Under Nigerian law, business activities may be undertaken in Nigeria through any of the following types of entities or arrangements:
- private limited liability company;
- public limited liability company;
- unlimited liability company;
- company limited by guarantee;
- incorporated trustees;
- partnership; and
- sole proprietorship.
The Companies and Allied Matters Act, Cap C20, Laws of the Federation of Nigeria ("LFN") 2004 ("CAMA") governs the formation and regulation of business enterprises in Nigeria.
Foreigners wishing to start up business operations in Nigeria may invest and participate in the operation of any enterprise in Nigeria by obtaining the local incorporation of a Nigerian company, which would be a separate and distinct entity from its parent company. Section 54 of CAMA provides that in order to carry on business in Nigeria, a foreign entity must incorporate a separate business enterprise in Nigeria. However, a foreign entity may apply to the Federal Executive Council1 for waiver of the requirement to register a separate entity in Nigeria if the foreign entity qualifies under any of exemptions listed in Section 56 (1) of CAMA, to wit:
- foreign companies engaged by, or with the approval of, the Federal Government of Nigeria to execute specific projects;
- foreign companies undertaking approved loan projects in Nigerian on behalf of donor foreign countries or international organizations;
- foreign companies owned by foreign governments and which are engaged wholly in export promotion activities; and
- a firm of engineering consultants or technical experts working on a specialist project under contract with any government of the federation of Nigeria or a department of such government.
Under Nigerian company law, a company having share capital may either be registered as a private limited liability company, a public limited liability company or an unlimited company. Most people desirous of setting up companies in Nigeria usually establish private limited liability companies,2 at inception and may thereafter, based on commercial considerations,3 convert such companies to public limited liability companies, at a later date.
1. A body comprised of the President and Vice President of the Federal Republic of Nigeria, as well as ministers and other senior members of the executive arm of the Federal Government of Nigeria
2. This is because private limited liability companies are generally subject to less disclosure and other compliance requirements than public limited liability companies.
3. For instance, where there is a need to have more than fifty (50) shareholders (excluding employees) or where it is proposed to list the shares of such companies on The Nigerian Stock Exchange.
The information contained here is based on relevant Nigerian laws, regulations and practices applicable to doing business in Nigeria, as of November 14 2018. This Manual only highlights legal issues, in general, and is not exhaustive. Also it does not, and it is not intended to, constitute legal advice and or opinion. If you have questions or require advice in respect of matters contained herein or any other specific issues, kindly contact us for such advice and we would be happy to assist you on an individual basis and walk with you on your journey to explore the limitless opportunities for investments in Nigeria.
Banwo & Ighodalo does not accept liability for any action (or lack thereof) by you or anyone else as a result of reliance on, or any other use of, information contained herein. For the avoidance of doubt, under no circumstance shall Banwo & Ighodalo be liable for any consequences resulting from reliance on or use of information contained in this Manual.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.