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Nigeria has several legal frameworks that govern the establishment of businesses be it a company, business name, partnership etc. The recently assented Companies and Allied Matters Act (CAMA), 2020 has introduced various innovations that make such establishment easier. The procedure is seamless, processed online and takes a few days to complete any incorporation.
There are additional requirements for a foreigner or foreign company intending to start a business in Nigeria, which will be discussed below in this article. By and large, every business requiring legal recognition in Nigeria must successfully do the following to set up a legal entity within Nigeria:
The first step is to register with the Corporate Affairs Commission (CAC), the government agency authorized to register businesses in Nigeria. The Companies and Allied Matters Act, 2020 offers a wide range of forms a business can be registered, which includes business name, limited liability company or limited liability partnership. For individuals, either locals or foreigners starting a business in Nigeria, the most suitable form of incorporation for them is a private limited liability company, which creates a separate legal entity that bears the liability of the company and the members liability is limited to the number of shares unpaid by them. Under the CAMA 2020, which takes effect on January 2021, the mandatory requirement of having to hire a company secretary has been dispensed with. Also, a small company needs not to mandatorily retain an auditor.
By section 18(2) of CAMA 2020, a private company can be formed by just one person. In addition to this, a foreigner must also comply with the provisions of other enactments to form a company in Nigeria.
Thus, to engage in business in Nigeria, the business must first be registered with the CAC.
The NIPC was established by the National Investment Promotion Commission Act, which regulates foreign investments in Nigeria. The Act further requires that upon registration with the CAC, every company with foreign participation must proceed to register with the NIPC before commencing business. The documents majorly required for this are documents obtained upon incorporation with the CAC. Registration with the NIPC also entitles such foreign investor to several incentives such as pioneer status, which enables the company participating in pioneer business to obtain certain tax incentives.
The FIRS was established by the Federal Inland Revenue Service (Establishment) Act which controls and administers federal tax in Nigeria. This registration is mandatory and is considered an offence where any business fails to remit the appropriate tax to the FIRS. Every company must register and open a tax file at the nearest FIRS office to the company’s registered office address. Furthermore, tax registration and tax clearance certificate are required when applying for any licenses to operate in any businesses or sectors that are specially regulated. It is also mandatory for a company intending to obtain government contracts.
This applies to businesses wholly owned by foreigners and does not apply to those where ownerships are shared between foreigners and citizens. It is obtained from the Ministry of Interiors to enable a foreign-owned company to start and operate a business in Nigeria.
An expatriate quota is granted by the Minister of Interior Affairs to any company in Nigeria intending to employ foreigners in its ranks. This, however, does not qualify as a work permit which must be applied for separately to enable the foreigner to reside and work in Nigeria. The Combined Expatriate Residence and Aliens Card (CERPAC) serves the purpose of work permit and is issued by the Comptroller General of the Nigerian Immigration Service or Comptroller of Immigration Service in various states.
This requirement is largely dependent on the business an entity seeks to venture into. As stated earlier, some businesses need to be specially regulated to protect its stakeholders such as the consumers of this product or its beneficiaries to ensure that in the delivery of this good or service meets the best standards. For instance, where a company seeks to trade in pharmaceutical products, a permit must be obtained from the National Agency for Food and Drug Consumption (NAFDAC). Also, for a company venturing into the telecommunication business, a license is required from the Nigerian Communications Commission.
Finally, for an individual or group of individuals who intend to start a business in Nigeria, the above steps need to be strictly followed. It is also noteworthy to state that any foreigner who registered a company in Nigeria cannot become a signatory to a Nigerian bank unless such person has obtained the Nigerian work permit or employ a local citizen that can be authorized to do so.
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