SETTING UP A FOREIGN-OWNED BUSINESS IN NIGERIA
Registration of a foreign company in Nigeria involves a process that allows a foreign company to set up a company and conduct business activities within the country. It is not only foreign companies that register subsidiaries in Nigeria, but a foreign individual can also register and become a shareholder of a Nigerian company. Company registration is carried out with the Corporate Affairs Commission (CAC), which is the regulatory body responsible for the incorporation and regulation of companies in Nigeria. Unlike some jurisdictions like the United States, where a company can be registered in any state, entire Nigeria maintains a single registry for company registration, which is administered by CAC. Any address in any state can be used for the company. The principal law governing incorporation in Nigeria is the Companies and Allied Matters Act 2020 (CAMA).
Registration of a foreign-owned company also follows the same procedure as registering a local company except for some special requirements that must be complied with before registration.
KEY FACTORS TO BE CONSIDERED IN REGISTERING A FOREIGN-OWNED COMPANY
There are various factors that must be considered in registering a foreign company in Nigeria. These factors will be summarily discussed below.
Authorized Share Capital for a Foreign-Owned Company:
Under Nigerian company regulations, a foreign-owned company (i.e. a local company having a foreigner or foreign company as a shareholder) must be composed of a minimum of Ten Million Naira (NGN10,000,000) authorized share capital. This does not imply this amount will be paid to the government at the point of registration, it is payable to the company itself and the government does not demand evidence of it during the incorporation process. Nevertheless, some companies may have a higher share threshold depending on the type of business the company is to engage in. For instance, a shipping company must have a minimum of 25 million Naira authorized share capital. Therefore, 10 million Naira authorized share capital is only a minimum share capital required from a foreign-owned company.
Address of Incorporation:
A foreign-owned company must maintain a local address during an incorporation process. A foreign address cannot be given be used as an address of a company to be registered in Nigeria. The law enjoys a foreign-owned company to acquire or maintain at least a service address locally at the point of incorporation. Therefore, a foreigner has the option to look for a local address to use for the incorporation by renting or buying a property in Nigeria, alternatively, look for a service address to use for the incorporation process.
Number of Shareholders/Directors:
A foreign-owned company can have a single shareholder, which can be a foreign individual or a foreign company. Currently, under the rule, a foreign-owned company is expected to provide a minimum of two directors, unlike a local-owned company that is allowed to have a single shareholder under CAMA.
Secretary of The Company:
The appointment of a secretary is mandatory for a foreign-owned company in Nigeria. Unlike a local-owned company where an appointment of a secretary is optional, a foreign-owned company must mandatorily appoint a local person or Firm (maybe a law firm) as a secretary. The secretary can assist the company with compliance and tax issues towards the operation.
REQUIREMENTS FOR A FOREIGN-OWNED COMPANY
Apart from the factors for incorporation discussed above, which must be put into consideration before incorporation, the requirement for registering is like the requirements for registering a locally owned company too. The basic requirements for registration of a company in Nigeria are as follows:
- Proposed name of the company (two options can be provided).
- Details & International Passport(s) of Director(s) and Shareholder(s):
- The percentage shares of each shareholder in the company (if the company will have more than one shareholder)
- Objectives of the company (i.e. the business the company intends to be carrying out in Nigeria)
- Incorporation Certificate of the foreign company (only applicable if a foreign company will be appointed as a shareholder)
It is important to take notice that notarization and apostilled of the required documents are not mandatory.
NIPC BUSINESS REGISTRATION
Setting up a company in Nigeria is not limited to company registration. The processing of NIPC business registration is also mandatory. The NIPC means the Nigerian Investment Promotion Commission, which is the agency responsible for promoting and coordinating investments in Nigeria. NIPC business registration refers to the process of registering a business with the NIPC to benefit from various incentives and facilitation services provided by the commission. The registration is primarily aimed at attracting foreign investments to Nigeria.
Below are the key aspects of the NIPC business registration process:
Business Incorporation: Before registering with the NIPC, the business must have been incorporated or registered with the Corporate Affairs Commission (CAC), which is the statutory body responsible for the incorporation of companies in Nigeria. The NIPC registration is a subsequent step after the CAC registration.
Application and Documentation: The business seeking NIPC registration must submit an application to the commission. The application requires information about the company’s shareholders, directors, business activities, share capital, and other relevant details.
Business Plan: Along with the application form, the business is required to provide a comprehensive business plan that outlines its objectives, operations, marketing strategies, financial projections, and the proposed investment in Nigeria if available.
Facilitation Services: Once the business is registered with the NIPC, it can benefit from various facilitation services provided by the commission. These services include assistance with obtaining necessary permits and licenses; protection from expropriation; and tax incentives for pioneer-status businesses.
Compliance and Reporting: Registered businesses are required to comply with relevant laws, regulations, and reporting requirements in Nigeria. A company registered with the NIPC must regularly report on the progress of the investment and any changes to the business structure or activities.
It’s important to note that the NIPC registration does not replace other necessary registrations such as obtaining necessary licenses and permits from other regulatory bodies where required.
BUSINESS PERMIT & EXPATRIATE QUOTAS
The Federal Ministry of Interior in Nigeria is responsible for various immigration-related matters, including the issuance of business permits and expatriate quotas. These provisions regulate the employment of foreign nationals and their involvement in business activities within Nigeria’s territory.
Below are the procedure and key facts about business permits and expatriate quotas processing in Nigeria.
Business Permit: A business permit is a requirement for foreign-owned businesses with foreign participation to operate legally in Nigeria. It is issued by the Federal Ministry of Interior and it is mandated for wholly owned-foreign companies. The law that provides for it is the Nigerian Immigration law, which states that no foreigner shall take over and operate any business in Nigeria except with the approval of the Minister.
Application Process: The application for a business permit is usually submitted to the Federal Ministry of Interior, along with the necessary documents, which may include the company’s incorporation documents, memorandum & articles of association, evidence of share capital, tax clearance certificates, and other supporting materials as may be required.
Approval Process: The Ministry reviews the application and supporting documents to assess the eligibility and compliance of the business. If approved, a business permit is issued, allowing the foreign-owned company to operate in Nigeria.
Expatriate Quotas: Expatriate quotas refer to the number of foreign employees that a company can employ in Nigeria. The Federal Ministry of Interior is responsible for approving and regulating these quotas. The expatriate quotas are also applicable to the director of a foreign-owned company coming to Nigeria to work, as the incorporation of a company alone does not automatically confer a right to work within the country.
Determining Quotas: The expatriate quota is determined by the Ministry of Interiors upon the submission of the application based on various factors, including the nature of the business, the size of the company, and the specific needs and skills required. The quotas are usually established to ensure that Nigerian citizens have employment opportunities and to promote the transfer of skills and knowledge to the local workforce.
Application & Approval Process: The company seeking to employ foreign nationals must apply for expatriate quotas first. The application must include details of the positions to be filled by expatriates, job descriptions, qualifications required, and supporting documents such as the company’s incorporation documents, tax clearance certificates, and evidence of compliance with other applicable laws.
The Ministry evaluates the application, considering factors such as the availability of local skilled personnel before arriving at a decision. If approved, the company will be issued appropriate numbers of expatriate quotas subject to the numbers applied for.
Work Permits (CERPAC): Once the expatriate quota is approved, the foreign employees must obtain work permits (also known as Combined Expatriate Residence Permit and Aliens Card – CERPAC) to legally reside and work in Nigeria. These permits are obtained through the Nigeria Immigration Service (NIS) and require the submission of relevant documents upon the arrival of the expatriates in Nigeria through a Subject to Regularization (STR) Visa.
It is very important to note that the specific requirements and processes for business permits and expatriate quotas may be subject to change and can vary depending on the nature of the business and government policy.
Finally, registering and setting up a foreign-owned company in Nigeria involves various steps that must be strictly followed. The first step is company registration with CAC, which must not be less than 10 million Naira authorized share capital company. The second step is registering with the NIPC and obtaining any license or permit, if applicable to the type of business to be carried out. Lastly, it is important for a wholly owned foreign company to obtain a business permit from the Ministry of Interiors, and the expatriate quotas if the foreign company director or other expatriates intend to migrate and work in Nigeria.
By Olusola J. Jegede, Esq. Partner at Resolution Law Firm
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