STARTING A COMPANY IN NIGERIA

The principal law guiding the starting of a business in Nigeria is the Companies and Allied Matters Act (CAMA) 2020. Different types of business entities can be registered in Nigeria. The choice of business to set up is influenced by various factors such as control, limitation of liability, cost, the complexity of formation, tax implications, purpose, capital, and ongoing administration.

There are different types of business structures that can be set up in Nigeria; each has peculiar identities and requirements to suit the purpose of the business.

By and large, there are two major types of business structures in Nigeria, which are briefly explained below:

  1. A Registered Business Name—This type of business structure is also popularly called a “Sole Proprietorship.” It is the simplest form of business venture one can operate in Nigeria. It is registered with the Corporate Affairs Commission and is not a legal entity that can sue or be sued in its own name. The owner of the business is responsible for its debts and liabilities. The major feature of this type of business set-up is that the business owner bears all the profit and loss of the business. This type of business can only be registered by Nigerian citizens or persons resident in Nigeria.
  2. A private company limited by shares- a private company limited by shares, often referred to as LLC in many jurisdictions is a separate entity different from its members. This kind of business set-up is a legal entity that can sue and be sued in its name. It is the most suitable form of commencing business for both Nigerians and foreigners. A company must have directors and shareholders, although one person can be the shareholder and the director simultaneously. Only one person can set-up a company in Nigeria, in case of foreign-owned company a minimum of two persons are required.

Starting an LLC in Nigeria must commence with the incorporation of the business with the Nigerian company house, the Corporate Affairs Commission(CAC). An LLC or private company limited by shares is an ideal type of company for any investor seeking to invest in Nigeria.

General Requirements for Starting a Business in Nigeria

  1. Registration of a Company

To conduct any business in Nigeria, an individual or investor must register a company. Foreigners who wish to set up a business in Nigeria must register a company with a minimum of N100 million in share of capital. This share capital requirement is not applicable to registering a business name or sole proprietorship. 

2. Registration with the Nigeria Investment and Promotion Commission (NIPC)

The NIPC registration is needed for all foreign-owned companies registered in Nigeria. The function of NIPC is to coordinate and promote investment in Nigeria.

3. Tax Registrations and Tax Clearance Certificate

Every newly registered business must be registered with the Federal Inland Revenue Service (FIRS) for a tax identification number(TIN) and value-added tax numbers. The tax identification number would enable the company to remit its taxes. It is also a mandatory requirement for a bank account opening

4. Business Permit

Every company wholly owned by foreigners must apply to the Federal Ministry of Interiors for a business permit before the commencement of a business

5. Expatriate Quota

For companies employing foreigners in their organization, the expatriate quota will be required for the foreigners seeking to work for them. Only companies limited by shares can apply for expatriate quotas for their foreign workers. 

6. Combined Expatriate Residence Permit and Alien Card (CERPAC)

Foreign individuals seeking to work in Nigeria must hold a valid residence or work permit. In Nigeria, CERPAC is the work permit that foreigners living or working in Nigeria must hold. The company’s expatriate quota approval must precede the application for CERPAC.

7. Bank Account Opening and Capital Importation

For a company limited by shares or a business name, a bank account can be opened in the name of the company or business. Regardless of which bank in Nigeria a company chooses to bank with, the requirements for bank account opening are consistent among all banks. Such requirements will include incorporation certificate and documents, valid mode of identification, account opening package duly completed and signed, company’s board resolution authorizing an account to be opened, Tax Identification Number (TIN) and Bank Verification Number (BVN).

When a bank account has been opened, the company may import capital through the Central Bank of Nigeria’s authorized dealers. Money can be imported in the form of equity or loan. Upon the arrival of the capital, the authorized dealer must issue a certificate of capital importation within 48 hours. The certificate of capital importation enables the company to repatriate its capital and profits in the future without any hindrances. 

8. Company Secretary

The appointment of a company secretary is no longer mandatory for private companies except the ones with foreign participation. The company secretary has statutory and administrative roles to play in the company, which include keeping statutory books and filing the company’s annual returns. 

9. Office and Property Acquisition

Every company must acquire a business address or property to conduct business activities. A takeoff address is needed for registration for a locally-owned or foreign-owned company. A foreign-owned company not having any address in Nigeria may use the address of their appointed secretary during the registration.

In conclusion, to start a business in Nigeria, it is essential that every individual understands the requirements to be met in accordance with the provisions of CAMA. Choosing an appropriate legal structure is an important decision; it is, therefore, advisable to seek professional advice in determining the proper business structure that would suit one’s business purposes.

 

By Corporate & Commercial Law Team at Resolution Law Firm. 

Email: info@resolutionlawng.com

Tel: +2348099223322