-approved association, for the company to obtain certifications or permits to operate that apply across all the sites the company operates. This may vary for each industry.

The primary thing with this category is that it is only relevant for that sector, and companies that have these permits, licenses, certificates can use it for all new projects till it expires and it is renewed.

In Nigeria, Solar Mini-Grid, Toll road, logistics parks, which form the basis of examples I share, typically do not have many examples in this category. – But If there are some then please let me know in the comments.

However, for example:

• The National Electricity Regulation Commission (NERC) issues Distribution licenses to distribution companies (Discos) delivering energy from the national grid to end users, which covers all their sites.

• The Nigerian Communications Commission (NCC) issues Class licenses and Value-added Service licenses to operators, which would apply across all their sites.

Corporate Compliance at Project level

Compliance with registrations, licenses, and permits obtained from various national, sub-national, and industry agencies and regulators, which are limited in scope to the specific project site or sites. This means that new sites will require new permits, and existing permits are not transferable across sites.

This distinction between what applies to a company and is useful across sites versus what is project-specific matters. Because providing evidence of compliance on existing projects is helpful to show a history of right behaviour, but conditions for new sites are not met till evidence is provided of progress or completion of approval for the new sites.

For example, in Nigeria, in addition to providing compliance with environmental and social regulations standards, by completing a Federal Ministry of Environment approved project ESIA (or ESMP), Resettlement action plan, livelihood restoration, stakeholder engagement plan( as is relevant, the following are project-specific permits for:

Solar-Mini Grids

• NERC Permit or license: For Mini grids in Nigeria, less than 100kw a permit/registration; Licenses for >100kw to 1MW.

• NERC Generation license: if the generation of energy is connected to the transmission network for distribution to end users.

• Standard Organization of Nigeria Conformity Assessment Programme (SONCAP) Import Permit/Certificate: to verify the quality of materials and imported components

• Nigerian Electricity Management Services Agency (NEMSA) certification: to certify the quality of the installations – post construction.

Logistics parks

If this park is used as a free trade zone, it requires

• A free trade zone license from the Nigerian Export Processing Zone Authority (NEPZA)

• Approvals from Nigerian customs to connect the site to the command to support the clearance of goods at the point of transition of goods from the free zone area into the country.

• If this park will handle food processing or drugs

• It requires approval from the National Agency for Food and Drug Administration and Control (NAFDAC) post construction, but approval on active sites will certainly help investors as proof that the new site will likely achieve this too.

Toll roads

The project-level compliance will be focused on

• Receiving rights to the carriage way and easements, typically done in the concession or operating agreements with the government authority.

• Approval of tolling policy and rules for that road ( in line with national tolling regulations in the case of federal roads)

• Construction permits with the Federal Ministry or the State Ministry of Works (If a Federal or State Road)

Bringing It All Home

Securing all required licenses and permits is not merely a formality; it is a strategic imperative for any infrastructure project. Developers must understand that while technical viability and commercial soundness are essential, they are insufficient without proven project legitimacy through comprehensive documentation and regulatory compliance.

By dedicating sufficient time and resources to securing and keeping up to date on managing all registrations, filings, submissions, permits, and licenses, developers not only protect their projects from delays and derailment but also significantly enhance their attractiveness to investors, paving the way for long-term success and value creation.