Introduction
The company and allied Matters Act 2020 (CAMA) which is the law that guides corporate and business-related activities in Nigeria requires any company that wishes to conduct business activities in Nigeria to register with the corporate affairs commission. The Corporate Affairs Commission (CAC) is the body that regulates business registration and post incorporation activities in Nigeria.
A Foreign company wishing to set up business operations in Nigeria must be registered in Nigeria as a company. The law also permits a foreign company to set up a representative office in Nigeria.
A representative or liaison office is one established by a foreign company or a legal entity to conduct marketing and other non-transactional operations in a foreign country where a branch office or subsidiary may or may not be established.
The need for a representative office usually arises when companies are faced with the growing need of their products or services entering into a new market and also to build a relationship with clients or customers.
Features of a Representative Office
- The representative office has no legal status and as such cannot be sued or sue in itself; it is oftentimes a temporary administrative arrangement.
- The liabilities of a representative office extend to the parent company which is a foreign company.
- The only allowed activities of a representative office are for conducting market research, act as storage or display of goods, or serves as a promotional office and provision of logistics for the foregoing.
- A representative office is not subject to tax payment since it cannot generate income provided that it does not include certain objectives in its memorandum and articles of association which could make it liable for taxation.
- A representative office cannot engage in business, negotiate or conclude contracts. The office only serves as a liaison or promotional office. The expenses run in the representative office must be an inflow from the foreign company.
- A representative is incorporated just like a private liability company, the only distinction is that the objectives are different and usually the name carries representative office. Thus, the cost and timeline for registration is the same as that of a private company limited by shares.
Benefits of setting up a representative office in Nigeria
- Market presence can be established at very low cost.
- A local bank account can be created to assist with financial transactions.
- The representative office would be allowed to hire employees
- The representative office can handle sales and delivery of items under the name of the parent company.
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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.