PROCEDURE FOR INCORPORATING A BUSINESS ENTERPRISE BY
A FOREIGN INVESTOR IN NIGERIA
THE LEGAL FRAMEWORK FOR BUSINESS ACTIVITIES
METHODS
OF CONDUCTING BUSINESS
All business enterprises
must be registered with the Corporate Affairs Commission. Business activities
may be undertaken in Nigeria as a:
(i) Private Limited Liability Company;
(ii) Public Limited Liability Company (Plc);
(ii) Unlimited Liability Company;
(iii) Company Limited by Guarantee;
(iv) Foreign Company (branch or subsidiary
of foreign company);
(v) Partnership/Firm;
(vi) Sole Proprietorship;
(vii) Incorporated trustees (religious, charitable, philanthropic or cultural);
(viii) Representative office in special cases.
THE
COMPANIES AND ALLIED MATTERS ACT AND INCORPORATION PROCEDURES
The Companies and
Allied Matters Act, 1990 (the Companies Act) is the principal law regulating
the incorporation of businesses. The administration of the Companies Act is
undertaken by the CORPORATE AFFAIRS COMMISSION (CAC), which undertakes the
administration of the Companies Act.
Minimum Share Capital
The minimum authorized share capital
is N10, 000 (Ten Thousand Naira) in the case of private companies or N500,000
(Five Hundred Thousand Naira) in the case of public companies with a minimum
subscription of 25% of the authorized share capital respectively.
OPERATIONS
OF FOREIGN COMPANIES IN NIGERIA
A non-Nigerian
may invest and participate in the operation of any enterprise in Nigeria.
However, a foreign company wishing to set up business operations in Nigeria
should take all steps necessary to obtain local incorporation of the Nigerian
branch or subsidiary as a separate entity in Nigeria for that purpose. Until so
incorporated, the foreign company may not carry on business in Nigeria or
exercise any of the powers of a registered company.
The foreign
investor may incorporate a Nigerian branch or subsidiary by giving a power of
attorney to a qualified solicitor in Nigeria for this purpose. The
incorporation documents in this instance would disclose that the solicitor is
merely acting as an “agent” of a “principal” whose name(s) should also appear in
the document. The power of attorney should be designed to lapse and the
appointed solicitor ceases to function upon the conclusion of all registration
formalities.
The locally
incorporated branch or subsidiary company must then register with the Nigerian
Investment Promotion Commission (NIPC) before commencing formal operations. The
new company may also apply to NIPC for other investment approvals (e.g.
expatriate quota) and other incentives.
Exemption
to the General Rule
Where exemption
from local incorporation is desired, a foreign company may apply in accordance
with Section 56 of the Companies Act, to the National Council of Ministers for
exemption from incorporating a local subsidiary if such foreign company belongs
to one of the following categories:
(a) “foreign companies invited to Nigeria by or
with the approval of the Federal Government of Nigeria to execute any specified
individual project;
(b) foreign companies which are in Nigeria for the
execution of a specific individual loan project on behalf of a donor country or
international organisation;
(c) foreign government-owned companies engaged
solely in export promotion activities; and
(d) engineering consultants and technical experts
engaged on any individual specialist project under contract with any of the
governments in the Federation or any of their agencies or with any other body
or person, where such contract has been approved by the Federal Government.”
The application
for exemption from disclosing certain details about the applicant is to be made
to the Secretary to the Government of the Federation (SGF). If successful, the
request of the applicant is granted upon such terms and conditions, as the National
Council of Ministers may think fit.
Representative
Offices
Foreign
companies may set up representative offices in Nigeria. A representative office
however, cannot engage in business or conclude contracts or open or negotiate
any letters of credit. It can only serve as a promotional and liaison office,
and its local operational expenses have to be floated by the foreign company. A
representative office has to be registered with the CAC.
FOREIGN
INVESTMENT REQUIREMENTS AND PROTECTIONS
Principal
Laws on Foreign Investments
The principal
laws regulating foreign investments in Nigerian are:
a. the Nigerian Investment Promotion Commission Act
No.16 of 1995; and
b. the Foreign Exchange (Monitoring and Miscellaneous
Provisions) Act No.17 of 1995.
Basic Functions and Powers of NIPC As Prescribed by
Act 16 of 1995
The Nigerian
Investment Promotion Commission (NIPC) is an Agency of the Federal Government
with perpetual succession and a common seal, which is specially established,
among other things, to:
(a) co-ordinate, monitor, encourage and provide
necessary assistance and guidance for the establishment and operation of
enterprises in Nigeria ;
(b) initiate and support measures which shall
enhance the investment climate in Nigeria for both Nigerian and non-Nigerian
investors;
(c) promote investments in and outside Nigeria
through effective promotional means;
(d) collect, collate, analyse and disseminate
information about investment opportunities and sources of investment capital
and advise on request, the availability, chance or suitability of partners in
joint-venture projects;
(e) register and keep records of all enterprises
to which the NIPC Act legislation applies;
(f) identify specific projects and invite
interested investors for participation in those projects;
(g) initiate, organise and participate in
promotional activities such as exhibitions, conferences and seminars for the
stimulation of investments;
(h) maintain liaison between investors and
Ministries, government departments and agencies, institutional lenders and
other authorities concerned with investments;
(i) provide and disseminate up-to-date
information on incentives available to investors;
(j) assist incoming and existing investors by
providing support services;
(k) evaluate the impact of the Commission on
investment in Nigeria and recommend appropriate remedies and additional
incentives;
(1) advise the Federal Government on policy
matters, including fiscal measures designed to promote the industrialization of
Nigeria or the general development of the economy; and
(m) perform such other functions as are
supplementary or incidental to the attainment of the objectives of NIPC Act.
Investment Features of the Acts 16 & 17 of 1995
Deregulation of Equity Structure in Nigeria
Enterprises
Effectively, the
Nigerian Investment Promotion Commission (NIPC) Act No. 16 of 1995 has
abolished any restrictions, in respect of the limits of foreign shareholding,
in Nigeria registered/domiciled enterprises. However, certain
business/enterprises are exempted from free and unrestrained participation by
any person or group of persons irrespective of their nationality. These
are:
- Production
of arms and ammunition;
-
Production of and dealing in narcotic drugs and
psychotropic substances;
-
Manufacture of military/paramilitary wears and
accoutrements;
-
Participation in coastal and inland shipping.
Provisions Relating to Investments
Notable amongst
the provisions relating to investments are the following:
- A non-Nigerian
may invest and participate in the operation of any enterprise in Nigeria;
- An enterprise,
in which foreign participation is permitted, shall after its incorporation or
registration, be registered with the NIPC;
- A foreign
enterprise may buy the shares of any Nigerian enterprise in any convertible
foreign currency.
- A foreign
investor in an approved enterprise is guaranteed unconditional transferability
of funds through an authorized dealer, in freely convertible currency, be it:
(a) dividends or profit
(net of taxes) attributable to the investment;
(b) payments in respect
of loan servicing where a foreign loan has been obtained.
- The remittance
of proceeds (net of all taxes) and other obligations in the event of sale or
liquidation of the enterprise or any interest attributable to the investment;
- Total
repatriation of capital should the investor choose to relocate elsewhere.
Investment Protection Assurance
- No enterprise
shall be nationalized or expropriated by any Government of the Federation, and
- No person who
owns, whether wholly or in part, the capital of any enterprise shall be
compelled by law to surrender his interest in the capital to any other persons.
- There will be
no acquisition of an enterprise by the Federal Government unless the
acquisition is in the national interest or for a public purpose under a law
which makes provision for:
(a) payment of fair and adequate compensation, and
(b) a right of access to the courts for the
determination of the investor's interest of right and the amount of
compensation to which he is entitled.
- Compensation
shall be paid without undue delay, and authorization given for its repatriation
in convertible currency where applicable.
Investment Promotion and Protection Agreements
(IPPA)
Apart from the
investment guarantee assurances of the NIPC Act countries are welcome to
execute and enter into bilateral Investment Promotion and Protection Agreements
(IPPA) with the Nigerian government.
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