The Corporate Affairs Commission (CAC) has issued a notice that Companies with foreign participation must have a minimum of N100,000,000 (One Hundred Million Naira) paid-up capital for it to be registered in Nigeria. This directive underscores the necessity for a substantial financial commitment from foreign businesses seeking entry into the Nigerian market.
Failure to comply with the new requirement hampers the incorporation process, as the CAC will not process applications that fall short of the stipulated paid-up capital. Additionally, existing companies with foreign participation are urged to align with this new directive within a stipulated six-month period. Non-compliance could lead to the commencement of compulsory winding-up procedures under Section 571 (e) of the Companies and Allied Matters Act 2020. Consequently, this new development affects every company with foreign participation in Nigeria.
While the minimum share capital requirement reflects a commitment to the Nigerian market, it can pose challenges, particularly for smaller foreign companies. Raising such capital may necessitate strategic financial planning or seeking partnerships to meet regulatory standards.
However, alternative strategies exist, some of which are:
- The guidelines do not say that the foreign partner or non-resident alone must be issued the entire NGN100,000,000 (One Hundred Million Naira) share capital. A foreign non-resident may thus own only a portion of the shares and only that portion will be required to be inflowed into Nigeria (with CCI as evidence) to satisfy the requirement for a business permit.
- The legislation doesn’t consider indirect involvement. As a result, one could designate oneself (in the case of being a citizen) as the shareholder and establish a trust agreement where the foreign company becomes the beneficiary. This action could potentially exempt your enterprise, owned by a foreign entity, from the repercussions of the recent law, as it would be under Nigerian ownership.
While this new development may pose initial challenges, it underscores the seriousness and dedication of foreign companies toward operating in Nigeria. Strategic planning, diligent adherence to legal requirements, and a comprehensive understanding of regulatory landscapes are essential for foreign entities aspiring to thrive in Nigeria’s vibrant business ecosystem.
