Introduction

With about 383 tech startups raising a combined total of US$2,068,709,445 between 2015 and 2022 - a higher total than any other country in Africa, Nigeria benefits greatly from the economic contributions of startups1 . The passing of the Startup Act therefore marks the dawn of a new dispensation for startup ventures in Nigeria.

In the first part of our Startup Act series, we provided an overview of the recently enacted Startup Act, 2022. In this second part, we discuss the incentives provided for under the Startup Act which will be beneficial to startups.

Administration of Fiscal Incentives and Startup Labelling

One of the essential contributions of the Startup Act to the startup ecosystem is bringing clarity to the types of business ventures that qualify as startups. For a startup to benefit from the incentives provided under the Startup Act, such a startup must be a "labelled startup". The main purpose of startup labelling is to ensure ease of regulating startups in Nigeria.

From the joint reading of the provisions of the Startup Act, startup labelling is the process of distinguishing and categorizing startups from other types of business enterprises. Startup labelling is achieved through the issuance of a startup label2 - a certificate issued by the National Information Technology Development Agency (NITDA)3, upon the fulfillment of the following conditions:

  • Establishment in accordance with the provisions of the Companies and Allied Matters Act, 2020, either as a limited liability company, a sole proprietorship or a partnership
  • Where the startup is a limited liability company then it must have been in existence for a period of not more than 10 years from the date of incorporation.
  • The business objects of the startup must include innovation, development, production, improvement, and commercialization of a digital technology innovative product or process.
  • The startup must be the holder or repository of a product or process which imbibes digital technology or be the owner or author of a registered software.
  • A labelled startup should have at least one-third local shareholding, which should be held by one or more founders/co-founders who are Nigerians and must share from the profit or revenue from the sale of shares.

Click here to continue reading . . .

Footnotes

1. The Nigerian Startup Ecosystem Report, 2022 by Disrupt Africa.

2. A Startup desirous of being granted a label under the Act shall apply via the Startup Portal in the prescribed form and with the documents prescribed by the Secretariat.

3. The Secretariat of the National Council for Digital Innovation and Entrepreneurship

Originally Published 22 November 2022

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.