Category: Corporate Law

TYPES OF BUSINESS ORGANISATIONS IN NIGERIA

There are many types of business organisations in Nigeria that can be reqistered with the Corporate Affairs Commission. Nigeria is essentially a free enterprise country, subject only to such regulations as are necessary for national interest. As such, any person can participate in the Nigerian Economy. This participation may be through sole proprietorship, partnerships, and unincorporated joint ventures, limited and unlimited liability companies.

The following are the different types of business organisations that can be registered, their features and the kind of business they are suitable for:

  1. Sole proprietorship
  2. Partnership; and
  3. Companies/Corporations

There are also in addition, what are categorised as NON BUSINESS ORGANISATIONS. like;

  1. Company Limited by Guarantee e.g. Nigerian Stock Exchange
  2. Incorporated Trustees

FACTORS AFFECTING CHOICE OF BUSINESS ORGANISATIONS

Below is a rundown of the main factors affecting the choice of types of business organisations in Nigeria.

  1. Nature of the business
  2. The capital available may affect the choice of business
  3. The number of members.
  4. Extent of liability of members.
  5. Commercial expediency.
  6. The extent and sphere of operation.
  7. Position of the law/statutory requirements.
  8. The cost of registration and expenses
  9. Speed of processing and completion of registration.
  10. Post registration compliance and regulatory supervision e.g. where persons intending to set up a business venture do not wish to be publishing their accounts and filing reports to CAC, they may be advised not to set up a public company.
  11. The desire of the client himself. The business venture which the client has in mind is to be considered, then fine tuned to meet up with the provisions of the law.

FACTORS CONSIDERED IN CHOOSING THE TYPE OF COMPANY TO ESTABLISH

  1. The number of the membership. For Ltd. it is 50 while in a PLC it is unlimited.
  2. The size and nature of the proposed business
  3. The cost/ capital intensity of the business. For Ltd it must have a minimum authorised share capital of N10, 000 while that of a PLC is N500,000.00
  4. Proposed date of incorporation
  5. Restrictions on the issue and transfer of shares. In Ltd that right is restricted but this is not so with a Plc. S. 22(2) of CAMA.
  6. The formalities to be complied with depending on the type of company incorporated like holding of statutory meetings, filling full or abridged statement of finance etc.

NOTE-A company’s asset is different from the share capital of the company. Shares give a member participating right to the affairs of the company and a right to dividend.

You can also visit the website of the CAC to find out more about the types of Companies permitted to be registered in nigeria

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Nigerian Investment Promotion Commission

The Nigerian Investment Promotion Commission was established in 1995 as a body corporate with perpetual succession under the NIPC Decree, 1995. The commission shall encourage, promote and coordinate investment in the Nigerian economy.

Functions of the Nigerian Investment Promotion Commission (S. 4 NIPCA)

The Commission shall encourage, promote and co-ordinate investment in the Nigerian economy and accordingly, shall—

Co-ordinate and monitor all investment promotion activities to which this Act applies;

Initiate and support measures which shall enhance the investment climate in Nigeria;

Promote investments through effective promotional means;

Collect, collate, analyse and disseminate information about investment opportunities and sources of investment capital, and advise on request, the availability, choice or suitability of partners in joint-venture projects;

Register and keep records of all enterprises to which this Act applies;

Identify specific projects and invite interested investors for participation in those projects;

Initiate, organise and participate in promotional activities, such as, exhibitions, conferences and seminars for the stimulation of investments;

Maintain liaison between investors and Ministries, Government departments and agencies, institutional lenders and other authorities concerned with investments;

Provide and disseminate up-to-date information on incentives available to investors

Assist incoming and existing investors by providing support services

Evaluate the impact of the Commission in investments in Nigeria and make appropriate recommendations;

Advise the Federal Government on policy matters designed to promote the industrialisation of Nigeria or the general development of the economy

Perform such other functions as are supplementary or incidental to the attainment of the objectives of this Act.

One Stop Investment Centre

In its continuous effort to encourage Foreign Direct Investment (FDI) in Nigeria, the Federal Government established the One Stop Investment Centre (OSIC) otherwise known as One Stop Shop (OSS) on 21st March 2006.

Nigeria like most African nations has set up statutory bodies to regulate foreign investment in the country. Therefore foreigners interested in carrying on business in the country are required to obtain investment approvals after incorporating their companies. The practice has been that company incorporation and foreign investment approvals are processed in different authorised government agencies. This process was characterised by delays usually caused by government bureaucracy, which also stifled the smooth start up of foreign businesses in Nigeria.

In a bid to ensure the timely incorporation of companies and grant of investment approvals, the government had in the early 1990’s set up the Industrial Development Commission Committee (IDDC) to serve as a one stop agency for all pre-investment approvals. The IDDC had the statutory responsibility to grant Business Permits, Approved Status-in-Principle, Expatriate Quota, approvals on fiscal concessions, vet licensing and transfer agreements and generally advise the Federal Government on policy matters designed to promote the industrialisation of the country.

Although the law establishing the IDDC provided that every valid application received would be processed within two months, this expectation was rarely ever met in practice. The IDDC Act was subsequently repealed by the Nigerian Investment Promotion Commission (NIPC) Act 1995 which established the NIPC to encourage and promote investment in Nigeria. Companies with foreign participation are required to apply to NIPC for registration and the statute provides that within 14 days from the receipt of completed registration forms, NIPC shall register such companies or otherwise advice the applicant accordingly.

Functions of OSIC

This includes simplifying and curtailing the procedures and guidelines for issuing business approvals, permits and authorisations by eliminating bottlenecks faced by investors in establishing and running businesses in Nigeria.

In addition, OSIC is expected to achieve the following functions:
• Reduce the high cost of doing business
• Eliminate dealing with multiple agencies
• Eradicate the use of discretion and lack of transparency in granting approvals, licenses, permits
• Eliminate over bureaucratisation in procedures and processes
• Eradicate poor service delivery
• Ensure Foreign Direct Investment and investor tracking
Features of OSIC
• The participating agencies will maintain their existing mandates and responsibilities within the structure of OSIC
• Only statutory provisions will be administered at OSIC and not special applications
• Agencies will establish their presence at OSIC in phases
• Approval time for business entry approvals is 24 hours
• OSIC covers investments into all sectors of the economy
• It is mandatory for all foreign investors to register with OSIC to facilitate foreign direct investment tracking/investor tracking as provided in the NIPC Act.

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REGISTERING A HOLDING, CONSORTIUM OR GROUP OF COMPANIES IN NIGERIA

How to register a group of Companies in Nigeria is a popular concern amongst those in the corporate circle. A “Group” of Companies is more popular than the other two.

A Holding, Consortium or a group of companies are special business structures that are established to achieve specific goals. As you may already know, the Companies and Allied Matters Act (CAMA) is the Law governing the formation of companies in Nigeria.

Generally speaking, using the words Holding or Consortium or Group for any proposed new company is prohibited by the CAMA except with the consent of the Registrar General of the Corporate Affairs Commission (CAC), had and obtained.

How to Set up a Holding Company In Nigeria.

A Holding company is a parent company. As the name already suggests, a Holding company must hold more than 50% shares in another company known as a subsidiary company. The purpose of the holding company is to control, acquire assets and manage the affairs of the subsidiary company. It must maintain a controlling share of the subsidiary company to retain its status and to be able to prevail on the subsidiary company as a parent would over its offsprings.
The law prohibits the use of the word “Holding” in registering a company unless the requisite consent of the Registrar General of the CAC is sought and obtained prior to the use of the word in the company name.

Basic Requirements for registration of a Holding company in Nigeria.

The following enumerates what it takes to register a Holding company in Nigeria.

  1. The applicant is to bring a formal application for Consent to use the word “Holding” in the name of the company, addressed to the Registrar General of the CAC.
  2. There must be evidence of at least, 2 subsidiary companies, which must be Limited Liability Companies whose controlling stakes are being held by the applying company. OR
  3. Statement by the majority of the Directors of the proposed holding company that the company shall acquire more than half in the nominal value of the share capital of each of the subsidiaries within 90 days of incorporation of the Holding Company.
  4. The applicant is to provide evidence of updated annual returns of the existing subsidiary company.
  5. Present Evidence of compliance with Section 553 of the Companies and Allied Matters Act where applicable, limited to categories of companies.
  6. Upon obtaining the Consent, the Applicant can go ahead to register a new company with the same procedure for the registration of a new company.

How to Register a Group of Companies in Nigeria.

Going by the provisions of the CAMA, a Group of companies comprise three or more associated companies with common shareholders and similar names. These companies become the shareholders of the distinct “Group” company.
Just as in the case of a Holding company, the law prohibits the use of the word “Group” in the name of a company except where the requisite consent of the Registrar General of CAC is sought and obtained prior to that.

Basic Requirements for registering a Group of Companies.

  1. First, make a formal application to the Registrar General for consent for the use of the word “Group” in the company name.
  2. There must be evidence of a minimum of three (3) or more associated companies to form the Group Company, which will be the distinct entity.
  3. Evidence of similar names of associate companies with common shareholders and ownership.
  4. There must be a resolution of the associate companies indicating consent to the “Group” relationship.
  5. The updated annual returns of all associate companies must be provided.
  6. Evidence of Company secretaries of associate companies.
  7. Statement by the proposed Group Company that the share capital shall not be less than the highest share capital amongst the associate companies.
  8. Evidence of compliance with S.553 CAMA where applicable.
  9. Upon obtaining the Consent, the Applicant can then proceed to register a new company with the same procedure for the registration of a new company.

The above stipulations must be met in order to register a group of Companies successfully in Nigeria.

How to Set up a Consortium Company in Nigeria.

A Consortium company is composed of separate and different companies that agree to pool resources together for a common goal. Each company is responsible for the consortium as specified or set out in the consortium agreement.
The word “Consortium” is prohibited against use by the CAC, and it is required that the consent of the Registrar General of CAC be had and obtained before the word can be used in the name of a company, just like “Holding” and “Group”.

Basic Requirements for registering a Consortium Company in Nigeria.

  1. Make a payment of a non-refundable application for the consent fee to the CAC.
  2. Make a formal application for consent to use the word ‘Consortium’ in the name of the company.
  3. Evidence of not less than 3 different companies forming the consortium.
  4. Evidence of registration in the home country, if the company is a foreign company.
  5. A Resolution of each company in the consortium indicating consent to the consortium arrangement and stating the objectives of the consortium.
  6. The statutory declaration to wind up the consortium in accordance with the provision of CAMA upon completion of the object of the consortium.
  7. Statement of the object of the consortium in the memorandum of association.
  8. Inclusion of a clause to wind up the consortium in the articles of association.
  9. Evidence of updated annual returns of component companies.
  10. Evidence of appointment of company secretary of component companies.
  11. Evidence of compliance with S.553 of CAMA where applicable.
  12. Upon obtaining the Consent, the Applicant can go ahead to register a new company with the same procedure for the registration of a new company.

Please note that a one company cannot use the words Holding, Group or Consortium among its names as a thing of choice. Before these names can be used, the consent of the Registrar General of the Corporate Affairs Commission must be sought, and such consent can only be given by the Registrar General upon meeting the specific thresholds or requirements of the the CAMA for the registration.

It is clear that to register a group of companies and other specialized business formations, strict attention must be given to statutory provisions.

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CAC COMPANY REGISTRATION IN NIGERIA

The CAC company registration in Nigeria is now conducted online strictly, having phased out manual registration. The Corporate Affairs Commission (CAC), has made company registration easy through its online portal also known as Company Registration Portal (CRP). One could register a company online with the CAC, with little or no help from anyone, except for Section E in the Registration Form CAC 1.1, which requires the signature of a Legal Practitioner and attestation by a Notary Public or Commissioner for Oaths.

Before commencing with incorporation of your company, the first step to take is to check whether or not your proposed name is available for registration or already in use by someone else. Checking for availability and subsequent reservation of name costs #500. However, to save cost and time, the CAC has made it possible for individuals to check if a company is already registered in that name, free of charge. This is done through the CAC’s public search webste. On here, you are expected to enter the first few letters of the name of your proposed company and hit the search button. A list of companies bearing names similar or exact with the one you intend to file will be produced from the CAC online database. In the event that the name has not been registered, the individual may then proceed to file for reservation proper.

CAC Online Company registration involves several processes that must be adhered to strictly in getting the intended results. The steps for company registration in Nigeria are as follows:

• Availability Check and Reservation of Name.

The first step towards incorporation of a company online with CAC is by filing for a name reservation on the CAC online portal as explained already. This step is important as it enables the registrant to confirm from the CAC whether the name is free for registration. It takes between few hours and a day to get a feedback from the CAC provided that it is a working day. It is recommended that applicant submit 2 alternative names to the CAC. One of the 2 alternatives will be reserved by the CAC. Reservations remain valid for 60 days after which they shall lapse and become available to other persons to reserve and register.

The steps to follow in this section include the following:

Create/sign up for a personal account (however, we recommend using an accredited account for CAC company registration in Nigeria) with the CAC for first-time users or log in for existing users; then click on Name Reservation — then New Name Reservation; fill the necessary column and pay all applied fees. Then wait for 24hrs for a response from the CAC officials. If your reservation is successful, you may proceed to print out the “Approval note” from your portal.

• PRE-INCORPORATION STAGE OF THE CAC COMPANY REGISTRATION

This is one of the most important stage as the success or otherwise of this phase determines the fate of the incorporation of the company. The steps to take in this stage are;

  1. Fill all the necessary columns in the Registration Form CAC 1.1 correctly and submit same online. Below are the information to fill:
    • Particulars of the Company
    • Nature of business the proposed company will be engaged in.
    • The Registered Office Address of the Company.
    • Email address of the Company.
    • Particulars of the 1st Directors (minimum of 2 adults who must be of sound mind) :
    The particulars referred to above must include the Name, Residential Address, Date of Birth, Sex, Phone Number, Email Address, Valid means of Identification (i.e National Identity card, Permanent Voters card, Driver’s Licence, International Passport etc).
    Percentage of shares to be held by each of the directors, that is in a situation where the director(s) is also a shareholder.
    • Particulars of Shareholders (minimum of 2 adults)
    • Particulars of the Company Secretary.
    • Name, Date of Birth, Sex, Phone Number, Email Address, Valid means of Identification such as National Identity card, Permanent Voters card, Driver’s Licence or International Passport.
    • Statutory Declaration of compliance with the requirements of CAMA by a Legal Practitioner. (This is to be signed by a Legal Practitioner, and attested to by a Notary Public or Commissioner for Oaths).
    • Particulars of foreigners who are members of the company, if any.
    • Name, Date of Birth, Sex, Phone Number, Email Address, Nationality, Forms of Identification such as National Identity card, Permanent Voters card, Driver’s Licence or International Passport.
    • Articles and Memorandum of Association. It is important to note that there is a template on the CAC portal to save you the pains of having to draft this documents from scratch. All you need to do is to edit it to serve your purpose. It is best to employ the services of an experience lawyer to do all the necessary alterations.
  2. After the filling of the form, an applicant then proceeds to payment to effect payment for the necessary fee. The specific payment to be paid for incorporation include the following:
    • CAC Fee = #15,000.00
    • Stamp Duty to the Federal Inland Revenue Service Fees (FIRS). As at the time of writing this post, it is charged at 0.75% of 1 million share capital.
  3. After that, an applicant is required to print the completed and electronically stamped Form CAC 1.1 and the Memorandum and Article of Association, sign in the necessary portions, notarize or affix oath for the attestations page and then proceed to upload the scanned copy of the signed and dated documents back on the CAC through the Document Upload Portal.

• UPLOADING ALL THE INCORPORATION DOCUMENTS.

In this stage, an applicant is to now log into the CAC Document Upload portal to upload all the incorporation documents.
Below are the documents to be scanned and uploaded on the CAC portal:
• Availability Printout, this is the same as the Name Approval Note.
• Registration Form CAC 1.1
• Valid means of Identification of Directors and Shareholders.
• Payment Receipt of CAC filing fees.
• Stamp Duty Certificate (This is to be printed, once the stamp duty fee has been paid).
• Stamped Memorandum and Article of Association.
• Certificate of Incorporation of the Company Secretary (This is only applicable where the Secretary is a corporate body).

Do note that all the above documents must be in Pdf format and most be uploaded in the provided portions.
Upon upload and submission, The CAC will register the company within 3 to 5 days and the applicant can then visit the branch of the commission he had chosen in the initial stage. Do note that you will have to present your own original copies of the incorporation documents before you can be handled with all his or her original documents to pick up the certificate.
In conclusion, as has been clearly demonstrated here, the procedure for registering a company online has been simplified. The timeline to complete a company registration has now been significantly reduced to just about 3 days, provided all the required documents and information are ready and filed without errors.

You can also contact professionals to assist you with CAC company registration in Nigeria from any part of the world.

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Registration with the Securities and Exchange Commission (SEC)

Registration with the Securities and Exchange Commission (SEC) is straightforward. To register as a Capital Market Expert/ Professional (otherwise called capital Market Operator (CMO), applicants must satisfy certain conditions.

The professionals allowed registration with the Securities and Exchange Commission (SEC) are Legal Practitioners, Accountants, Auditors, Engineers, Estate valuers, Property Manager and others as determined by SEC.

For individual Partners, they must possess 5 years post-call (Lawyers) experience to qualify to be registered while for sponsored individuals, it is 2 years post-call that is needed.
See R.178 SEC Rules 2013


Procedure For Registration with the Securities and Exchange Commission (SEC)

  1. Send an application to SEC by filling SEC Form 2 or 3 ( depending on the category).
  2. Pay the application fees of:
    Firm – N20, 000
    Principal partner- N 5, 000
    Sponsored individual- N1, 000
  3. Submit the application Form with the following documents:
    a. Bank statement of 3-6 months of the applicant with a minimum balance of:
    i. Individual- N500,000
    ii. Firm- N 2, 000,000.00
    iii. Company Ltd. – N5,000,000.00
    b. Curriculum vitae of at least two partners, if a Firm.
    c. Police clearance certificate.
    d. 4 copies of the Partnership Deed, if a partnership.
    e. Profile of the Firm.
    f. Sworn undertaking to keep proper records as specified by SEC.
    g. A copy of the receipt of payment of practicing fees.
    h. Professional indemnity insurance policy.
  4. SEC will then visit the office of the applicant.
  5. The applicant is to participate in SEC training school.
    Kindly note that you are required to revalidate accreditation at SEC every 5 years.

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Securities Exchange Commission

The Securities and Exchange Commission (SEC) is the apex regulatory body for Nigeria’s capital market. It however, operates under the supervision of the Federal Ministry of Finance. The Securities and Exchange Commission, Nigeria, like other exchange commissions elsewhere, regulates the operation of capital market transactions, ensuring that the relevant rules are complied with. It regulates the Nigerian Stock Exchange.
The business of capital formation and mobilisation is at the root of economic development, which is why every economy wants to develop its capital market. Capital markets drive capital mobilisation and allocation to businesses, in the push for economic growth. Through the capital market, companies and governments mobilise capital for investment, while offering opportunity to investors to seek profitable outlets for their funds. Because complex financial processes are often involved, and large numbers of investors participate, the need for guarding the mechanism for those transactions becomes apparent. Investors need to be protected, just as the process needs to be kept viable.
The Securities and Exchange Commission as it is today, is the outcome of the Investments and Securities Act (ISA) No 45 of 1999. However, its seed was actually sown in 1962, when the Capital Issues Committee, an arm of the Central Bank of Nigeria, was set up to evaluate applications from companies wanting to raise capital from the market and recommend for approvals. That committee transmuted to the Capital Market Commission in 1973 and the Securities and Exchange Commission in 1978, by virtue of Decree No. 7 of 1979. The Investment and Securities Act No. 45 of 1999 finally sought to broaden the operation of the Commission and refocus it for more impact on economic growth. ISA 2007 replaced ISA 1999.

Features of SEC

The features of the Commission are that it consists of a chairman appointed by the President and 10 other persons including 2 full-time Commissioners who are 10yrs post call who must be persons with ability, experience and specialised knowledge in capital market matters – section 3 of the ISA. There is a Director-General for the Commission. He is appointed by the President and he is the Chief Executive of the Commission.
Functions of SEC (Section 9 ISA)

  1. To regulate investment and securities business in Nigeria.
  2. To register and regulate Capital Market Operators and their functions.
  3. To register securities of public companies.
  4. To maintain a register of foreign investment portfolios in Nigeria.
  5. To render assistance to promoters and investors wishing to establish Securities Exchanges and Capital Trade Points.
  6. To register and regulate the venture capital funds and collective investments schemes.
  7. To protect the integrity of the securities market.
  8. To facilitate the establishment of a nationwide system for securities trading in the Nigerian capital market.
  9. To facilitate the linking of all markets in securities through modern communication and data processing facilities.
  10. To review, approve and regulate mergers, acquisitions and other forms of business combinations.

Relevance to corporate law In Nigeria

SEC Headquarters, Abuja.

The relevance to corporate law regime in nigeria is that The Securities and Exchange Commission is consequently there to see to the orderly and rapid development of the capital market. Its basic role is to ensure transparent conduct, such that parties that take decisions, especially on investments, do it on the strength of good information and sound processes. By that, it is to attract more funds into the market and also attract more viable companies that could expand their operations by tapping funds from the capital market.

Contact Information Of The SEC.

Phone: +234 (0) 94621100; +234 (0) 94621168

Email: sec@sec.gov.ng
Twitter: @SECNIGERIA
Facebook: Securities and Exchange Commission Nigeria

Head Office – Abuja

SEC TOWERS, Plot 272, Samuel Adesujo Ademulegun Street, Central Business District
P.M.B:315
Garki
Abuja

Lagos
3, Idejo Street, Opposite ICON House,
Off Adeola Odeku Street, Victoria Island
P.M.B:12638 Marina
Lagos State
email: lzo@sec.gov.ng
phone: 017358159
fax: 234-1-2644538

Kano
African Alliance House (4th Floor), F1, Sani Abacha Way/Airport Road, Opposite KLM Airlines
Kano
Kano State
email: kzo@sec.gov.ng

Port-Harcourt
31 Woji road, GRA phase 2
Port Harcourt
Rivers State
email: phzo@sec.gov.ng

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