Doing Business requires careful planning so as to determine the particular system suitable for such business. Issues to be considered before deciding on business registration category to use for your business includes but not limited to; the quantum of capital available to you, tax burden, easy of registration, type of intended business. After these considerations have been done it is time to select a particular business registration category. The registration of businesses in Nigeria is governed by the companies and allied matters act hereinafter referred to as ‘CAMA’. Registration of all categories of businesses under this Act is carried out by and at the Corporate Affairs Commission (CAC).
BUSINESS NAME
There is no restriction in registering business name either for a Nigerian or a foreigner. What this means is that the only consideration that is necessary here is what type of business you are embarking on because certain business can only be done with an incorporated company on that score you can use business name outside this consideration you are free to use business name. For the registration of business, all that is needed is passport photo and an identity card. It can be a Nigerian government issued identity card or one issued by a foreign government. If you are a foreigner and you are using Nigerian address you have to attach your residence permit to the application but you can use your foreign address if your residence permit is not ready.
This business registration type is appropriate for small and medium scale enterprise hereinafter referred to as ‘SME’ it also has some tax benefits; it is cheaper and faster to register. It has fewer registration requirements. It can be registered by a single applicant. Its demerits are the lack of corporate personality and other attributes of a company.
PARTNERSHIP
Partnership according to Section.1 of partnership Act of 1890 is a relationship which subsists between persons carrying on a business in common with a view to making profit. Thus it must involve not less than two persons. However, according to Section.20 of Companies and Allied Matters Act hereinafter referred to as ‘CAMA’ it must not be more than twenty persons if not it becomes an illegal association
There are two types of partnership to wit;
- General partnership
- Limited liability partnership
General partners are jointly liable for the debts and liability of the partnership but a limited partner is only liable to the extent of his equity contribution.
There are benefits that partnership as a form of business has over other forms of business. These include tax benefits that it has over incorporated companies, ease of decision making.
INCORPORATED COMPANIES
There are three types of incorporated companies in Nigeria. There are;
- Company limited by guarantee
- Company limited by shares
- Unlimited company
These categories offer different functions and are used for specific purposes.
A company whether limited or not may be private or public, Section. 22 of CAMA defines a private company as one which;
- It is stated in its memorandum to be a private company
- Its article restricts the transfer of its shares
- Membership is limited to fifty
- It is prohibited from inviting the public to subscribe to its shares or debentures
COMPANY LIMITED BY GUARANTEE
This is mostly used for not for profit organizations. This is a company which the liability of its respective members are limited by the memorandum to such amount that members have undertaken to contribute to the assets of the company in the event of its liquidation. Such companies are incorporated for the purpose of promoting commerce, art, science, religion etc. The income and assets are applied for the promotion of the objects and are not available for distribution to members as profit. To register company under this heading you will need to obtain the Attorney General’s permission
COMPANY LIMITED BY SHARES
This company type the liability of the members/ shareholders of the company is limited to the capital originally invested.
UNLIMITED LIABILITY COMPANY
This form of company does not have limit with regards to the liability of its members. It is akin to general partnership because every member is liable in full for the debts of the company and its liability. it is used mainly by professionals who assume personal liability for their obligations.
BENEFITS OF INCORPORATED COMPANY OVER BUSINESS NAME AND PARTNERSHIP
- Limited liability
- Vesting of property: the property of the company belong to it and not to the members
- Perpetual succession
- Contract: it can contract in its name
- Borrowing Facility
There are demerits of using incorporated company for business in Nigeria. These include Tax burden, registration of company is costlier and takes more time.
FOR FOREIGNERS AND FOREIGN COMPANIES
For Nigerians once their company is registered, it is invested with capacity to do whatever are its objectives but for company with foreigners in its board there are other requirements of the law to be fulfilled before it can effectively move on. These are:
INVESTMENT AUTHORIZATIONS AND APPROVALS
The principal laws regulating foreign investment in Nigeria are, the Nigerian Investment Promotion Commission (“NIPC”) Act No. 16 of 1995, and the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act No. 17 of 1995.
Once registration is completed, there are other approvals that the foreign Investor would require, to secure capacity to remit the proceeds of such investment. Some of these approvals are mandatory, others are only required where the company wishes to employ expatriates or take advantage of certain incentive schemes.
Registration with the Nigerian Investment Promotion Commission hereinafter referred to as ‘NIPC’ was established under the Nigerian Investment Promotion Commission Act, 1995, which provides that any enterprise in which there is foreign participation must be registered with the NIPC. The NIPC Act permits foreigners to own up to 100% of any business enterprise with the exception of enterprises on the
“Negative list” of the Act. The negative list includes enterprises involved in the production of and dealing in arms, ammunition, narcotic drugs and psychotropic substances.
Procedure for obtaining NIPC Registration
- Application is made to the Nigerian Investment Promotion Commission
- Completed copies of the NIPC Form 1 (Original and 3 copies)
- Original copy of receipt of purchase of NIPC Form 1 (and three copies)
- A copy of COMPANYs’ Certificate of Incorporation (and three copies)
- Evidence that COMPANY has a minimum share capital of N10million. (3 copies)
- COMPANYs’ Allotment of shares and Particulars of Directors (3 copies)
- Details of the shareholding structure of COMPANY (3 copies)
- Joint Venture, Shareholders’ or Partnership Agreement, where applicable (3 copies).
Business Permit
In order for an enterprise in which there is foreign participation to undertake any business in Nigeria, it must obtain a business permit from the Ministry of Internal Affairs. A business permit will only be granted in respect of companies having an authorized share capital of at least =N=10,000,000.00. One of the documents that a company applying for business permit is required to submit is a Certificate if Capital Importation to evidence the importation of the foreign investor’s capital/equity contribution into Nigeria.
Procedure for obtaining Business Permit
- Application is made to the Ministry of Internal Affairs
- Completed copies of the NIPC Form 1 (Original and 3 copies)
- Original copy of receipt of purchase of NIPC Form 1 (and three copies)
- A copy of COMPANYs’ Certificate of Incorporation (and three copies)
- Evidence that COMPANY has a minimum share capital of N10million. (3 copies)
- COMPANYs’ Allotment of shares and Particulars of Directors (3 copies)
- Details of the shareholding structure of COMPANY (3 copies)
- Joint Venture, Shareholders’ or Partnership Agreement, where applicable (3 copies).
Certificate of Capital Importation
Investors who wish to be able to remit dividends to non-resident shareholders or repatriate capital on disinvestment must ensure that they obtain a Certificate of Capital Importation from the Nigerian bank through which the payment is transferred into Nigeria.
Procedure for Obtaining Certificate of Capital importation (CCI)
- Application will be made to COMPANY’s bankers
- The foreign shareholders will instruct their bank (“the remitting bank”) by telex to transfer the necessary funds either directly to COMPANY’s bankers or to their foreign affiliate;
- The transfer must be accompanied by a telex stating that the money being remitted to the bank is for the account of COMPANY and that the money represents the foreign investors’ capital contribution to the equity of COMPANY;
- Upon confirmation that the funds have been remitted to Nigeria, COMPANY is required to send a formal letter of application to the receiving bank to issue a CCI in respect of the equity contribution.
- The following documents must be submitted together with the letter of application:
- A Board resolution of COMPANY authorizing the foreign investment;
- A letter from COMPANY stating the purpose for which the money has been remitted;
- A copy of the certificate of incorporation of COMPANY;
- A copy of the swift message from the remitting bank.
- If satisfied with the documentation the receiving bank will issue a CCI in respect of the funds. The receiving bank is required to notify the CBN whenever it issues a CCI.
Expatriate Quota [This is a non-mandatory approval only required if the company want to employ expatriates]
A company wishing to employ expatriates must obtain an expatriate Quota position for each expatriate it wishes to employ. The Expatriate Quota establishes the maximum number of expatriates that the enterprise may employ. A company having a paid-up share capital of not less that N10,000,000 (Ten million Naira only) is entitled to one automatic quota positions, while a company capitalized at N20,000,000.00 (twenty million Naira only) is entitled to four automatic quota positions.
Procedure for obtaining Expatriate Quota
- Application is made to the Ministry of Internal Affairs
- In addition to the requirements listed under Business Permit application, the following requirements have to be met for Expatriate Quota applications:
- Evidence of acquisition of operational machinery and equipment
- Management and Technical Services Agreement
- Minimum authorized share capital of =N=10million
- Tax Clearance Certificate
- Company applying for Permanent until Reviewed (PUR) Quota slots must show evidence of payment of tax for minimum of =N=1 million.
- Names, addresses, qualifications and positions to be occupied by the expatriate
- Project Implementation Program
- Training Program for Nigerians and a Management Succession Schedule
Approval for Transfer of Technology and other Agreements [This is also non- mandatory]
By virtue of the provisions of the National Office for Technology Acquisition and Promotion Act, 1992 any agreement under which a foreigner is to provide foreign technology, management, or assistance, to a Nigerian company must be approved by the National Office for Technology Acquisition and Promotion (“NOTAP”). Fees payable for the provision of such technology or services must also be approved by the NOTAP.
Registration with the Department of Petroleum Resources [this is also non-mandatory except for companies into petroleum operations}
Companies that wish to engage in petroleum operations in Nigeria are required to register with the Department of Petroleum Resources (“DPR”). The DPR issues Permits, upon application, in respect of oil exploration and production activities, as well as oil service activities. Fees payable depend on the category of operations for which the company applies
GUARANTIES TO FOREIGN COMPANIES BY NIPC ACT
The NIPC Act is an investment protection legislation, which provides important guarantees that investors consider as a prerequisite condition before taking the decision to invest.
Protects against unlawful expropriation, and gives a guarantee of free transfer of funds. In the event of a dispute arising between a foreign investor and the government, the Act also opens access to international arbitration forums.
Grants judicial determination of the amount of compensation to which the investor is entitled to in accordance with international standards. Sets out the basic principles of a non-discriminatory access to both foreign and domestic investors, although it does not explicitly embody the principle of National Treatment.
Thus every foreign investor doing business in Nigeria must incorporate in Nigeria however CAMA sets out some exceptions to the requirement to incorporate. These exceptions include
- Companies engaged by the Federal Government to execute specific projects.
- Companies undertaking approved loan projects on behalf of donor countries or international organizations.
- Foreign government owned companies engaged wholly in export promotion activities