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Doing Business in Nigeria - Investment Laws in Nigeria Introduction - Constitution of a Company - Tax System
Part
2
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
Jacques S. Boedels ARMAND BOEDELS Chambers Lawyers of Paris bar |
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