Registering a Company in Nigeria

– Chinedu Collins Aguocha, Esq

Despite the economic challenges in Nigeria, it is always a place to do business. The legal form a business will take depends on several factors, chiefly the nature of the business and the financial capacity of the promoters. The Companies and Allied Matters Act 2020 (CAMA) which is the principal law on business registration in Nigeria, recognizes the following legal forms:

  • Business Name (BN)
  • Limited Partnership (LP)
  • Limited Liability Partnership (LLP)
  • Private Company Limited by shares (LTD)
  • Public Limited Company (PLC)
  • Unlimited Company (ULTD)

However, this piece focuses on the last three mentioned above, i.e., the companies. Unlike the other legal forms of a business, companies are more regulated by law, hence they are employed as the form for properly structured businesses. In the following paragraphs, this piece discusses the three types of companies and how to register them.

DISCLAIMER

This piece is not legal or professional advice, and it is provided for general information purposes only. If you require legal assistance with any matter, please contact Charles Anthony Lawyers.

Why choose a private company limited by shares?

Under CAMA 2020, a private company limited by shares (LTD) is a company which can be owned by a minimum of one person and a maximum of 50 people. It is characterized by restrictions on the transfer of shares and a limit on the number of shareholders, which cannot exceed 50.[1] The minimum issued share capital of a private company which shall be fully issued is NGN100,000,[2] but it may be higher for some sectors such as banking, maritime etc. This simply means that the owners of a company will give it a minimum of NGN100,000 as the capital for starting the business.

The beauty of a private company is that it can be owned by one person, i.e. one person can own all the shares of a private company. This benefits people who do not want any other person to be part of the business. Other advantages of an LTD are listed below.

  • It is relatively cheaper to set up and maintain compared with other forms of business.
  • Its corporate personality means it is different from its owners and can hold and dispose of property in its name.
  • Its limited liability means the owner cannot be held liable for the debts of the company beyond what has been or remains unpaid on the shares held by that owner.
  • Decision-making can be quick if it has only one shareholder or through written resolutions or virtual meetings if it has two or more shareholders.
  • There is no mandatory statutory meeting which applies to public companies.

Why choose a public limited company?

A public company limited by shares or a public limited company (PLC) is the opposite of a private company.[3] The members of the company cannot be less than two and can be more than 50, although their liability is limited. Unlike a private company, a public company can offer its shares to the public and must comply with more stringent regulatory requirements. The minimum share capital of a public company which shall be fully issued is NGN2,000,000,[4] but it may be higher for some sectors such as banking, maritime etc. A public company is preferable to business owners for the following reasons:

  • The public can be invited to subscribe to the shares of a public company.
  • Its equity and debt stocks can be publicly traded, i.e., the company can be listed on a stock exchange.
  • It has wider access to capital in the form of equity, debt or a hybrid of both equity and debt, through the capital markets.
  • Its corporate personality means it is different from its owners and can hold and dispose of property in its name.
  • Its limited liability means the owner cannot be held liable for the debts of the company beyond what has been or remains unpaid on the shares held by that owner.
  • A public company is also good for business owners who are not bothered by excessive government scrutiny.

Why choose an unlimited company?

An unlimited company (ULTD) has no limit on the liability of its members. This means that members are personally liable for the company’s debts. It could be a private company or public company with the same applicable rule on share capital.[5] While it is not advisable to incorporate an unlimited company, it is preferred for the following reasons:

  • Its corporate personality means it is different from its owners and can hold and dispose of property in its name.
  • It encourages diligence and care among the shareholders in dealing with the company since they will be personally liable if the company stops being a going concern.
  • It raises public confidence in the company since they know the shareholders personally have skin in the game.

Steps for registering a company

The steps for registering a private company limited by shares, a public limited company and an unlimited company are the same, but the nature of the information to be provided may, among other things, be different. The steps are summarised below.

  • Engaging a lawyer

It is always advisable to engage a lawyer who is an accredited agent of the Corporate Affairs Commission to advise on and carry out the registration. While accredited chartered accountants and chartered secretaries can also assist in setting up companies, a lawyer is most suited because special laws may apply in specific cases, and the lawyer is in the best position to advise on compliance with those laws in advance. Also, a lawyer is most suited to assist with preparing the required corporate and proprietary documents to suit the circumstances of the proposed company.

  • Planning

It is important to plan the business and the company before registration. While the lawyer can provide guidance on the legal aspects of planning the business, such as advising on the minimum share capital, number of officers (directors and secretaries), disclosures, corporate documents, property transactions, ratifying pre-incorporation contracts etc., the promoter of the business may have to consult business development professionals to plan the commercial aspects of the enterprise or do the planning themselves.

  • Name reservation

The next step is to conduct a name availability search on the Corporate Affairs Commission (CAC) website and reserve the preferred company name online via the companies registration portal (CRP) after paying the name reservation fee.[6]

  • Submission of business data

Once the name is approved, the business data is submitted or uploaded to the CRP. The business data includes the personal details of the shareholders, director and secretary such as names, date of birth, addresses, IDs, signatures etc.; business objects; business address(es) etc.

  • Submission of corporate documents

The proposed corporate documents of the company will have been prepared in advance and will be uploaded to the CRP. The corporate documents are the memorandum and articles of association (MEMART). The MEMART govern the relationship of the company within and without.

  • Payment of fees

The next stage of the registration process is payment of the registration fee to the CAC and the stamp duty to the Federal Inland Revenue Service (FIRS). Sundry fees like payment charges will also be paid, and the payment is fully automated. The stamp duty is calculated as 0.75% of the proposed share capital e.g. NGN7,500 for a share capital of NGN1 million.

The registration fee is gradated on the proposed share capital as NGN10,000 for the first NGN1 million of part thereof and NGN5,000 for each other NGN1 million or part thereof e.g. both share capitals of NGN1.5 million and NGN2 million will attract a registration fee of NGN15,000 while both share capitals of NGN100,00 and NGN1 million attract a registration fee of NGN10,000.

  • Review and queries

The next stage is to submit the application and resolve queries. Officials of the CAC review the application and may request that certain steps be taken before approval (query). Once all queries are resolved, approval is given to the application.

  • Issuance of certificate etc.

Upon approval, the CAC issues a Certificate of Incorporation, signifying the legal existence of the company. It also issues certified copies of the memorandum and articles of association and of a status report. The status report takes the place of the incorporation forms such as Form CAC 1.1 etc. which were used before.

The status report contains a profile of the company such as its share capital, officers (active and past), shareholders (active and past), charges on its assets, status (active, inactive, liquidation etc.). A certified status report is also generated each time changes are made to the company’s status, share capital, officers, shareholders etc. of the company, and it is important to properly label and keep such reports.

  • Getting a TIN

While a tax identification number (TIN) may be automatically issued upon the approval of the registration, system glitches may prevent such. However, the TIN can still be generated online in just a few steps. The TIN is required for filing tax returns, paying or remitting taxes, opening bank accounts etc.

  • SCUML registration

In a bid to combat money laundering and the financing of terrorism, certain businesses are required to register with the Special Control Unit Against Money Laundering (SCUML). The SCUML certificate is also required for opening or operating a bank account in the name of the company.

CONCLUSION

Registering a business in Nigeria is quite easy as demonstrated in this piece, and the process can take 24-72 hours from start to finish. However, some businesses may require a licence or a permit before they commence operations. Therefore, it is always important to consult a professional in all cases.

Chinedu Collins Aguocha is a Counsel at Charles Anthony Lawyers, Lagos Island, Lagos. He can be contacted via his account on LinkedIn or chinedu@charlesanthonylaw.com. You can view other insights from Chinedu here.

[1] CAMA 2020 s 22(3).

[2] ibid s 27(2)(a).

[3] ibid s 24.

[4] ibid s 27(2)(a)

[5] ibid s 25.

[6] ibid s 31.

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