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The principal law guiding the starting of a business in Nigeria is the Companies and Allied Matters Act (CAMA) 2020. This Act which regulated Companies, Business Names and Incorporated Trustees activities in its previous provisions, now has additional business entities provided for in its new and updated version recently signed into law on the 7th of August 2020 by the President of the Federal Republic of Nigeria, Mohammadu Buhari.
There are different types of business structures that can be set up in Nigeria, each of these structures have peculiar identities and requirements to suit the purpose of the business. The new Companies and Allied Matters Act 2020 makes provisions for these following business entities:
There are general requirements for starting a business in Nigeria, one of such requirement is registration.
To set up a business structure in Nigeria, the individual or investor who wishes to start a business must register such business or company. 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 that can register a business name. For foreigners, setting up a business in Nigeria goes beyond registering such business entity, there are several other factors, considerations and permits that must be obtained. Some of them highlighted below.
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. The permit is also required to process expatriate quotas where the registered company is intend to bring in expatriates to work in the company.
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 having a minimum of N10 Million share capital that can file or seek for expatriate quotas for their foreign workers.
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.
To set up a business in Nigeria, a bank account opening requirement must be met. 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.
The new CAMA 2020 has now made provisions that will enable ease of starting a business in Nigeria. Several provisions from the repealed CAMA were stumbling blocks for setting up a business in Nigeria, such obstacles have now been removed and replaced with easier provisions meant to ease business set ups and activities. Few of them will be discussed below.
Under the repealed CAMA, it takes at least two persons to set up a private company. This provision which had hitherto created a form of problem has now been replaced with the provisions of Section 18(c) of the new CAMA 2020 which provides:
18. (1) As from the commencement of this Act, any two or more persons may form and incorporate a company by complying with the requirements of this Act in respect of registration of the company.
(2) Notwithstanding subsection (1), one person may form and incorporate a private company by complying with the requirements of this Act in respect of private company.
Small companies or any company having a single shareholder are no longer mandated to appoint auditors at their annual general meetings to audit their financial records. This also applies to companies that have not carried out any form of business since its incorporation. Section 402 of the CAMA 2020 provides as follows:
402. (1) A company is exempt from the requirements of this Act relating to the audit of accounts in respect of a financial year if-
(a) it has not carried on any business since its incorporation; or
(b) it is a small company within the meaning of section.
However, the above provision does not apply to Banks, Insurance Companies or other companies as prescribed by CAC.
With this new provision, promoters of companies need not pay for shares not needed at a specific time.
In conclusion, starting a business in Nigeria has been made easy with the improvement on the repealed CAMA. 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.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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