Commencement and Registration of Foreign owned Business
An overview on the Commencement and Registration of a Foreign owned Business in Nigeria
International investments in foreign jurisdictions are a global economic trend due to its huge benefits and positive impacts. Today, it is one of the foremost reasons for the establishment of foreign owned businesses in developing countries.
This has propelled companies legally established in one country of the world to also seek to be established in another country to leverage on investments in several sectors, amongst many other reasons. More often than not, such foreign-owned businesses subject themselves to the laws regulating the operation of the corporate establishments in another country. In Nigeria, the registration of a subsidiary or a foreign owned company is similar to the process to register a local entity, with a few exceptions. This procedure is governed by the Companies and Allied Matters Act 2004 (“CAMA”) in Nigeria as amended.
A foreign company can be established in Nigeria for business as a secondary establishment, for instance as an office, agency, branch or subsidiary. As indicated earlier, such a company must fulfil certain legal requirements to obtain local incorporation of the Nigerian branch or subsidiary as a separate legal entity. Foreign company registration in Nigeria is the only means a foreign entity can acquire a separate legal entity in Nigeria and legitimately carry on business.
Similarly, every foreign individual seeking to engage in any form of business in Nigeria must also incorporate a company and meet other requirements to set up a business in Nigeria as stipulated by requisite laws. It must be stated that a foreign company or foreign national would normally not be permitted to carry on business in Nigeria or exercise any of the powers of a registered company until it is incorporated.
Exemption of Foreign Companies
Regardless of the foregoing and by virtue of Section 56 of the Companies and Allied Matters Act (CAMA), a foreign company may apply for an exemption from incorporating a local subsidiary if such a foreign company falls within indicated categories expressly stipulated in the Act. Such categories include foreign companies invited to Nigeria to carry out a specialized duty by government among a few others.
Every other foreign company that does not fall within the categories mentioned above must incorporate a company before commencing business transactions in Nigeria. However, the requirement of foreign company registration in Nigeria is but one of the many steps required for a foreign company to commence a business operation in Nigeria.
Incorporation of Company With CAC
The first requirement for foreign company registration in Nigeria either for a foreign individual or corporate entity, willing to start a business in Nigeria is to incorporate a company in accordance with the provisions of the Nigerian laws. Foreign participation in business in Nigeria must commence with a registration of a company with a minimum of N10, 000,000 authorized share capital. That simply means the company must have at least 10,000,000 shares divided into 1 Naira per share. This does not imply such foreign individual or company is required to pay up the share capital immediately to the government, but indicates the extent of the promoter’s risks and liabilities to the company. Further, every Nigerian company must have a minimum of two members (shareholders) and two directors. However, in the absence of a second person to act as a director, a foreign individual or entity may engage the services of a local director or even shareholder in compliance with the provisions of the Act. Although several foreign jurisdictions now allow a single individual to form a company, this is currently not acceptable under Nigerian law.
Registration with the NIPC
A foreign entity is also required to register with the Nigerian Investment Promotion Commission (NIPC) which is important. The Nigerian Investment Promotion Commission (NIPC) is a Federal Government Agency in Nigeria established by the NIPC Act to promote, coordinate and monitor all investments in Nigeria. The basic functions and powers of the NIPC are as prescribed by Act. The Commission coordinates, monitors, encourages and provides necessary assistance and guidance for the establishment and operation of enterprises in Nigeria. It also initiates and support measures which enhance the investment climate in Nigeria for both Nigerian and non-Nigerian investors among others as well as perform such other functions as are supplementary or incidental to the attainment of the objectives of NIPC Act. Registration with the NIPC is a major prerequisite for a business permit.
A business permit is issued by the Ministry of Interior permitting individuals or companies to conduct business within Nigeria. It serves as an authorization to start a business. A business permit is an operational and permanent permit for the local operation of a business with expatriate investment either as a branch or subsidiary of a foreign company or otherwise.
Section 36(1)(a) and (b) of the Immigration Act (2015), and Paragraph 4 of the Immigration Regulations (2017) requires that persons other than a Nigerian citizen on his own account or in partnership with any other person, practice a profession or establish or take over any trade or business whatsoever or register or take over any company with limited liability for any purpose without the written consent of the Minister of Internal Affairs. The consent of the Minister of Internal Affairs is issued in the form of Business Permit. This business permit is required for wholly foreign-owned companies.
Section 36(1)(a) and (b) of the Immigration Act, 2015 requires that a foreigner granted a business permit must be able to fit into the Expatriate quota. A business permit allows a foreigner to take up employment in Nigeria. However, all companies that intend to employ foreigners must have an expatriate quota. Expatriate quota refers to the allowable number of foreigners to be employed by business organizations operating or wishing to operate in Nigeria. This approval granted to this business organization is what is known as Expatriate Quota. Expatriate quotas are of two types:
- Permanent Until Reviewed (PUR), which is usually granted to the chairman of the board of a company or the Managing Director. It is permanent until a need arises for its review.
- Temporary Quota (TQ), which is usually granted to the directors or other employees of the company. It is usually granted for a maximum period of 5years subject to renewal for another period of two years
The quota position attaches to a particular post or position. Therefore, the same quota can cover different persons.
Immigration Requirements and Residence Permit
Immigration processes in Nigeria are governed by the Immigration Act 2015 and the Immigration Regulations 2017, issued by the Honourable Minister of Interior. The Regulations creates a legal framework for the implementation of the Immigration Act 2015. The Comptroller General of the Nigerian Immigration Service (CGI) issues residence permits to immigrants that intend to reside in Nigeria.
The immigration permits that may be granted to a foreign company or its employees are
- Resident Permits
- Temporary Work Permits (TWP)
- Subject to Regulation (STR) Visa
We would like to briefly address these permits.
- Resident or Work Permits
The Immigration laws provide that residence permits, otherwise known as the Combined Expatriate Resident Permit and Alien Card (CERPAC) may be granted for a maximum period of two years. CERPAC is required for expatriates residing or working in Nigeria. This, therefore, confirms that an expatriate can obtain a residence permit valid for two years. The CERPAC CARD is a document, which allows a foreigner to reside in Nigeria and carry out business as specified in the permit, or to accompany a resident or citizen of Nigeria as a dependent. Every CERPAC must be submitted for renewal after the two years expiration.
However, the validity of a residence permit is subject to the validity of the expatriate quota. Valid residence permits can also be used for re-entry into Nigeria. It is worthy of mention that the date endorsed in the passport is the effective date for re-entry purposes and not the date on the Combined Expatriate Resident Permit and Alien Card (CERPAC) temporary receipt.
With regards to an Investment visa, the Regulations provide that a foreign national that imports a minimum ‘threshold of capital’ over a period of time may be issued with a permanent residence permit (PR). However, this investment PR is subject to revocation upon withdrawal of investment from Nigeria.
- Temporary Work Permit (TWP)
This is an approved visa endorsement authorizing an immigrant to enter Nigeria in order to perform a specific job within a specified period of time. TWP is usually issued for a period of 3 months. The Comptroller of the Nigerian Immigration Service must approve all TWP cable visa.
- Subject to Regulation (STR) VISA
This visa is required from a foreigner who wishes to take up business in Nigeria. Subject to Section 33 of the Immigration Act, the prospective employer must write to the Comptroller General that he has a slot on the expatriate quota. The employer applies to the Nigerian Embassy or Consular office at the country where the employee resides. Upon his arrival in Nigeria, he would be granted a residence permit.
STR visas are valid for 90 days without reference to the Comptroller General provided that the applicant provides specified documents.
An Export Certificate
There are two government agencies vested with the power to grant export licenses or certificates:
- The Nigeria Export Promotion Council (NEPC) which is saddled with the responsibility of issuing out export licenses for agricultural commodities and manufactured goods;
- The Federal Ministry of Solid Minerals Development, which is responsible for granting licenses for extraction and exportation in Nigeria.
Specialized Operating License and Other Requisite Licenses
For companies intending to carry out operations in specialized sectors, there is the need to get operating licenses and other requisite licenses from appropriate bodies. Some of these include:
- Department of Petroleum Resources (DPR) – Oil & Gas Sector
- Nigerian Communications Commission (NCC) – Telecommunications Section
- Central Bank of Nigeria (CBN) – Financial Sector
- Ministry of Mines and Steel Development (MMSD) – Solid Minerals Sector
- National Agency for Food and Drug Administration and Control (NAFDAC) – Pharmaceuticals and Foods etc.
Certificate of Capital Importation (CCI)
Subject to the Regulation released by Central Bank of Nigeria on the 12th of June, 2012, certificates of capital importation are to be issued in respect of importations of equipment and raw materials, foreign exchange inflow for loans, investments or capital subjects to existing guidelines as specified in the Foreign Exchange Manuals.
The ultimate objective of this regulation is for the certificates to serve as evidence of direct foreign capital investment into Nigeria. Such capital inflows may relate to debt or equity, and can be in the form of cash or goods. Foreign investors can then use the CCI as a guarantee for unconditional repatriation of capital and profits, as well as any interest and/or dividend attributable to their investments. This certificate is required for wholly foreign companies.
Nigeria is well positioned for business. The policy of the Nigerian government is supportive of foreign investors, and such policy will be sustained for a very long time since Nigeria desires of having more investors to accelerate growth and development.
The first step for anyone seeking to do business in Nigeria is usually the incorporation of a company although foreign companies seeking to undertake a business may still be able to carry such activity without a company’s registration subject to the provisions of the Act.
There are also certain sectors which require special licenses to carry on business in those sectors. These include the telecommunications, banking, capital markets, insurance and the oil and gas sectors.
Nigeria affords numerous benefits and incentives for foreigners doing business, such as allowing foreigners to register and wholly own a Nigerian company or subsidiary, repatriation of capital and profits among others.
Any person or organization seeking to do business in Nigeria is expected to seek detailed legal advice to ensure a productive and successful business investment.
1. For a detailed list of the possible exemptions from incorporation of foreign owned businesses, see Section 56 of CAMA
2. Elexica “Doing business in Nigeria – a guide for foreign investors” <http://www.elexica.com/en/legal-topics/corporate-governance-and-compliance/doing-business-in-nigeria-a-guide-for-foreign-investors>
3. See Section 4 NIPC Act
4. Section 36(1)(a) and (b) of the Immigration Act (2015)
5. KPMG “Implementation of electronic certificate of capital importation” https://home.kpmg/content/dam/kpmg/xx/pdf/2017/09/tnf-nigeria-sep12-2017.pdf