Company Formations in Nigeria
Posted: 18th September 2017 08:42
The principal legislation regulating the registration of businesses in Nigeria is the Companies and Allied Matters Act1 (“CAMA”). The CAMA establishes the Companies registry called the Corporate Affairs Commission (“CAC”). Over the years, concerted efforts by the Nigerian government, geared towards encouraging investment in the country, particularly foreign direct investment (“FDI”) has made the process of incorporating a business in Nigeria a lot easier. An overview of the process of incorporating a company in Nigeria will be highlighted below.
Eligibility to Register a Company
Generally, under Nigerian law, there are no nationality restrictions for persons or entities eligible to form a company, thus a non-Nigerian can participate in the formation of a company in Nigeria. 2
However in some sectors of the economy3, there are local content restrictions in relation to participating in the formation of companies.
Types of Companies
By virtue of section 21 CAMA, the following types of companies can be registered at the CAC:
a. Company limited by shares
b. Company limited by guarantee c.Unlimited company
1. Setting up the Company
The minimum statutory requirements for the incorporation of a company are:
a. Shareholders: a company is required to have a minimum of two shareholders.4 Where the shareholders are natural persons, at least two of the shareholders must be aged 18 years of age and above.5
b. Directors: every company incorporated in Nigeria must have at least two directors.6
c. Authorised Share Capital: the minimum authorised share capital of a private company is N10,000.007, whilst that of a public company is N500,000.00. The initial shareholders of a company are required to take amongst themselves a total amount of shares representing not less than 25% of the authorised share capital.
d. Secretary: every company incorporated in Nigeria is required to have a secretary.8 Where the company is being incorporated as a public company, the secretary to be appointed must be either a legal practitioner licensed to practice in Nigeria, a member of the Institute of Chartered of Secretaries and Administrators, or a member of the Institute of Chartered Accountants of Nigeria.9
Eligibility to Register a Company
Generally, under Nigerian law, there are no nationality restrictions for persons or entities eligible to form a company, thus a non-Nigerian can participate in the formation of a company in Nigeria. 2
However in some sectors of the economy3, there are local content restrictions in relation to participating in the formation of companies.
Types of Companies
By virtue of section 21 CAMA, the following types of companies can be registered at the CAC:
a. Company limited by shares
b. Company limited by guarantee c.Unlimited company
1. Setting up the Company
The minimum statutory requirements for the incorporation of a company are:
a. Shareholders: a company is required to have a minimum of two shareholders.4 Where the shareholders are natural persons, at least two of the shareholders must be aged 18 years of age and above.5
b. Directors: every company incorporated in Nigeria must have at least two directors.6
c. Authorised Share Capital: the minimum authorised share capital of a private company is N10,000.007, whilst that of a public company is N500,000.00. The initial shareholders of a company are required to take amongst themselves a total amount of shares representing not less than 25% of the authorised share capital.
d. Secretary: every company incorporated in Nigeria is required to have a secretary.8 Where the company is being incorporated as a public company, the secretary to be appointed must be either a legal practitioner licensed to practice in Nigeria, a member of the Institute of Chartered of Secretaries and Administrators, or a member of the Institute of Chartered Accountants of Nigeria.9
- Cap. C20, Laws of the Federation of Nigeria, 2004
- Section 20(4), CAMA, and section 17, Nigerian Investment Promotion Commission Act, Cap N117, Laws of the Federation of Nigeria, 2004 (“NIPC Act”).
- For example, the petroleum and advertising sectors.
- Section 18, CAMA.
- Section 20(2), CAMA.
- Section 246(1), CAMA.
- Section 27(2)(a), CAMA.
- Section 293(1), CAMA.
e. Registered Office: every company incorporated in Nigeria must have its registered office located in Nigeria.10
f. Certificate of Proficiency: where the objects of the company to be incorporated involves the provision of specialised services such as engineering, architecture or consultancy services, CAC would require that at least one of the directors of the company submits a proficiency certificate in respect of the company’s object.
2. Overview of Incorporation Process
a. Availability search: a search is conducted at the CAC to ascertain the availability of the proposed name of the company, and if available, the name will be reserved for a period of 60 days.
b. Procurement and preparation of incorporation documents for filing.
c. Stamping of the necessary documents at the Federal Inland Revenue Service (FIRS).
d. Filing the necessary documents at the CAC. e.Obtain Certificate of Incorporation.
After incorporation, the new company is required to register with certain regulatory agencies obtain
necessary permits and/or licences for carrying on business. The following are important to note:
a. Registration with Nigeria Investment Promotion Commission (NIPC), where the company has foreign membership;
b. Tax registration with the FIRS;
c. Obtain Business Permit from the Ministry of Interior (where the company is wholly foreign); and
d. Obtain relevant permits from regulatory agencies and bodies (where necessary).
3. Financing the Company
Capital to be injected into the company may be in the form of cash (whether as equity or loan) or machinery. A foreigner that intends to import capital into the Company needs to import the capital through an Authorised Dealer (commercial banks). Once the capital has been imported into Nigeria, the Authorised Dealer must within 24 hours of the importation issue a certificate of capital importation (CCI) to the investor and within 48 hours, make returns to the Central bank of Nigeria (CBN)11. Importing capital through the authorised channel guarantees unconditional transferability and repatriation of capital and proceeds, as well as guarantees against expropriation of the business.
4. Taxes
It is also appropriate to state that Nigerian tax law is purely statutory and thus features a wide and mixed range of statutes by which the various levels of government in the country seek to charge and collect revenue for operating various legitimate functions.
10 Section 27(1) (b), CAMA.
f. Certificate of Proficiency: where the objects of the company to be incorporated involves the provision of specialised services such as engineering, architecture or consultancy services, CAC would require that at least one of the directors of the company submits a proficiency certificate in respect of the company’s object.
2. Overview of Incorporation Process
a. Availability search: a search is conducted at the CAC to ascertain the availability of the proposed name of the company, and if available, the name will be reserved for a period of 60 days.
b. Procurement and preparation of incorporation documents for filing.
c. Stamping of the necessary documents at the Federal Inland Revenue Service (FIRS).
d. Filing the necessary documents at the CAC. e.Obtain Certificate of Incorporation.
After incorporation, the new company is required to register with certain regulatory agencies obtain
necessary permits and/or licences for carrying on business. The following are important to note:
a. Registration with Nigeria Investment Promotion Commission (NIPC), where the company has foreign membership;
b. Tax registration with the FIRS;
c. Obtain Business Permit from the Ministry of Interior (where the company is wholly foreign); and
d. Obtain relevant permits from regulatory agencies and bodies (where necessary).
3. Financing the Company
Capital to be injected into the company may be in the form of cash (whether as equity or loan) or machinery. A foreigner that intends to import capital into the Company needs to import the capital through an Authorised Dealer (commercial banks). Once the capital has been imported into Nigeria, the Authorised Dealer must within 24 hours of the importation issue a certificate of capital importation (CCI) to the investor and within 48 hours, make returns to the Central bank of Nigeria (CBN)11. Importing capital through the authorised channel guarantees unconditional transferability and repatriation of capital and proceeds, as well as guarantees against expropriation of the business.
4. Taxes
It is also appropriate to state that Nigerian tax law is purely statutory and thus features a wide and mixed range of statutes by which the various levels of government in the country seek to charge and collect revenue for operating various legitimate functions.
10 Section 27(1) (b), CAMA.
The Companies Income Tax Act12 is the governing law on the taxation of companies in Nigeria. It is a Federal law and deals with the taxation of all limited liability companies in Nigeria save for those engaged in petroleum operations. Profits arising from the business operations of a company are subject to tax under the CITA. Apart from Companies income tax, a company will also be liable to Capital Gains tax13, Education tax and Stamp duties.
5. Incentives
Under Nigerian law, there are a number of incentives which make Nigeria a business- friendly country. Some of these incentives include:
a. Relief on Foreign Loans: where a foreign loan of an amount not less than N150,000 is granted to a Nigerian company and is repayable within a period of not less than 10 years, the interest derived by the foreign company from the loan shall be exempted from tax, but the loan is repayable within a period of not less than five years, the interest accruing on the loan will be charged half the rate of tax due.
b. Pioneer Status: pioneer status is granted to any company whose investment is related to industry or products designated as pioneer14. A pioneer status exempts the company from taxes for an initial period of three years but may be extended for addition period of two years but is granted to a company only upon specific application to the NIPC.
6. Conclusion
Nigeria, as a country, is an environment conducive for doing business. This is evidenced by the fact that both the government and its agencies continually develop means by which the process of gaining entrance into the country, registration or incorporation of business entities as well as carrying on business is made seamless. As a firm we are positioned as a result of our vast experience in this area to offer our services to persons/ entities desirous of setting up shop in Nigeria.
12 Cap. C21 Laws of the Federation of Nigeria, 2004.
Michael Amadi
+234 1 2702551 Ext: 2711
mamadi@olaniwunajayi.net
Michael Amadi, the head of the Enterprise practice has served as Special Assistant to the Chief Executive Officer of the Nigerian Investment Promotion Commission, where he coordinated the legal, regulatory, and compliance portfolio of the Commission.
Omowumi Fajemiroye
+234-12702551 Ext: 2619
ofajemiroye@olaniwunajayi.net
Omowumi Fajemiroye is a Senior Associate in the firm’s Enterprise practice and has assisted notable foreign companies in wading through the Nigerian regulatory landscape including establishing business presence in Nigeria, advising on immigration, employment law and investments contracts.
Olaniwun Ajayi LP is a leading full-service law firm with broad financial, corporate and commercial, infrastructure development, telecommunications, energy & natural resources, and regulatory advisory experience. With nearly sixty (60) years’ experience of advising corporates, government agencies, organizations and individuals achieve their goals; the Firm has developed particular expertise in sophisticated commercial and financial matters, a fact which is illustrated by a track record of involvement in some of the largest and most complex matters in the dynamic sectors of the Nigerian economy.
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The Firm is widely regarded as Nigeria’s foremost commercial law practice and is acknowledged as “one of the most distinguished and successful law firms in Nigeria (IFLR 1000),” and “the First Firm to Come to Mind for Mega Matters” (Chambers Global).
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