No doubt, the real estate sector in Nigeria is a very lucrative business to venture in. but establishing it requires a good understanding of how to navigate the legal and regulatory framework.
Legal Structure and Regulatory Requirements
In this comprehensive guide, you’ll learn about the legal structure and regulatory requirements you need to start a Prop-tech company in Nigeria.
We will break it down into these subtopics:
1. Company Formation and Registration
2. Protection of Trademarks
3. Special Control Unit Against Money Laundering (SCUML) Registration
4. Contracts for Your Prop-tech Company
Services Offered by a Prop-tech Company
Some of the services the prop-tech companies offer through online platforms are Property Listings so as to connect with real estate agents, providing Real Estate Crowdfunding Platforms that enable individuals to invest in real estate projects or properties collectively, providing Mortgage and Financing Services that assist with mortgage pre-approval and financing options for homebuyers, etc.
Company Formation and Registration Requirements
All companies must register their businesses. Failure to register would mean such a person is operating an unlawful business.
The organization that all companies must register with is the Corporate Affairs Commission (CAC) and it is a governmental agency saddled with the responsibility of registering business and non-governmental organizations.
A company can register either as a Limited Liability Company, Unlimited Company, or Company Limited By Guarantee (Ltd/Gte).
Also read: Understanding The Types Of Companies In Nigeria To Make The Best Choice in Business
However, 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.
A Prop-tech company must first meet the following requirements to be registered as a 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, it is advisable to have two 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 Prop-tech company in Nigeria is 10 million.
This ensures the company has sufficient capital to operate within the regulatory framework.
Having this share capital doesn’t mean that this 10 million naira 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 10 million minimum share capital is also one of the types of capital needed to start a business.
Also, it is 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 for permission to use the company name you desire. Then, the CAC informs you on whether the name is available or not if due processes are followed.
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. The particulars of the following:
- The directors;
- The shareholders;
- The 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 will be involved, a minimum of two directors will also 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
All Prop-tech Companies must register with the Special Control Unit Against Money Laundering.
The Economic and Financial Crimes Commission (EFCC) is the agency that oversees the SCUML.
One of the reasons for getting the SCUML certificate is because it is mandatory for all non designated financial institutions to register for a SCUML certificate; the Prop-tech company being one of such institutions.
Another reason is that it is necessary for opening a corporate bank account for the Prop-tech company.
A very much more important reason is that it helps protect the business’ account from being targeted or used 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 property includes intangible assets like ideas, designs and innovations that are protected by law from being copied, used, or profited from without permission.
In Nigeria, the primary forms of intellectual property protection are patents, copyrights and trademarks with trademarks being the most relevant to your company’s specific business needs, although I will also provide a brief explanation of the other two.
A trademark is the unique sign that distinguishes your company’s products or services from others. It could be a name, logo, or symbol.
Some products, for example, 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
Registering your trademark gives you the legal right to take legal action against anyone who wants to steal away your trademark.
The following are the requirements for registering your trademark:
– 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 Prop-tech company covered by the trademark
– Name of the owner of the company
– Contact details of the owner of the Prop-tech 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 Prop-tech 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 PROP-TECH COMPANY
Since the company will be involved in numerous contracts as a commercial company, it is important for the Prop-tech company to have contract documents readily available for its operations.
An important key note regarding contracts is that it must be legally valid.
For a contract to be valid, it must include certain necessary details.
Our legal experts ensure these details are included to protect your business and prevent losses.
Some of the documents required include the following:
- Terms and Conditions for Customer Services
A clearly defined terms and conditions for real estate services are crucial to manage customer expectations and protect your business from potential disputes.
This contract should detail the purchase process, allocation process, payment terms, cancellation policies, liability limitations, and customer responsibilities.
It includes clauses on property searches, valuations, pricing, changes and cancellations, refunds, insurance, and disclaimers about third-party service providers.
It also ensures customers acknowledge and accept these terms before confirming their registrations and service requests.
2. Employee contract of employment
There is a document that tells employees that are newly employed into the Prop-tech company and it is the employee contract of employment. It tells the employees 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
It is crucial for a Prop-tech company to have a document that outlines the company’s rules and regulations that the company and every staff of the company must follow.
The document outlines 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
It is crucial for a prop tech company to have a website term of use because of its technology involvement.
Since the company will make provisions for all real estate services 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 wrong order or incorrect data can be resolved.
5. Privacy Policy
A Prop-tech company will require a privacy policy since they will be collecting personal and sensitive data of customers.
So a privacy policy is like a set of rules that explain 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
Since Prop-tech companies will be accepting and managing customers’ funds, a refund policy is however essential for special circumstances.
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 service rendered.
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
Independent Contractor Agreements are like a special job contract.
It is for hiring people such as freelancers or temporary staffs such as accountants, tax auditors, website designers, social media managers, etc to perform their specific job.
In the agreement, 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
Clearly, a Prop-tech company will need a Service Level Agreement, or SLA. It is a bit 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.
9. Lease/Tenancy Agreement
With regard to the physical operational address of the prop-tech company, whether rented or leased property, it is important that there is a tenancy or lease agreements properly drafted for the prop-tech company.
Having this agreement ensures legal compliance and secures operational space.
It also outlines the responsibilities of both the prop-tech company and the owner of the property.
Are you in the process of 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
With all this knowledge provided in this article, I believe this is more than enough to prepare you for the legal needs of your new prop-tech company.
However, 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 Prop-tech company, you can click HERE to get started.
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