The hotel business in Nigeria is a very profitable one. However, establishing it as a company requires good understanding of the legal and regulatory structures.
Legal Structure and Regulatory Requirements
In this comprehensive guide, we’ll walk you through the legal structure and regulatory requirements for starting a hotel business as a company in Nigeria.
We will specifically discuss the following:
1. Company Formation and Registration
2. Protection of Trademarks
3. Special Control Unit Against Money Laundering (SCUML) Registration
4. Contracts for Your hotel business
Services Offered by a Hotel Business
A hotel business provides the services of letting out a guest room, meeting rooms, providing food or beverages, providing banquet halls, spa services, etc.
These services help provide a comfortable and safe place for customers and business enthusiasts to stay, reduce stress and unwind.
Company formation and Registration Requirements
Starting a company in Nigeria without registration is illegal. It must first of all be registered with the Corporate Affairs Commission (CAC).
The CAC is the governmental agency saddled with the responsibility of registering businesses in Nigeria.
It offers 3 company options. They include the Limited Liability Company, Unlimited Company, and the Company Limited by Guarantee.
Amongst these 3, the Limited Liability Company is the most popular. It is equally the best choice for any business interested in making profits because it is profit oriented.
Also Read: Understanding The Types Of Companies In Nigeria To Make The Best Choice in Business
In Nigeria, a hotel business must first meet the following requirements to be registered as a Limited Liability Company.
- Shareholders
– Minimum Number: At least one shareholder is required.
– Who Can Be a Shareholder: Shareholders can be individuals or corporate entities. Nigerian citizens and residents can be shareholders.
Foreigners can also be shareholders. However they have special requirements to comply with. They must comply with the Nigerian Investment Promotion Commission (NIPC) regulations. They will also need to obtain a business and residence permit.
2. Directors:
A minimum of one director is required for a private limited company. However, having at least two directors is recommended for better management and compliance.
– Who can be a Director: According to Companies and Allied Matters Act (CAMA) which is the law governing company operations in Nigeria, a person qualified to be a director of the company must:
– Be above 18 years but not older than 70 years.
– Be a person of sound mind (not a mentally unstable person)
– Must not be a person declared by the bank to be a debtor.
– Not be disqualified by a High Court from being a director.
– Directors should possess relevant experience and qualifications to manage the company effectively.
3. Authorized Share Capital
The minimum authorized share capital for a Hotel business company in Nigeria is 10 million naira.
This ensures the company has sufficient capital to operate within the regulatory framework.
This share capital is not the total amount of capital used to start the business. Like we have cash at hand, machineries and human resources as some of the types of capital required for starting a business, the share capital is also one of the types of capital a company must have.
In this case, this minimum share capital must be completely allocated to all the shareholders at the point of registration and they can pay for these shares over time.
4. Company Name
Search and reserve a unique company name with the Corporate Affairs Commission (CAC).
To search and reserve a name means applying to the CAC for permission to use a particular name as the company name. If the due process is followed, the CAC informs you on whether the name is available or not.
5. Registered Office Address:
Provide a physical address for the company’s operations in Nigeria.
6. Memorandum and Articles of Association (MEMART): Drafted documents outlining the company’s objectives, regulations, and operational guidelines.
7. Provide the particulars of the following:
- The directors;
- Shareholders;
- Company Secretary: The company secretary is the person responsible for administrative tasks such as keeping and filing documents on behalf of the company. However, this requirement is optional.
8. Filing Fees: Pay the required CAC filing and stamp duty fees and submit proof of payment.
9. Identification Details Needed:
For Directors and Shareholders:
– Full name
– Date of birth
– Gender
– Phone number
– Email address
– Residential address
– Means of identification (International Passport, National ID, Voter’s Card, or Driver’s License)
2. Company Secretary (if applicable):
– Name and address
– RC number (if a corporate entity)
– Means of identification
Please note that only one person can register a company and act as both director and shareholder where there are no foreigners involved in the creation of the company.
Where foreigners are involved, a minimum of two directors will be required. Where the shareholders are individual foreigners, a minimum of two persons are required to be shareholders for the company.
Importance of SCUML Registration
The hotel business Company is mandated to register with the Special Control Unit Against Money Laundering of The Economic and Financial Crimes Commission (EFCC).
The EFCC is the agency responsible for the registration of the SCUML.
The reason for obtaining the SCUML certificate is because it is mandatory for all non designated financial institutions to register for a SCUML certificate with the hotel business being one of such businesses.
Another reason is that it is a necessity for the opening of a corporate bank account for the hotel business.
It also helps protect your corporate account from being targeted for money laundering.
The requirements for SCUML registration include:
– Certificate of Incorporation
– Memorandum and Articles of Association
– Form CAC 1.1 (or CAC 2 and CAC 7 for older registrations)
– Tax Identification Number (TIN)
– BVN, bank name, and account number
INTELLECTUAL PROPERTY PROTECTION
Intellectual properties are intangible properties or assets created from your mind which the law protects.
In Nigeria, there are three main types: patents, copyrights, and trademarks. However for your business, trademarks are the most important.
A trademark is a unique sign that shows your company’s products or services are different from others. It could be a name, logo, or symbol.
For instance, some products are known by their trade names such as like Coca-Cola or Apple or Mercedes or Toyota.
In fact, their names and logos are usually almost immediately recognizable.
A Certificate of Registration is what is usually given after successful registration to prove that the trademark belongs to you.
Patents protect inventions while Copyrights protect literary and artistic works.
Requirements for Trademark Registration
Upon the registration of your trademark, you have the legal right to take legal action against anyone who wants to steal away your trademark.
The requirements for registering your trademark include:
– Any of the marks which you intend to register (name, logo, image, or symbol) or a combination of these.
– A description of the services of the hotel business company covered by the trademark
– Name of the owner of the company
– Contact details of the owner of the hotel business company
– Power of Attorney appointing an agent to do the registration (an accredited agent/lawyer may help to prepare the power of attorney)
– Upon registration, the hotel business company gets a trademark certificate which is valid for 7 years and can be renewed.
Also Read: What Every Business Owner in Nigeria Should Know About Intellectual Property Rights
CONTRACTS FOR YOUR HOTEL BUSINESS COMPANY
As a hotel business company owner, you will agree with me that your company is set up to sell both physical goods like food and intangible services like the hospitality service.
It is therefore necessary for your hotel company to enter into a series of contracts that must be valid.
A contract is a legally binding agreement between two or more parties and for it to be valid, your lawyer must make sure these contract documents contain the necessary features for it to be valid.
When the company purchases a property or relates with the public, the necessary contracts must be executed so that the company’s hard-earned resources and integrity don’t go down the drain.
Some of the documents required include the following:
- Terms and Conditions for Lodging and Booking
A well drafted terms and conditions for booking rooms, suites or conference halls are crucial to manage customer expectations and protect your business from potential disputes.
This contract should detail the booking process, payment terms, cancellation policies, liability limitations, and customer responsibilities.
It includes clauses on pricing, changes and cancellations, refunds, lodging and booking insurance, and disclaimers about third-party service providers.
It also ensures customers acknowledge and accept these terms before confirming their bookings.
- Employee contract of employment
As a hotel business, the company will require a lot of employees.
It is then necessary to have a well drafted employee contract readily available for your employees.
An employee contract of employment is a document that tells employees that are newly employed into the hotel business company, what their individual job description is, the salary, the rules to be followed while working with the company and the rules for leaving or resigning from the company.
- Company policies and employees handbook
In addition to employee contract of employment, the company must have their rules and regulations that the company and every staff of the hotel company must follow.
The document usually includes the company’s work rules, the code of conduct, safety guidelines, and procedures for conflict resolution.
These rules and regulations provide a structured work environment for the staff thereby contributing to a harmonious workplace, boosting employee morale and their overall productivity.
- Website Terms of Use
Hotel companies definitely involve taking bookings for lodging and holding conferences.
Where the company accepts these bookings via a website or application, it is necessary for the company to have well drafted website terms of use.
They explain what your customers can and can’t do when they visit the site.
They cover things like their rights, the website’s rights, and how disputes arising from hotel booking mixups or unforeseen circumstances can be resolved.
- Privacy Policy
A Privacy Policy is a set of rules that explains how your customer’s information is handled when they use your company’s website or applications.
The documents usually includes details about how your customer’s information are collected, used, the security measures put in place and the procedures for getting access to the information or deleting the information.
You need these agreements to keep your customers rest assured that their personal information is safe with you and this brings about trust and integrity for the company.
- Refund Policy
A Refund Policy is a necessity for hotel companies because of the nature of the business operation.
It is a set of rules that say when and how your customers can get their money back if they’re not happy with a purchase.
It usually includes details like the conditions for refund, time frame for the refund, their eligibility criteria and any other special requirement for a refund.
It is needed to create a fair win for both you and your customers when the need for a refund arises.
- Independent Contract Agreement
A hotel business also requires an Independent Contractor Agreement. It is like a special job contract.
It’s for when the company hires people such as freelancers or temporary staffs to do a specific job.
You agree on things like what they’ll do, how much they’ll be paid, and when it should be done.
It’s important because it shows that they’re not a full-time employee, so they might have different rights and responsibilities.
- Service Level Agreement
A Service Level Agreement is also important for a hotel business.
It usually includes the services rendered, the response time, performance metrics and procedures for dispute resolution.
It’s like a deal to make sure your customers are happy with the service they’re getting.
- Lease/Tenancy Agreement
If the hotel company is using a rented or leased space, it is essential for the company to have a water tight tenancy or lease agreement.
Having this agreement ensures legal compliance and secures operational space.
It also clarifies the responsibilities for both your company and the owner of the property.
Are you buying your own property? Ensure to follow the due process to avoid getting scammed, you can watch this video here for more.
Also Read: 7 New Strategies For Lagos Landlords To Avoid Hassles in Real Estate Transactions
CONCLUSION
Luxurious hotels that have been in existence for a long time did not perform magic to exist and stay in business over a period of time. The owners of these hotels did their assignment of setting up their hotel business well, sought the right Professional advice and that has been what has been helping them stay in business.
Seeking legal help is crucial to getting the legal foundation of your business right.
We offer our services to sophisticated entrepreneurs who are particular about getting it right in the legal foundation of their business right from the get go.
If you need our team to work with you to set up a hotel company, you can click HERE to get started.
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