Doing Business in Nigeria – Constitution of a Company
By Barrister Jacques S. Boedels, 2002 - Armand, Boedels & Associés

FREE ACCESS REPORT

Part 2
Constitution of a Company

IV – CONSTITUTION OF A COMPANY

A – MEMORANDUM AND ARTICLES OF ASSOCIATION (STATUTES)

The memorandum is the constitutive agreement of the company which defines its aims, type of company, name, company headquarters and the nature and distribution of stock.

The articles of association determine the direction of the company, the rights and obligations of directors and shareholders.

4.1 The name

The name of the company is followed by:

                        Public Limited Company (if it is a public limited company)

                        Limited (if it is a private limited company)

                        Limited By Guarantee (if it is limited by guarantee)

When an unlimited company is formed it is followed by the word Unlimited.

The following names are not allowed:

-         Those that could create confusion with an already existing company,

-         Those using the words Chamber of Commerce,

-         Those against public order,

-         Those using a trademark or a commercial name registered in Nigeria.

The following can be registered but they need agreement first from the Corporate Affairs Commission:

-         Federal, National, Regional, State, Government, or those that could cause confusion with a Nigerian federal state organisation,

-         Municipal or Chartered, those that could lead to confusion with a municipal institution,

-         Cooperative, Building Society, Group or Holding.

4.2 Aim of the company

The aim for which the company has been formed must be stated.

4.3 Capital

The Companies and Allied Matters Act requires minimum capital of 10,000 Nairas for a private company and 50,000 Nairas for a public company.

25% of this amount should be open to tender.

4.4 Company headquarters

The company headquarters should be in Nigeria.

4.5 Limitation of liability

The memorandum should set the limitation of liability of the society.

4.6 Signatories of the memorandum

The signatories of the memorandum must hold at lest 25% of the capital, but they can cede their holding once the company is registered.

B – ARTICLES OF ASSOCIATION

The Company Act gives some examples of typical statutes, but investors are entirely free to alter, within the framework of the law, the following points:

§         Stock (nature, benefit, privilege),

§         Loans,

§         Assemblies,

§         Directors (description, pay, powers, division of powers),

§         Secretariat (description, powers, pay)

§         Corporate accounts and audit

§         Dividends (reserves, capitalisation)

Differently to French law on commercial companies which is endlessly modified, Nigerian commercial company law appears to remain extremely stable.

There are two texts governing the working of this area of law:

-         the Companies and Allied Matters Act 1990 (CAMA)

-         the Companies and Allied Matters Decree 1990 (CAMD)

CAMA was established at Abuja, federal capital of Nigeria, by the Corporate Affairs Commission (CAC) which is charged with the registration and administrative running of commercial companies.

Incorporation is obligatory for foreign companies. However the following are exempted:

-         International organisations involved in government activities (for example, charity, foreign aid, governmental assistance).

-         Companies involved in operations in the free zones of Calabar and Onne for petrol and gas exploitation.

INCORPORATION OF A NIGERIAN COMPANY

Any company which has a subsidiary in Nigeria must be incorporated at the Corporate Affairs Commission in Abuja where the following will be registered:

1)      The memorandum of association,

2)      The articles of association,

3)      Statement of share capital and declaration of compliance with CAMA,  

4)      Copy of lease or documents relating to corporate headquarters,

5)      Names of directors with a letter indicating their agreement to carry out the roles to which they have been appointed,

6)      Distribution of capital.

Stamp duty of 1.259% is charged against the total capital.

INCORPORATION OF A FOREIGN COMPANY

A foreign company, that´s to say a company with foreign involvement must be registered with the Nigerian Investment Promotions Commission (NIPC) before undertaking any commercial business in Nigeria.

This procedure is indispensable to allow expatriates to obtain a work permit.

LIST OF FORMALITIES NECESSARY TO CREATE A COMPANY IN NIGERIA

REGISTRATION WITH THE N.I.P.C.

Following its incorporation the company must, in accordance with the provisions of the Nigerian Promotion Decree (N.P.D) be registered with the Nigerian Investment Promotion Commission (N.I.P.C).

COST OF INCORPORATION OF A FOREIGN COMPANY IN NIGERIA

The approximate minimum cost of creating and incorporating a company in Nigeria is more or less 8,000 € including costs of incorporation, obtaining work permits for expatriates and formalities in Nigerian administration as well as the costs and fees of the local Council.

 CONTROL OF FOREIGN INVESTMENTS

The provisions of the Immigration Act require the presentation of a request of a business permit to allow the foreign investor to acquire stock in a company incorporated in Nigeria.

The business permit will only be granted to companies with minimum capital of two million Nairas for this purpose.

It is necessary to provide a certain amount of information relating to the company, its activities and its directors.

In practice, it is possible to incorporate a business and proceed later to presenting a request for a business permit.

EXCHANGE CONTROLS AND TRANSFER OF CAPITAL

New legislation on foreign exchange has put an end to previous restrictions and Nigeria has adopted a liberal policy as regards transferral of profits, dividends and equity

The legislation on the matter results from the Foreign Currencies and Capital Investment Monitoring Decree, which forces banks charged with the export of capital to verify that all taxes have been paid or that the amounts exported correspond to the amounts imported to Nigeria.

Following its incorporation, the foreign company can open a bank account through which it can effect all capital import operations and export of revenues and profits.

The import of corporate capital gives rise to the issuance of a "Certificate of Capital Importation", providing the necessary evidence to undertake eventual export operations of capital.

EXPATRIATE QUOTA

A foreign company or a foreign funded Nigerian company can request the facility to employ a certain number of expatriates.

This number varies according to the amount of capital of the company:

-         A company with capital of 2 million Nairas can employ 1 expatriate,

-         A company with capital of 5 million Nairas can employ 2 expatriates,

-         A company with capital of 10 million Nairas can employ 4 expatriates.

However it is possible to employ a higher number of expatriates with the help of local companies.

NIGERIAN SOCIAL INSURANCE TRUST FUND

The N.S.I.T.F decree states that any company incorporated in Nigeria must contribute according to the following scale:

Employees:                        2.5% of base salary capped at 40,000 Nairas per year

Employers:     5% of base salary capped at 48,000 Nairas per year

  (to be continued ...)

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