On processes in the formation of enterprise in Nigeria (2)

It is noteworthy to mention that more information and supporting documents may be required in the case of a company or an individual agent company carrying on business on behalf of another individual, firm or corporation whether as a nominee or trustee and in the case of a firm or individual carrying on business as general agent or representative for another concern or overseas company and not having a business address in Nigeria.

Incorporated Trustees

This is used in the establishment of Non-Governmental Organisations (NGOs) which are also known as not-for-profit organisations. It is used for the establishment of social, research, educational, religious, cultural, foundation, association, club and other similar bodies. The organisation is required to appoint Trustees.

Reserving a Business Name

The Company and Allied Matters Act (CAMA) law allows the promoters of a new enterprise to start application by, first of all, determining whether or not the proposed name is available for use. If the name is available, it can be reserved for a period of sixty (60) days within which it can be registered. After the expiration of sixty (days), another user can register the name.

Requirements for Minimum Share Capital and Disclosures of Limited Liability Companies

The minimum share capital required of a private limited company is N100,000, and for a public limited company, it is N2,000,000. The share capital must be 100 percent allotted to its subscribers and the Memorandum of Association of the company must state that the subscribers “shall take amongst them a total number of shares of a value of not less than 25 percent of the authorised share capital and that each subscriber shall write opposite his name the number of shares that he takes”.

CAMA allows others (nominees) to hold shares for business promoters, provided the fact of such shares held on trust is disclosed in the Memorandum and Articles of Association, taking into account the need for business convenience. A number of foreign investors in order to speed up the incorporation process give Powers of Attorney to local professionals (lawyers, accountants, company secretaries etc) to incorporate companies for them and to obtain the relevant statutory licences and approvals for the establishment of enterprises in Nigeria.

Right to Vote per Share

In recent times, non-voting shares and Shares with “weighted” voting rights have been prohibited. All shares (i.e. whether ordinary or preferential) issued by a company must carry one vote in respect of each share (Section 140(1) of Companies Act, 2020).

Published Disclosures to be in Company Correspondence and Business Premises

Every company is obliged to disclose on its letter headed papers used in correspondence, the following details:

• Name of the company/enterprise;

• Business Address;

• Registration/Incorporation Number;

• Names of Directors and Alternate Directors (if any).

• Nature of business

This disclosure will ensure the authenticity of correspondences from genuine companies, and as much as possible, to check the activities of fake and non-existing companies. In addition, the law requires companies/enterprises to display their Certificates of Incorporation/Registration in conspicuous positions at their head and branch offices. There are criminal and civil penalties on the part of the company, its directors and other officers responsible for non-disclosure.

Foreign Companies in Nigeria

A legal non-Nigerian is at liberty, and indeed encouraged to invest and participate in the operation of any enterprise in Nigeria. However, the promoters or investors would have to register a company in Nigeria. This company will be a separate and distinct entity from its parent company abroad. A foreign company may not carry on business in Nigeria or exercise any of the powers of a registered company unless it is so incorporated. This does not mean, however, that a company not registered in Nigeria cannot sue or be sued for goods or services delivered.

A foreign investor may incorporate a Nigerian branch or subsidiary of the parent company by commissioning professionals for this purpose. The incorporation documents in this instance would disclose that the professional is just an “agent” of a “principal” whose name(s) should also appear in the document. After the registration, the registered branch or subsidiary company must then apply to the Nigerian Immigration Services (NIS) for an expatriate certificate for the foreign workers, export permit from the Nigerian Investment Promotion Commission (“NIPC”) and Ministry of Trade and Investment for a Business Permit.

A good business man will commission an estate surveyor and valuer to look for suitable property where he or she can operate his or her business, including warehouse and residences.

Exceptions to the General Rule

A foreign company may apply according to Section 56 of the Companies Act 2020, to the National Council of Ministers for exemption from incorporating a local subsidiary if such a foreign company belongs to one of the following categories:-

• Foreign companies in partnership with already existing company in Nigeria;

• foreign companies invited to Nigeria by or with the approval of the Federal Government of Nigeria to execute any specified individual project;

• foreign companies which are in Nigeria for the execution of a specific individual loan project on behalf of a donor country or international organisation;

• foreign government-owned companies engaged solely in export promotion activities, and;

• 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.

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