PROCEDURE FOR INCORPORATING A BUSINESS ENTERPRISE BY A FOREIGN INVESTORPost Comment PROCEDURE FOR INCORPORATING A BUSINESS ENTERPRISE BY A FOREIGN INVESTOR Nigeria
LEGAL FRAMEWORK FOR BUSINESS ACTIVITIES
1 . METHODS OF CONDUCTING BUSINESS
All business enterprises must be registered with the Corporate Affairs Commission. Business activities may be undertaken in Nigeria as a:
(i) Private or Public limited liability company;
(ii) Unlimited liability company;
(iii) Company limited by guarantee;
(iv) Foreign Company (branch or subsidiary of foreign company)
(vi) Sole Proprietorship;
(vii) Incorporated trustees (religious, charitable, philanthropic or cultural);
(viii) Representative office in special cases ;
2. THE COMPANIES AND ALLIED MATTERS ACT AND INCORPORATION PROCEDURES
The Companies and Allied Matters Act, 1990 (the Companies Act) is the principal law regulating the incorporation of businesses. The administration of the Companies Act is undertaken by the CORPORATE AFFAIRS COMMISSION (CAC), which undertakes the administration of the Companies Act.
2.1. Minimum Share Capital and Disclosures in Memorandum of Association
The minimum authorised share capital is N10, 000 in the case of private companies or N500,000 in the case of public companies. The Memorandum of Association must state inter-alia that the subscribers “shall take amongst them a total number of shares of a value not less than 25 per cent of the authorised capital and that each subscriber shall write opposite his name the number of shares he takes.” The law permits and acknowledges the roles of attorneys and other relevant professionals in facilitating business transactions provided, of course, that this “agency arrangement is disclosed”.
2.3. Membership of the Company – Prohibition of Trusts
The Companies Act prohibits “notice of any trust, express, implied or constructive” and such shall not be entered on the register of members or be receivable by the CAC.
All categories of company shares should carry one vote. Shares with “weighted” voting right are prohibited. All shares (i.e. whether ordinary or preferential) issued by a company must carry one vote in respect of each share.
Consequently, preference shareholders are entitled to receive notices and attend all general meetings of the company and may speak and vote on any resolution before the meeting.
2.4. Disclosures To Be published In Company's Correspondence and Business Premises
Every company is obliged to disclose on its letterhead paper used in correspondence, following particulars:
(i) Name of company/ enterprise;
(iii) Registration/Incorporation Number;
(iv) Names of Directors and Alternate Directors (If any).
In addition, the law requires companies/enterprises to ensure that the Certificate of Registration be displayed in conspicuous positions at their principal and branch offices.
3. OPERATIONS OF FOREIGN COMPANIES IN NIGERIA
A non-Nigerian may invest and participate in the operation of any enterprise in Nigeria . However, a foreign company wishing to set up business operations in Nigeria should take all steps necessary to obtain local incorporation of the Nigerian branch or subsidiary as a separate entity in Nigeria for that purpose. Until so incorporated, the foreign company may not carry on business in Nigeria or exercise any of the powers of a registered company.
The foreign investor may incorporate a Nigerian branch or subsidiary by giving a power of attorney to a qualified solicitor in Nigeria for this purpose. The incorporation documents in this instance would disclose that the solicitor is merely acting as an “agent” of a “principal” whose name(s) should also appear in the document. The power of attorney should be designed to lapse and the appointed solicitor ceases to function upon the conclusion of all registration formalities.
The locally incorporated branch or subsidiary company must then register with the Nigerian Investment Promotion Commission (NIPC) before commencing formal operations. The new company may also apply to NIPC for other investment approvals (e.g expatriate quota) and other incentives.
3.1. Exemption to the General Rule
Where exemption from local incorporation is desired, a foreign company may apply in accordance with Section 56 of the Companies Act, to the National Council of Ministers for exemption from incorporating a local subsidiary if such foreign company belongs to one of the following categories:
(a) “foreign companies invited to Nigeria by or with the approval of the Federal Government of Nigeria to execute any specified individual project;
(b) foreign companies which are in Nigeria for the execution of a specific individual loan project on behalf of a donor country or international organisation;
(c) foreign government-owned companies engaged solely in export promotion activities; and
(d) engineering consultants and technical experts engaged on any individual specialist project under contract with any of the governments in the Federation or any of their agencies or with any other body or person, where such contract has been approved by the Federal Government.”
The application for exemption from disclosing certain details about the applicant is to be made to the Secretary to the Government of the Federation (SGF). If successful, the request of the applicant is granted upon such terms and conditions as the National Council of Ministers may think fit.
3.2. Representative Offices
Foreign companies may set up representative offices in Nigeria . A representative office however, cannot engage in business or conclude contracts or open or negotiate any letters of credit. It can only serve as a promotional and liaison office, and its local operational expenses have to be inflowed from the foreign company. A representative office has to be registered with the CA .
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