Nigeria: Share Capital Requirement For Companies With Foreign Participation In Nigeria

Introduction

On the 5^th of December 2023, the Corporate Affairs Commission ("CAC") of Nigeria announced an increase in the minimum paid-up capital requirement for companies with foreign participation from N10,000,000 (Ten Million Naira) to N100,000,000 (One Hundred Million Naira). The notice was issued in line with Paragraph 3, page 5 of the Revised Handbook on Expatriate Quota Administration (2022) (the "Revised Expatriate Quota Handbook") released by the Federal Ministry of Interior on the 31st of August 2022. However, on the 8^th of December 2023 CAC, through one of its social media handles, announced that the initial notice should have been on issued capital rather than paid-up capital and an amended notice to this effect would be issued accordingly.

In view of enquiries made by our clients, we have deemed it necessary to in this newsletter explain the possible implication of CAC's notice on companies with foreign participation.

Q1. What was the share capital requirement for companies with foreign participation before the CAC notice?

Prior to the notice, the share capital requirement for the registration of a company with foreign participation was N10,000,000 (Ten Million Naira). Hence, at the point of incorporation with CAC, such companies must have a minimum issued share capital of the aforementioned value.

Q2. Are companies with foreign participation required to pay the CAC prescribed share capital at incorporation?

No, companies with foreign participation are not required by CAC to have paid fully for the shares at the point of incorporation. CAC simply requires such companies to issue shares worth the prescribed share capital at the point of incorporation.

Q3 What is the difference between issued share capital and paid-up share capital.

Issued share capital represents the total value of shares that a company has allotted to the shareholders and registered with the CAC while Paid-up share capital, on the other hand, specifically refers to the portion of the issued share capital for which payment has been made by the shareholders.

Q3. What is the consequence of the change in share capital requirement for companies with foreign participation?

The implication of an increase in the prescribed share capital is that the CAC filing fee and stamp duties will be calculated based on the prescribed share capital. As stated earlier the company will not be required to fully pay for the shares at the point of registration.

Q4. What is the relevance of the Revised Expatriate Quota Handbook on share capital requirements for companies with foreign participation?

As a condition for the grant of business permits to wholly foreign owned Nigerian companies and joint venture with foreign participation, the Revised Expatriate Quota Handbook requires that such companies have a minimum paid-up share capital of N100,000,000 (One Hundred Million Naira). Therefore, at the point where a company with foreign participation requires business permit and expatriate quota, the share capital required is a minimum of N100,000,000 (One Hundred Million Naira) paid-up share capital. The value of equipment or machinery imported into the country for the purpose of conducting the business of the company also forms part of the paid-up capital. Please see our newsletter on business permits and expatriate quota. The yet-to-be issued CAC notice seeks to reflect this increased capital requirement, emphasizing 'issued capital' rather than 'paid-up capital.'

Conclusion

In conclusion, we await the new notice on increase in issued capital by the CAC and it is hoped that the new directive would provide further clarity on the share capital requirements for companies with foreign participation in Nigeria.

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.