On 19 October 2022, the President of the Federal Republic of Nigeria gave his assent to the Nigeria Startup Bill 2021 (the Bill), effectively signing it into law as the Nigeria Startup Act 2022 (the Act). In the main, the Act serves to establish a legal and institutional framework for the advancement of labelled startups1 in Nigeria, and to create an environment that encourages the formation, growth and operation of startups in Nigeria. More so, the Act seeks to foster the growth of tech-related skills and place the Nigerian startup ecosystem as the foremost digital technology hub in the continent.2
In this newsletter, we highlight some of the notable provisions of the Act, and their potential impacts on key stakeholders.
HIGHLIGHTS OF THE ACT
Establishment of the National Council for Digital Innovation and Entrepreneurship
Notable among the key provisions in the Act is the establishment of the National Council for Digital Innovation and Entrepreneurship (the Council),3 which is comprised of the President and Vice-President of the Federal Republic of Nigeria serving respectively as Chairman and Vice-chairman of the Council, as well as other stakeholders.4 Chief among the functions of the Council include:
- the formulation of policies for the realisation of the objectives of the Act, and ensuring implementation of these policies;
- the creation of a pathway for the harmonisation of laws which regulate startups; and
- the provision of support in form of grants to persons, research institutions and universities for the furtherance of technological development.5
The Act also onboards the National Information Technology Development Agency (NITDA), making it the Secretariat of the Council. The Secretariat's roles have been designed to help operationalise the function of the Council.
Applicability of the Act and Startup Labelling
By section 2 of the Act, the Act is applicable to companies incorporated under the Companies and Allied Matters Act that are granted the startup label6. This is perhaps the hallmark of the Act given that only startups that have received a startup label will qualify for the incentives provided in the Act7. Notably, the applicability of the Act seems to extend to startups set up as sole proprietorships and partnerships8, however, only a 'pre label' status will be granted for a period of six months until the sole proprietor or partnership is registered as a company and can meet the conditions set in paragraph 6 below9. The Act also applies to organisations whose activities affect the creation, support and incubation of labelled startups such as venture capitalists, accelerators, incubators and equity funds10.
A startup is eligible for labelling if:
- it is registered as a limited liability company in Nigeria and has been in existence for a period not more than ten years from the date of incorporation;
- its objects are innovation, development, production, improvement and commercialisation of digital technology innovative products or processes;
- it is a holder or repository of a product or process of digital technology or the owner or author of a registered software; and
- the founder or cofounder of the startup is Nigerian and holds at least one-third of its shareholding.11
To be granted a startup label, the startup is required to apply on the Startup Support and Engagement Portal (the Portal).12 The Portal Coordinator13 shall, with the approval of the Secretariat14, enter the name and particulars of the applicant in the register of startups and issue a startup label to the applicant. This label (certificate) is valid for ten years and will be prima facie evidence that the startup has complied with all the requirements for labelling and has been labelled according to the Act.15
If a labelled startup defaults in its obligations under the Act and fails to regularise the default within thirty days of notification from the Portal Coordinator, the Secretariat is empowered to withdraw the startup label.16 A startup whose label is withdrawn may however apply to the Secretariat for a re-issuance of the startup label after rectifying the default.17
1. A startup is defined as a company in existence for not more than 10 years with its objectives being the creation, innovation, production, development or adoption of a unique digital technology innovative product, service or process.
2. Section 1 of the Act
3. Section 3 of the Act.
4. Section 4 of the Act.
5. Section 7 of the Act.
6. Section 2(a) of the Act.
7. Section 13 of the Act; A startup label is a certificate issued by the Secretariat to a startup upon meeting labelling requirements under the Act.
8. Section 13(2)(e) of the Act.
9. Section 13(4) of the Act.
10. Section 2(b) of the Act.
11. Section 13 (2) of the Act.
12. Section 14 of the Act.
13. The Portal Coordinator is charged with, among other things, maintaining a register of labelled startups in Nigeria.
14. Section 47 of the Nigeria Startup Act 2022 defines the Secretariat as the secretariat of the Council established under section 9 of this Act
15. Section 15 of the Act.
16. Section 17 of the Act.
17. Section 18 of the Act.
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.