Hi everyone. Am Barr. Amaka Obizolu, the principal partner of Amaka Obizolu & Co., today we continue our discussion on Nigerian Business Law and Tax System.
Foreign participation of business in Nigeria
Are you a foreigner or a foreign company intending to carry on business in Nigeria, or a Nigerian wishing to carry on business with a foreigner or foreign company, then you must take practical steps to be registered by the CAC as a separate entity, and until it is registered, the foreign company shall not have a place of business in Nigeria for any purpose other than the receipt of notices and other documents.
EXCEPT an application for exemption is made to the secretary to the government of the Federation:
- Where a foreign company is invited to Nigeria by or with the approval of the Federal Government to execute a specific project.
- Where a foreign company which is in Nigeria for the execution of a specific loan project on behalf of the donor organisation or agency.
- where it is engaged solely in export promotion activities.
- where they are Engineering consultants and technical experts engaged on any specific project under contract with any of the governments of the federation.
On this note, the status of the exempted company will normally have the status of an unregistered company, and the exemption order must have a lifespan as the period must be stated and can never be indefinite.
Non- Nigerians wishing to do businesses alone or in partnership with another non-Nigerian or Nigerians in Nigeria are advised to register their businesses under the CAMA (Companies and Allied Matters Act), with Nigerian Investment Promotion Commission, apply to Securities and Exchange Commission for registration, apply for necessary permits: Business permit, residence permit etc. and the non-Nigerian can then bring in his capital.
It is Paramount that where a business is carried on jointly between non-Nigerian and Nigerian, it is advised to start with JOINT VENTURE AGREEMENT, SHAREHOLDERS AGREEMENT or the like.
However, it should be noted that where a non-Nigerian is to subscribe to the MEMART or other documents of the proposed business enterprise, all the incorporation documents should provide for the address of the non-Nigerian abroad, otherwise the CAC must require the non-Nigerian to produce his residence/business permit.
Please note that there are specified procedures for the purchase of shares and application for business permit and their approvals by an Alien.
On transfer of Technology, every contract or agreement entered into by any person in Nigeria with another person outside Nigeria involving the transfer of foreign technology to the Nigerian partners SHALL be registered with NOTAP not later than 60 days from the execution of the agreement.
Although none registration of a contract does not render the contract void or unenforceable between the parties, but merely frustrates transfer of any fees or payment due under the contract to the account of the aliens outside Nigeria.
WHAT IS A SHARE:
It is a kind of company securities by which the holder acquires certain rights in and owes liabilities to the company. These might include a right to notice and allowance at the meeting, vote, dividend when declared, join in sharing the assets of winding up, inspect company document, Liability on the other hand includes to honour calls to pay for issued but unpaid shares. The type of share one acquire depends on whether it is either of the below:
Nominal share capital – This is the limited sum with which the company is registered. The minimum for private company is 10,000 while public is 500,000. This does not mean that the company has the amount at incorporation, it is only the value of the liability of the company, and same can be increased or decreased.
Issued Capital– It’s a total number of shares that must be issued to members at incorporation and shall not be less than 25% of the nominal capital.
Paid up capital.
The uncalled capital and
Reserve capital.
A limited liability company may by special resolution, determine that any portion of its uncalled share capital shall not be called up except on winding up, as this serves as a security to its creditor for loans.
On payment of shares, kindly note this can be done by cash, payment by consideration other than cash, part consideration and part cash. When its done by consideration the following must be declared to the company within one month.
- Valuation report stating the consideration offered.
- Contract – duly stamped contract.
- Return of allotment.
An investor may want to know the difference between his status as a director and a subscriber. Please note that while a subscriber signs the memorandum and article of a company at incorporation, the director need not sign. Every subscriber is deemed to be a member of the company, but a director need not be a member, a minor may be a subscriber provided that there are 2 other adults, but a minor cannot be a director of a company.
Note that every company must have a minimum of 2 directors and 2 shareholders, and the following persons are disqualified from forming a company, and subscribing to shares: Infants, Unsound mind, Undischarged bankrupt, Companies in liquidation and Fraudulent persons.
Do you know that a subscriber can change his signature after incorporation? Sometimes the client instructing a solicitor to incorporate a company may be outside Nigeria or not available at the time of incorporation, in a situation like this, his solicitor may initial the memorandum and articles of association of the company and later apply to the commission to change the signature via an application on the company letter head showing the signature of the subscribers, and an affidavit deposed to by the solicitors showing the circumstances leading to the need to change signature.
Join us for the third instalment in the following day to discuss “How to become a member of a company”.
Presented by:
Amaka C. Obizolu Mrs. (LL.B, BL)
+234 803 5404 780
