LEGAL REQUIREMENTS FOR THE ESTABLISHMENT OF START-UPS & SMALL BUSINESSES IN NIGERIA Pastor Tola Harrison-Abiola

Start Your Business Off on the Right Legal Footing  Starting your business can seem overwhelming  What do you need to do?  Where should you start?

Decide on a Business Structure  When you have determined the viability of your business concept and you’re ready to set up your business, one of the first steps is to register a name. But before doing so, you must decide if you’re going to be a sole proprietorship, a partnership, a corporation, or a society. Each has important implications for liability, taxation, and succession planning. There are a few things to consider when setting up your business structure. The most common business structures in Nigeria include:

The most common business structures in Nigeria  1.Sole Proprietorship If you plan to operate the business on your own, either under a business name or your own name eg. Nnamdi & Sons Trading, Nnamdi Ventures, or Enterprises, or Concepts. The certificate will have BN (Business Name No.) 2.Partnership If you plan to operate the business with one or more partners. 3.Corporation If you plan to operate the business as a separate legal entity, separate from yourself and your personal assets. The certificate will have RC (Registered Company No.) and the name will end with the word LIMITED (LTD) or PUBLIC LIMITED COMPANY (PLC).

 4.Society Or Registered Trustees If you plan to operate a not-for-profit organization, in which any funds or profits will be used only for the society’s or organization’s purposes. 5.Co-operative If you plan to operate a business that is owned and democratically controlled by several people who use and benefit from your operations. The most common business structures in Nigeria

Registering A Business Name  When you operate your business under a name other than your own, you need to register that name because you will require proof of business registration to open bank accounts, apply for loans, and many other business start-up and business building activities. Business Name registration is a two-step process:

Registering A Business Name  1.Submit your business name request. The first step in registering your business is the approval of your business name by submitting your Name at the CAC (Corporate Affairs Commission ) in your State where you want to carry on the business or otherwise preferably at Abuja for a search in the register to determine if the name is available for your use. 2. Register your business. Once you have been notified that your business name has been approved, you have 60 calendar days to register your business name.

Incorporation of a Nigerian Company.  1.Name Availability Search 2.Documents and prescribed statutory forms required to be submitted at the CAC. The under-listed documents will be required to be submitted to the CAC in respect of the registration of the Newco: i.The Memorandum and Articles of Association of the Newco. ii.Form CAC 3, notice of the Newco’s registered address. This must be a Nigerian address. iii.Form CAC 7, particulars of the first directors of the Newco. CAMA requires a minimum of two (2) directors. iv.Form CAC 2, statement of the authorized share capital and return of allotment of shares of the Newco. (Please note that a minimum of 25% of a company’s authorized share capital is required to be issued on initial subscription and in respect of any subsequent increases of such capital).

Incorporation of a Nigerian Company.  3.Membership The CAMA requires all companies to have a minimum of two (2) shareholders who could themselves be incorporated companies (i.e. corporate shareholders). A Corporate shareholder must be represented by named individuals who must sign the Memorandum and Articles of Association on its behalf. A representative of a corporate shareholder must be properly conferred with the power to act in this regard. The board of directors of any corporate member will be required to pass a resolution, (i) consenting to the company’s subscription for shares in the Newco, and (ii) appointing the designated representative(s) in respect of the incorporation of the Newco.

Incorporation of a Nigerian Company.  4.Directorship As earlier mentioned, a minimum of 2 (two) directors is required, details of whose full names, residential and addresses and nationalities must be stated in the statutory form CAC 7. A corporate entity may be designated as a director; however, an individual must be designated to represent such corporate entity. 5.Appointment of Company Secretary The CAMA requires all companies to have a Company Secretary. As a means of ensuring compliance with this requirement, the CAC now insists on the filing by all companies of a notification of the appointment of a Company Secretary as a pre-condition for effecting other post-incorporation filings with it.

Incorporation of a Nigerian Company.  6.Incorporation Time Line Estimated time line for the incorporation process is usually between 3 to 4 weeks from the date of submission of the prescribed forms and documents barring unforeseen circumstances. 7.Foreign Investment Approvals, Business Permits and Expatriate Quotas Please note that there are certain approvals required to be obtained from the Nigerian Investment Promotion Commission (“NIPC”) and the Federal Ministry of Interior in case of foreign shareholding. I. Expatriate Quota Positions II.National Office of Technology Acquisition and Promotion (“NOTAP”) Approval 8.Registration with relevant Tax Authorities In line with the requirement under the various Nigerian laws for the registration of every Nigerian company with the relevant tax authorities, it is necessary for the Newco to obtain its tax registrations and obtain a taxpayer identification number in respect of such registration.

Incorporation of a Nigerian Company.  a.Corporate Tax Under the Companies Income Tax Act (CITA), a Nigerian company is generally taxed at the rate of 30% on all of its worldwide profits, accruing in, derived from, brought into or received in Nigeria. b.Value Added Tax (VAT) The Newco will be required by law (the Value Added Tax Decree of 1993) to register for VAT within six months of the commencement of business. Please note that where the Company chooses to import any machinery and equipment, the same shall be subject to VAT at the rate of 5%. c.Pay As You Earn (PAYE) taxes Please note that the Company will also be required to register with the Inland Revenue Service of the relevant State(s) of Nigeria in which its operations are conducted for the remittance of the Pay As You Earn (PAYE) tax deductions of its employees.

Incorporation of a Nigerian Company.  9.General Employment /Immigration Approvals- Applicable and necessary visas must be obtained for foreigners e.g. a.Subject to Regularisation (“STR”) Visa. b.Combined Expatriate Residence Permit and Aliens Card. c.Entry Permit Applications/ Extension. d.Temporary Work Permit/ Cable Visa.

Incorporation of a Nigerian Company.  10. Costs - Official Fees and Processing Expenses (a)Stamp duties Stamp duties are assessed ad valorem on share capital and payable to the FIRS. Extra copies of the Memorandum and Articles of Association are stamped at the rate of N500 per copy. (b)Registration fees The following are the fees payable a) These are payable at the CAC at the rate of N10, for the first N1million, N5, for every subsequent N1million of the Company's share capital up to N500,000,000 and N2,500 for every N1 million of the Company's share capital above N500,000,000.

Incorporation of a Nigerian Company. b). Fees for obtaining certified true copies of incorporation documents from CAC amount. c). Professional Fees, if a lawyer or accountant’s services is employed. d). Processing Costs and Expenses Incorporation The total processing costs and expenses applicable to the incorporation of the Company, including conduction of availability and name reservation searches, the purchase of incorporation forms, printing costs, courier costs and transportation expenses to the Stamp Duties office and the CAC, are estimated at N50,000

Thank You