A professional who understands the capital market will make a lot of returns on the funds/portfolio management business but taking it a step further to register it requires that the legal and regulatory structures are in place.
Legal Structure and Regulatory Requirements
This comprehensive guide however will walk you through the legal structure and regulatory requirements for starting a Funds/Portfolio Management company in Nigeria.
We will specifically cover 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 Funds/Portfolio Management company
Services Offered by a Funds/Portfolio Management Company
Portfolio management companies are responsible for making decisions on what to buy or sell to help your money grow. They do this by constantly watching the financial markets and making smart choices based on research and experience.
Company Formation and Registration Requirements
Starting a Funds/Portfolio Management company in Nigeria without registration is illegal.
The CAC is a governmental agency saddled with the responsibility of registering business and non-governmental organizations.
There are 3 different types of companies that can be formed in Nigeria with the Corporate Affairs Commission. They include the Limited Liability Company (LLC), Unlimited Company, and the Company Limited by Guarantee (Ltd/Gte).
Also read: Understanding The Types Of Companies In Nigeria To Make The Best Choice in Business
For a company interested in making profits, the Limited Liability Company is the most popular choice and it will be our focus in this article. The reason is because it is the best form for a business and is profit oriented.
In Nigeria, a Funds/Portfolio Management company 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, but they must comply with the Nigerian Investment Promotion Commission (NIPC) regulations and might 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 Funds/Portfolio Management company in Nigeria is 50 million naira.
This ensures the company has sufficient capital to operate within the regulatory framework.
Where the law stipulates this amount of share capital, it doesn’t mean that the share capital is the total amount of capital that will be used 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, this 50 million minimum share capital is also one of the types of capital needed to start a business.
In addition, it is also a way of raising funds for the company in which the share capital must be completely 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 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 responsible for administrative tasks such as keeping and filing documents on behalf of the company. However, this requirement is mainly 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
Every Funds/Portfolio Management company is required to register with the Special Control Unit Against Money Laundering. The Economic and Financial Crimes Commission (EFCC) is the agency responsible for the registration 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.
An important reason for this registration is that it helps protect your corporate account from being targeted for money laundering.
Another reason is that it is a necessity for the opening of a corporate bank account for the Funds/Portfolio Management company.
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 Funds/Portfolio Management company covered by the trademark
– Name of the owner of the company
– Contact details of the owner of the Funds/Portfolio Management 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 Funds/Portfolio Management 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 FUNDS/PORTFOLIO MANAGEMENT COMPANY
As a Funds/Portfolio Management company owner, you need to know that your company is set up to sell both physical goods like food and intangible services like the hospitality service.
In addition, your Funds/Portfolio Management company will also enter 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 Portfolio Management
A well drafted terms and conditions for funds/portfolio management are crucial to manage customer expectations and protect your business from potential disputes.
This contract should detail the opening of account process, funding terms, cancellation policies, liability limitations, and customer responsibilities.
It includes clauses on funding, changes and cancellations, refunds, and disclaimers about third-party service providers.
It also ensures customers acknowledge and accept these terms before confirming opening their accounts.
2. Employee contract of employment
As a Funds/Portfolio Management company, 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 Funds/Portfolio Management 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.
3. 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 Funds/Portfolio Management 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.
4. Website Terms of Use
Funds/Portfolio Management companies definitely involve opening funds/portfolio accounts.
Where the company makes this provision available on 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 account management or unforeseen circumstances can be resolved.
5. 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.
6. Refund Policy
A Refund Policy is a necessity for Funds/Portfolio Management 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 their funds or portfolio management.
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.
7. Independent Contract Agreement
A Funds/Portfolio Management company 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.
8. Service Level Agreement
A Service Level Agreement is also important for a Funds/Portfolio Management company.
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.
9. Lease/Tenancy Agreement
If the Funds/Portfolio Management 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
Setting up a Funds/Portfolio Management company requires careful registration process and seeking legal help is the best thing you can do to get 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 Funds/Portfolio Management company, you can click HERE to get started.
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