The Companies and Allied matters Act 1990 (CAMA) is the principal law regulating the
incorporation of business in Nigeria. The administration of the Companies Act is
undertaken by the Corporate Affairs Commission (CAC). The principal law regulating
Foreign Investments in Nigerian is the Investment Promotional Act 1995 and
administered by Nigeria is Nigeria Investment Promotion Council (NIPC).
INVESTMENT PROTECTION ASSURANCE
The NIPC Decree provides that:
(a) No enterprise shall be nationalised or expropriated by any Government of the
Federation; and
(b) 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
Compensation shall be paid without undue delay, and authorisation given for its repatriation in convertible currency where applicable.
COMPANY INCORPORATION AND REGISTRATION
Foreigners wishing to set-up business operations in Nigeria is obliged to take necessary steps to :
1 Obtain local incorporation of a Nigerian company, OR
2 Incorporating a Branch or subsidiary of an existing company
The following organisations are excepted from the above requirement: that all foreign
investor doing business in Nigeria must incorporate in Nigeria .
i Companies undertaking approved loan projects on behalf of donor countries
ii Companies engaged by Federal government to execute specific projects
iii Foreign government owned companies engaged wholly in export promotion activities
These exceptions are granted for a fixed period of time (usually three years) and are hardly renewed and may be revoked by the Federal Executive Council. Foreign investors envisaging a long-term existence in Nigeria are therefore advised to incorporate a local company.
Instead on incorporating a local company, Foreign companies may consider to set-up Representative Offices in Nigeria. A Representative Office however, cannot engage in business activities. It can only serve as a promotional and/or liaison office. In this circumstance, its local operational expenses have to flow in from the foreign company. Representative Office also must be registered with the CAC.
Incorporation can easily be done in Nigeria by giving a power of attorney to a qualified
Solicitor, Chartered Accountants or Chartered Secretaries in Nigeria. The incorporation
documents in this instance would disclose that the Solicitor, Chartered Accountant or
Chartered Secretaries is merely acting as an "agent" of a "principal" whose names should
also appear in the document. The power of attorney should be designed to lapse and the
appointed solicitor or chartered accountant ceases to function upon the conclusion of all
registration formalities.
Under the Nigerian Investment Promotional Act 1995, foreigners are allowed to wholly owed companies (with the exception of enterprises on the “negative list” of the Act. The negative list includes enterprises involved in the production of and dealing in arms, ammunition, narcotic drugs and psychotropic substances) or part own companies with Nigerians. Other several laws that regulate foreign investments in Nigeria are, Foreign Exchange Act, 1995, Investment and Security Act 1999 and the Immigration Act cap III.
Share Capital Requirement
The currency allowed for shares is Naira. Non voting shares are prohibited and it is one vote per share except for preference shares. The share capital requirement for Nigerians is same for foreigners except that a business permit will only be granted in respect of companies having an authorized share capital of at least ₦10,000,000 .
Minimum authorised share capital for company formation
Private companies 10,000
Public companies (Plc) 500,000
*Not less than 25% must be taken-up by subscribers (first shareholders) to the
Memorandum and Article of Association.
Required number of individual that can own a company and to share the authorised
share capital.
Private companies 2 - 50
Public companies (Plc) 2 - Infinity
Directors
The promoters of business ventures in Nigeria are free to appoint directors of their choice, either foreign or Nigerian, and the directors may be resident or non-resident. The application to the NIPC must reflect the names of the proposed Nigerian and foreign directors (with an indication of resident and non-resident directors). The Business Permit Certificate consequently issued following such application usually reflects the respective names of the proprietors of the company, as well as the directors representing each proprietor or co-proprietor.
Once incorporation of local company is done, there are other approvals (NIPC investment approval) that the foreign investor would require, to secure enhanced returns from an investment and remit the proceeds of such investment. Some of these approvals are mandatory and some are not.
Mandatory for approvals
i Registration with NIPC
ii Registration with FIRS (Federal Inland Revenue Service)
iii Certificate of Capital Importation (CCI)
iv Business Permit
Not mandatory for approvals
v Expatriate Quota and Work plus Residence permit for expatriate staff
vi Approval for transfer of Technology and other Agreements
vii Pioneer Status
viii Registration with appropriate Regulatory Authority relevant to the company's business
i Registration with NIPC
The principal laws regulating foreign investment in Nigeria are, the Nigerian
Investment Promotion Commission (NIPC) Act No. 16 of 1995 and the Foreign
Exchange (Monitoring and Miscellaneous Provisions) Act No. 17 of 1995.
NIPC Act Provides that any company in which there is foreign participation must be registered with the NIPC. NIPC permits foreigners to own up to 100% of any company with the exception of companies on the "negative list" of the Act. The negative list includes enterprises involved in the production of and dealing in arms, ammunition, narcotic drugs and psychotropic substances.
Requirement for obtaining NIPC registration
a Application to the Nigeria Investment Promotion Commission
b Completed copies of the NIPC Form 1 (in triplicates)
c Original copy of receipt of purchase of NIPC Form 1 (and 3 copies) d Copy of Certificate of Incorporation
e Memorandum and Article of Association
f Evidence that the Company has a minimum share capital of 10million (3 copies)
g Company's allotment of shares- Form CO 2 (3 copies)
h Company's particulars of directors - Form CO 7 (3 copies)
i Details of the shareholding structure of the company (3 copies)
j Shareholders agreement , where applicable (3 copies)
ii Registration with FIRS (Federal Inland Revenue Service)
The company is expected to registered with the Federal Inland Revenue Service (FIRS) for tax compliance purpose and obtain the first Tax clearance Certificate.
Double Taxation Relief
Nigeria currently has seven comprehensive double tax treaties. Treaties on income and capital gains are currently in force with:
• United Kingdom and Northern Ireland
• Canada
• France
• Netherlands
• Belgium
• Romania
• Pakistan
iii Certificate of Capital Importation (CCI)
Investors who wish to be able to remit dividends to non-resident shareholders or repatriate capital must ensure that they obtain Certificate of Capital Importation from the Nigerian bank through which the payment is transferred into Nigeria.
Requirement for obtaining CCI
a Application to the company's banker
b The foreign shareholders will instruct their bank ( the remitting bank) by telex to
c The transfer must be accompanied by a telex stating the money being remitted to
d Upon confirmation that the funds have been remitted to Nigeria, the company is
e The following documents must be submitted together with the letter of application:
i A Board resolution authorizing the foreign investment
ii A letter from the company stating the purpose for which the money has been
remitted
iii A copy of the certificate of incorporation
iv A copy of the swift message from the remitting bank
f If satisfied with the documentation, the receiving bank will issue a CCI in respect
iv Business Permit
In order for a company with foreign participation to undertake any business in Nigeria,
it must obtain a business permit from the Ministry of Internal Affairs. A business permit
will only be granted in respect of companies having authorised share capital of at least
N10million.
Requirement for obtaining Business Permit
a Application to the Ministry of Internal affairs
b Certificate of Capital Importation (CCI)
c Completed copies of the NIPC Form 1 (in triplicates)
d Original copy of receipt of purchase of NIPC Form 1 (and 3 copies) e Memorandum and Article of Association
f Copy of Certificate of Incorporation
g Evidence that the Company has a minimum share capital of 10million (3 copies)
h Company's allotment of shares- Form CO 2 (3 copies)
i Company's particulars of directors - Form CO 7 (3 copies)
j Details of the shareholding structure of the company (3 copies)
k Shareholders agreement , where applicable (3 copies)
v Expatriate Quota
A company wishing to employ expatriates must obtain an Expatriate Quota position for each expatriate it wishes to employ. The expatriate quota establishes the maximum number of expatriates that the company may employ.
A company having a paid-up share capital of not less than 10million is entitled to one automatic quota position, while a company with paid-up share capital of 20million is entitled to four automatic quota positions.
Requirement for obtaining Expatriate Quota
a Application to the Ministry of Internal affairs
b In addition to requirements under Business permit, the following documents are
required
i Evidence of acquisition of operational machinery and equipment
ii Management and technical Service agreement
iii Minimum authorised share capital of N10million
iv Tax clearance certificate
v Company applying for Permanent Until Reviewed (PUR) Quota slots must
show evidence of payment of tax for minimum of N1million.
vi Name, addresses, qualification and positions to be occupied by the expatriate vii project implementation Program
viii Training program for Nigerians and a Management succession schedule
The Difference Between ‘BUSINESS PERMIT’ and ‘EXPATRIATE QUOTA’
Business permit, as the name connotes, is the permanent authorization for the local operation of businesses with foreign investments either as branch/subsidiary of a foreign company or otherwise.
Expatriate quota is the official permit to a company, conveying permission for the company to employ individual expatriates to specifically approved job designations, and also specifying the permissible duration of such employment.
The expatriate quota forms the basis of work permits for expatriate individuals employed ( whose qualifications must fulfil the criteria established for the particular quota position). Expatriate quota positions are usually granted for 2-3 years subject to renewal, EXCEPT in cases where companies qualify for and are granted not more than one (1) “PUR” Quota ( i.e. Permanent Until Reviewed) position.
vi Approval for transfer of Technology and other Agreements
By virtue of the provisions of the national OFFICE FOR Technology Acquisition and
promotion Act, 1992 any agreement under which a foreigner is to provide foreign
technology, management, or assistance, to a Nigerian company must be approved by
the National office for technology Acquisition and promotion (NOTAP). Fees payable
for the provision
vii Pioneer Status
The benefit of a Pioneer status Certificate is that the holder is exempted from payment
of tax for a specified number of years (5 years in urban area and 7 years in rural area).
The company must not be more than one year old from commencement of production.
Requirement for obtaining Pioneer status
a Application to the Ministry of the Executive Secretary b Duly completed NIPC Form II
c Certificate of incorporation
d CAC's Form CO2 and CO7
e Memorandum and article of association
f Tax Clearance Certificate
g Evidence of acquisition of machinery (Form M)
h Evidence of business premises (Tenancy or lease agreement) i Shareholder or Joint venture agreement (where applicable)
viii Registration with appropriate Regulatory Authority relevant to the company's business ( such as DPR, NCC, NAFDAC, etc)
DPR
Companies that wish to engage in petroleum operations in Nigeria are required to
register with the Department of Petroleum Resources (DPR). The DPR issues permits,
upon application, in respect of oil exploration and production activities, as well as oil
service activities. fees payable depends on the category of operations for which the
company applies.
FEES
1 |
NIPC Form I |
25,000 |
2 |
Business permit certificate |
25,000 |
3 |
Expatriate quota processing fees |
25,000 |
4 |
Payment for each expatriate quota position approved |
10,000 |
5 |
NIPC Form II |
20,000 |
6 |
Pioneer status processing fees |
50,000 |
7 |
Collection of pioneer status approval letter |
30,000 |
8 |
Application for pioneer status extension |
free |
9 |
Approval of pioneer status extension |
50,000 |
IMPORTANT NOTE: One Stop Investment Centre (OSIC) is available with Nigeria Investment Promotion Council (NIPC) to take care of all incorporation and registration needs at a go. Foreign investors are advice to exploit this opportunity to reduce cost of entry and to maintain close and professional working relationship among government Agencies/Ministries in support of investors