Foreigners that start their businesses in their countries and extend them to Nigeria know how lucrative it is to render services to Nigerians. However, setting up a foreign company in Nigeria requires vast knowledge and understanding of the legal structure and regulatory requirements for setting it up.
Legal Structure and Regulatory Requirements
In this comprehensive guide, we’ll delve into the legal structure and regulatory requirements for setting up a foreign company in Nigeria.
We will explore the following subtopics:
1. Company Formation and Registration
2. Protection of Trademarks
3. Special Control Unit Against Money Laundering (SCUML) Registration
4. Contracts for Your Foreign Company
Services Offered by a Foreign Company
Foreign companies provide a wide range of services including technology and software development, financial services, e-commerce and online retail, healthcare and medical services, telecommunications, construction and engineering, etc
These services are usually provided through various channels such as direct investment, joint ventures or partnering with local businesses.
Company formation and Registration Requirements
Operating an unregistered business in Nigeria is illegal. For any successful business to operate, it must first register with the Corporate Affairs Commission (CAC).
The CAC is a governmental agency that oversees business registrations in Nigeria.
They offer 3 different types of companies namely Limited Liability Company, Unlimited Company, and the Company Limited by Guarantee with the Limited Liability Company being the most popular choice for profit oriented businesses.
Also Read: Understanding The Types Of Companies In Nigeria To Make The Best Choice in Business
For the purpose of this article, the Limited Liability Company will be our focus.
To start with, a foreign company must first meet the following requirements to be registered as a company.
- Shareholders
– Minimum Number: At least two shareholders are required.
– Who Can Be a Shareholder: Shareholders can be individuals or corporate entities. Nigerian citizens and foreigners can be shareholders.
Foreign companies must comply with the Nigerian Investment Promotion Commission (NIPC) regulations and its foreign shareholders might need to obtain a business and residence permit.
Registration with NIPC provides protection for foreign investments, makes room for importation of foreign capital into the country, ensure regulatory compliance.
The reason for this is because without the foreigners and the foreign company getting registered with the regulatory agencies and getting necessary permits, it would be illegal to do business in Nigeria without being registered.
2. Directors:
A foreign company requires a minimum of two directors for a private limited company.
– Who can be a Director: According to the 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 foreign company in Nigeria is 100 million naira.
This ensures the company has sufficient capital to operate within the regulatory framework.
Actually, the company having this minimum share capital does not mean that is that is needed to start the business. Just like cash at hand, machineries and human resources are some of the types of capital required to start the business, the share capital is also one of the types of capital that the company requires and must be allocated to all the shareholders at the point of registration.
4. Company Name
Search and reserve a unique company name with the Corporate Affairs Commission (CAC).
To search and reserve a name means that you apply to the CAC to say you want to use the name for a business company name. After following the due process, CAC then informs you on whether you can go ahead to use the name 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
Importance of SCUML Registration
Every foreign Company doing business in Nigeria is mandated to register with the Special Control Unit Against Money Laundering (SCUML).
The Economic and Financial Crimes Commission (EFCC) is however responsible for the regulation of the SCUML.
The reason for getting the SCUML certificate is because it is mandatory for all non designated financial institutions to register for a SCUML certificate.
Another reason is that it is necessary for opening a corporate bank account for the foreign company.
A very much more important reason is that it helps protect your business 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 properties created from your mind and which the law helps to protect like a special shield from those who may want to copy it.
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
When you register 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 foreign company covered by the trademark
– Name of the owner of the company
– Contact details of the owner of the foreign 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 foreign 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 FOREIGN COMPANY
It is important that all commercial companies have contract documents readily available for their operations most especially for foreign companies doing business in Nigeria. This is as a result of their commercial nature which mostly involves different countries.
In addition, the contract agreement must be well drafted for it to be legally valid. However, for a contract to be valid, it must include certain necessary details.
It must be carefully prepared to prevent losses and safeguard your company’s properties and investments.
Some of the documents required include the following:
- Terms and Conditions for Foreign Business Services
It is advisable that the foreign company depending on their business services get clearly defined terms and conditions. For any foreign company, it is crucial to manage customer expectations and protect your business from potential disputes.
This contract should detail whatever process of service the company will offer. Since it is involved in commercial transaction, it must also include the payment terms, cancellation policies, liability limitations, and customer responsibilities.
It should include clauses on pricing, changes and cancellations, refunds, shipping insurance, and disclaimers about third-party service providers.
Having terms and conditions also ensures customers acknowledge and accept these terms before confirming their bookings.
- Employees contract of employment
As a foreign company, it is important for the company to a contract that tells employees that are newly employed into the company including foreign and local employees what their job 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
Every company must have their rules and regulations that the company and every staff of the company must follow most especially and a foreign company is not exempted.
The document should include the company’s work rules, the code of conduct, safety guidelines, and procedures for conflict resolution.
These rules and regulations must be listed in a book that will be readily available to anybody joining the company as a staff.
- Website Terms of Use
Foreign companies that use website and mobile or web applications for their commercial transactions with customers must prepare a well drafted website term of use for their company. This website term of use are the rules put in place for your customers while using the company’s website.
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 can be resolved.
It’ is also important to make sure you have these because of the customers that you don’t see.
- Privacy Policy
Foreign companies that own websites require a privacy policy too.
A Privacy Policy is a set of rules that explain how your customer’s information is handled when they use your company’s website or app.
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
When dealing with commercial transactions, a refund policy is a necessary requirement for the foreign company.
A Refund Policy 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.
You need a refunds policy drafted so that there is a fair win for both you and your customers when the need for a refund arises.
- Independent Contract Agreement
Aside employee contract f employment, An Independent Contractor Agreement is also necessary.
This one 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. Think of it as a job agreement for special, not full-time, work.
- Service Level Agreement
A foreign company also needs a Service Level Agreement. It is a like a promise between a company and its customers.
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
Regardless of whether your foreign company operates from a rented or leased space, it is crucial to have a well drafted tenancy or lease agreement in place.
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
Now you can begin to put that vision of a Multinational CEO into reality by getting started with the setting up of the foreign company in Nigeria wherever you are around the world.
However, the crucial part of setting it up is seeking legal help to getting the legal foundation of the company 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 foreign company, all you need is to take the first step by clicking HERE to get started right away, and we’ll guide you every step of the way.
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