REGISTRATION OF COMPANY IN NIGERIA
The law guiding the company formation in Nigeria is the Companies And Allied Matters Act, (CAMA) Laws of the Federation of Nigeria (2004). The Act is the guidelines for the formation of any type of company in Nigeria and other ancillary matters.
Unlike the United States of America where each state has its own company registry and can individually register companies, the company registration in Nigeria is central and a company can only be registered with the Corporate Affairs Commission (CAC) only.
The procedure for foreign-owned company registration in Nigeria is almost the same as the procedure for local company registration. However, every company with foreign participation in Nigeria must be capitalized with a minimum of N10 Million share capital, so as to enable such a company obtains the expatriate quota required to obtain a Nigerian work permit for all its expatriates including the directors.
In our previous write-up, we discussed the procedure to register a foreign subsidiary company in Nigeria.
Types of Companies in Nigeria
There are different types of company formation allowed under Nigeria’s company law. Several people seeking to do business in Nigeria, especially for the first time, often want to know what type of company is most suitable or appropriate in Nigeria. The answer to such a question is not far-fetched. A private limited liability limited is obviously the best type of company for private individuals seeking to start a business in Nigeria. Having said that, I will briefly state the types of companies that can be registered in Nigeria. Pursuant to the provisions of Section 22 CAMA, these three types of companies can be registered in Nigeria:
- Private Limited Company
- Companies limited by guarantee and
- Unlimited Companies.
The Act further states that any of the three above companies may be a private company or public company, and as such, making it six types of companies that can be registered in Nigeria in accordance with the provision of the Act. However, there are difficulties and technicalities that could make it impossible for some types of the above-stated company to be registered as public companies. For instance, it is practically impossible for any public company to be registered as a company limited by guarantee or an unlimited company in Nigeria. Therefore, it is generally believed that it is only four types of companies that one may be able to register in Nigeria. Accordingly, the CAC in its official website state such four types of companies that can be registered in Nigeria as follows:
- Private Limited Company (LTD)
- Public Limited Company (PLC)
- Companies limited by guarantee and
- Unlimited Companies.
Having stated the 4 types of companies available for registration in Nigeria, it is very relevant to further restate that among all the 4 types of companies mentioned, private limited liability companies are the most widely used form of business enterprise in Nigeria. A private limited liability company has several advantages, which include but limited to perpetual succession, limited liability, and separate legal personality. Above all, it is the only form of company that can easily and be swiftly registered in Nigeria.
As can be seen above, although there is another type of private company that can be registered known as the public limited company(PLC), the high threshold statutory requirements attached to its formation make it unattractive for individuals starting a new venture. Furthermore, public limited liability companies are also subjected to different external laws outside the CAMA for it to operate. For instance, every PLC must comply with the provisions and the requirements of the Investment and Securities Act(ISA) and other SEC Rules and codes of corporate governance.
Additionally, one of the reasons a company limited by guarantee may not be appropriate or suitable for a business venture is the fact that a company limited by guarantee may not be set up except with the consent of the Attorney General of the Federation. Although a company limited by guarantee may also be used for profit, it is seldom used as profit-oriented in Nigeria, but rather for a special purpose such as corporate social responsibility or charity. Whereas Incorporated Trustees can be used or more suitable for the purpose.
The other type of company, which is an unlimited liability company may only be recommended to be used to a parent company desiring to have such a subsidiary with unlimited risk. It is not in any way suitable for individuals who seek to start up a venture, as the major benefit of incorporating a company, which is the ability to limit one’s liability or risk does not feature in the unlimited company.
The procedure for foreign company registration in Nigeria is almost the same as the procedure for domestic company registration for Nigerians except for a legal requirement that a company with foreign participation in Nigeria must be capitalized with a minimum of N10 Million share capital.
Having regards to the above, it is no longer in doubt that the most suitable type of company that may be registered in Nigeria is the limited liability company, whose registration procedure we shall extensively focus on here.
Section 18 of the Companies and Allied Matters provides that it takes a minimum of 2 persons to form a limited liability company. Section 246 of the same Act mandates every company registered in Nigeria to have or maintain a minimum number of 2 directors. A single person or entity currently cannot form a company in Nigeria. However, a single parent company or foreign company seeking to register a subsidiary in Nigeria may nominate two persons as directors of the new company or subsidiary.
Procedure for company registration in Nigeria
The procedure for company registration in Nigeria are as follows:
- Any person proposing to register a company is advised to speak to a consultant, especially a corporate lawyer. Although CAC has made good efforts through online registration to ensure individuals are able to register companies online themselves, however, the services of accredited agents or lawyers are still requested for attestation of the incorporation documents. The following information must be furnished to proceed with company registration in Nigeria:
- Name of the proposed company (two names are to be submitted by the applicant: the proposed name of the company and an alternative name)
- Objects of the proposed company(summary of the work or business the company intends to engage in).
- Names, addresses, and email of the shareholders( the shareholders can also be the directors
- The sharing formula or ratio of the company shares among the shareholders.
- Names, addresses, and emails of the first directors of the company (the same shareholders are qualified to also be directors).
- Copies of the means of identification of the shareholders and directors, such as driver license, international passports e.t.c
- The availability check and reservation of the name of the proposed company must be conducted with the Nigerian company’s registration agency, Corporate Affairs Commission (CAC).
- The consultant or lawyer prepares the necessary incorporation documents and completes the incorporation forms obtained from the CAC. The incorporation documents include:
- Duly verified particulars of the director and statement of share capital known as CACForm 1.1
- Duly stamped Memorandum and Articles of Association
- The individual completes all the incorporation documents with the input of an accredited lawyer to duly attest to the incorporation documents.
- The payment of the prescribed fees will now be duly made online and the incorporation documents immediately stamped online.
- The stamped incorporation documents will now be duly uploaded into the CAC online portal again for the final review of the commission
- If all the incorporation documents are well completed and executed, the commission will incorporate the company and issue an incorporation number immediately online.
- Certificate of Incorporation and the Certified True Copies of the other documents will be issued by CAC and received by the consultant or lawyer, usually in less than 48 hours after the company is duly incorporated by CAC
Cost of Company Registration in Nigeria
The cost of company registration in Nigeria depends on the number of the share capital of the proposed company to be registered. The higher the share capital of a company, the higher the filing fee and stamp duty payable to the government.
The processing or professional fees that may be charged by an accredited agent for processing the registration differs from one agent to another.
Other Types of Incorporation in Nigeria
Apart from the private limited liability company and the three other types of companies stated above, there are still other forms of incorporation that can be conducted with the CAC. These types of incorporation include business name, for a small-scale business owner, which does include separate legal personality and Incorporated Trustees, also known as Non-governmental Organization(NGO), which is relevant for the religious organization, social clubs, and charitable foundation.
In conclusion, it is very clear that it is better to register a limited liability company as against other forms of companies as it holds several benefits and easy to register.
Written by the Corporate & Commercial Law Department at Resolution Law Firm, Nigeria. Resolution Law Firm is a Licensed company registration agent in Nigeria. The Firm is accredited with the Corporate Affairs Commission.
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