New Measures Enhance Disclosure and Ease Company Registrations

Introduction

As part of the Investment Climate Reform Programme, which is aimed at reducing the cost of doing business in Nigeria and improving Nigeria’s competitiveness rating as a foreign direct investment destination, the Corporate Affairs Commission (CAC) and the Nigeria Investment Promotion Commission (NIPC) have recently made changes that impact on the registration of business entities in Nigeria.

The NIPC was set up by the Nigeria Investment Promotion Commission Act (16/1995) to promote, encourage and coordinate investment in Nigeria. Section 4 of the act mandates that the NIPC register and keep records of all enterprises with foreign equity participation. Accordingly, every company with foreign participation must register with the NIPC after incorporation at the CAC before it can commence business.

In a bid to encourage new and existing businesses with foreign participation to register their presence, on February 11 2012 the NIPC issued a statement notifying the general public and would-be foreign investors that the minister of trade and investment had approved a reduction in the fee to register a company with foreign participation with the NIPC from N50,000 to N15,000 (around $90).

Similarly, pursuant to the powers granted in Section 16 of the Companies and Allied Matters Act 2004, the CAC, which is the registrar of companies, published the Companies Regulation 2012, which was approved by the minister. The regulations, which came into effect on January 1 2013, cover changes relating to the CAC’s pre and post-incorporation processes. The preface to the regulations also indicates that the changes were made with a view to ensuring that the CAC’s processes and procedures are in line with global best practice, and that pre-incorporation documentation meets the ‘know your customer’ principles. The key changes are as follows:

  • Promoters (ie, initial directors and/or subscribers) can now process the registration of limited liability companies directly with the CAC.
  • Documents delivered in electronic form or by courier will now be accepted (dispensing with the requirement that documents be delivered physically).
  • Newly designed registration and post-incorporation forms that require additional know-your-customer information are now in use.
  • Filing fees for some services have been increased and stiffer penalties introduced for late filing to encourage the timely filing of statutory documents and returns.

Practical implications

The NIPC fee reduction means that companies with foreign equity participation now pay a reduced registration fee to the NIPC. However, this is merely a start, as such companies still have other post-incorporation costs in respect of business permits and expatriate quota to deal with.

Hitherto, only accredited professionals were allowed to register limited liability companies with the CAC. Although proprietors of ordinary businesses (ie, unincorporated partnerships, firms and sole proprietorships) could register themselves, unregistered agents and freelancers also had free rein at the CAC, which led to disorderly conduct, cases of irregularly compiled documentation and allegations of underhand practices.

The recent changes have effectively brought Nigeria into the realm of global business, where interested persons can approach the CAC to set up limited liability companies without the need to procure the services of an agent, professional or otherwise. In addition, the Companies Regulation now allows the submission of electronic documents accompanied by evidence of payment of the requisite fee; meaning that e- transacting with the CAC is now possible.

Although some professionals have expressed the opinion that the Companies Regulation will have the effect of taking business away from them, for law firms that regularly visit the CAC to carry out instructions for their clients this is a welcome development, as the changes mean that there will be more order at the CAC, and promoters can decide between undertaking the incorporation process themselves or procuring the services of a professional.

With the new forms, subscribers and directors of companies must now submit passport photographs and other recognised forms of identification (ie, the information page of a passport, a national identity card or a driver’s licence) for registration and subsequent post-registration applications. This should provide the much-needed disclosure, act as a database and reduce the anonymity associated with promoters of limited liability companies who may otherwise intend to engage in nefarious activities.

Comment

These changes mean that company registration costs will be reduced as promoters (initial shareholders and directors) are now allowed to carry out transactions at the CAC independent of professional advisers. Ostensibly, this will save promoters the often- begrudged additional cost of professional fees. However, both local and foreign promoters will still require the input of professional parties (ie, lawyers, chartered secretaries or accountants) with respect to requirements specific to their areas of investment (ie, qualification and compliance with local content requirements and regulatory requirements).

Moreover, there is still a requirement for a solicitor to confirm compliance with the law in respect of the proposed incorporation by providing a sworn statutory declaration of compliance in accordance with Section 35(3) and the proviso to Section 61 of the Companies and Allied Matters Act. Further, in addition to requiring the submission of passport photographs and other recognised forms of identification, the Companies Regulation requires applicants’ passport photos to be certified by a notary public, magistrate or commissioner for oaths before any registration. Thus, while the changes have removed the professional fee barrier to registering business entities in Nigeria, professionals and other parties still have a role to play.

In addition, the NIPC fee reduction is a positive step towards dismantling perceived entry barriers to trading in Nigeria. However, further improvements of the processes and procedures are expected in order to enhance the ability of the NIPC’s One-Stop Investment Centre to deliver on its 24-hour registration timeframe and ensure speedy approval of business permits and expatriate quotas.

Author: Bukola Iji

For further information on this topic please contact Bukola Iji at SPA Ajibade & Co by telephone (+234 1 472 9890), fax (+234 1 280 0987).

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