STARTING A COMPANY IN NIGERIA
The principal law guiding the starting of a business in Nigeria is the Companies and Allied Matters Act (CAMA) Cap C20. There are different types of business entities that 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 of these structures has peculiar identities and requirements to suit the purpose of business.
By and large, there are two major types of business structures in Nigeria, which are briefly explained below:
- A Registered Business– business name is a name and style in which a person trades. this type of business structure is also popularly called a “Sole Proprietorship” is the simplest form of business one can operate in Nigeria. It is registered with the Corporate Affairs Commission and It is not a legal entity that can sue or be sued in its own name. The owner of the business is responsible for the debts and liabilities of the business. The advantage of this type of business set up is that the owner of the business bears all the profit and loss of the business.
- 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. Unlike the business name, it takes a minimum of two persons to form a private company in Nigeria. There is corporate governance set in place for running a company such as shareholders, directors, secretary etc. This kind of business set up is a legal entity that can sue and be sued in its own name.
Starting an LLC in Nigeria must be commenced with the due incorporation of the business with the Nigerian company house- 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 are as follows:
- Registration of a Company
The individual or investor must register a business name or company to carry on any business in Nigeria. For foreigners who wish to set up a business in Nigeria, such foreigners must register a minimum of N10 Million share capital company. This share capital requirement is not applicable for the registration of a business name or sole proprietorship. However, it is only Nigerian citizens or any person lawfully resident in Nigeria register a business name.
2. Registration with Nigeria Investment and Promotion Commission (NIPC)
The NIPC registration is needed for the foreigners coming to invest or participate in any investment in Nigeria. The function of NIPC is to coordinate and promote investment in Nigeria.
3. Tax Registrations and Tax Clearance Certificate
For every new business set up, the business must be registered with the Federal Inland Revenue Service for Tax Clearance Certificate, Tax Identity Number and Value Added Tax numbers. The tax identification number would enable the company to remit its taxes.
4. Business Permit
For foreigners coming to carry on business in Nigeria, a business permit is required. Every company wholly owned by foreigners must apply to the Ministry of Interiors for a business permit.
5. Expatriate Quota
For companies employing foreigners into their organization, the expatriate quota will be required for the foreigners seeking to work for them. It is only companies limited by shares that can file or seek for expatriate quotas for their foreign workers.
6. Combined Expatriate Residence Permit and Alien Card (CERPAC)
Foreign individual seeking to work in Nigeria must hold a valid residence or work permit. In Nigeria, CERPAC serves as the work permit that foreigners living or working in Nigeria must hold. The application must be preceded with the expatriate quota approval for the company.
7. Bank Account Opening and Capital Importation
To set up a business in Nigeria, a bank account opening requirement must be met. For a business name, the owner can use his private account or an account opened in the name of the business. While for companies limited by shares a bank account in the name of the company must be opened. Regardless of any 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 choose to 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. Appointment of Auditors
For a business setup, the requirement of auditors must be met. An auditor must be appointed for companies limited by shares to prepare and audit the company’s account.
9. Company Secretary
A company secretary must be appointed for companies limited by shares in compliance with the provisions of CAMA. The company secretary has statutory and administrative roles to play in the company, which includes keeping statutory books, filing of annual returns of the company. A business name can appoint a secretary for the purpose of carrying out administrative duties. But such an appointment is not filed with the Corporate Affairs Commission.
10. Office and Property Acquisition
Every company is expected to acquire a business address or property to carry on its business activities. For a foreign company which is to be formed in Nigeria, a takeoff address is needed for the purpose of registration. This requirement is applicable to all types of business set up in Nigeria.
In conclusion, to start a business in Nigeria, it is important that the individual or investor has knowledge of the factors that can influence the choice of business to be registered and the requirements to be met in accordance with the provisions of CAMA.
Choosing an appropriate legal structure is an important decision to be made; it is, therefore, advisable to seek professional advice in determining the appropriate business structure that would suit one’s business purposes.
By Corporate & Commercial Law Team at Resolution Law Firm.
The Law Firm regularly assists in starting a new business in Nigeria.