The Corporate Affairs Commission (CAC) is the regulatory agency responsible for registering and regulating companies in Nigeria. The removal of directors in Nigeria is governed by the Companies and Allied Matters Act (CAMA) which provides the legal framework for the appointment and removal of directors in Nigerian companies.
According to CAMA, directors can be removed by:
1. RESIGNATION: A director may resign from their position at any time by giving notice in writing to the company.
2. RETIREMENT: Directors are required to retire at the annual general meeting of the company and may be re-elected if they wish to continue serving on the board.
3. TERMINATION BY THE COMPANY: The company may remove a director by passing a resolution to that effect at a general meeting of the shareholders.
4. TERMINATION BY THE CAC: The CAC may remove a director if they are found to have acted in a manner that is prejudicial to the interests of the company or if they have been declared bankrupt.
It is important to note that the removal of directors must be done in accordance with the provisions of CAMA and any relevant regulations. The CAC may investigate and enforce compliance with these provisions to ensure the proper removal of directors.
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INTRODUCTION: In Nigeria, partnerships are governed by the Companies and Allied Matters Act (CAMA) 2020. Partnerships in Nigeria can be classified into three types: general partnerships, limited partnerships, and limited liability partnerships.
GENERAL PARTNERSHIPS (GPs), are formed by two or more individuals who share the profits and liabilities of the partnership. The partners are jointly and severally liable for all the debts and obligations of the partnership, and each partner has the right to take part in the management and administration of the partnership.
LIMITED PARTNERSHIPS(LPs), on the other hand, consist of one or more general partners and one or more limited partners. The general partners are liable for all the debts and obligations of the partnership. In contrast, the liability of the limited partners is limited to the amount of capital they have contributed to the partnership. Limited partners do not have the right to participate in the partnership’s management and administration.
LIMITED LIABILITY PARTNERSHIPS(LLPs) are similar to limited partnerships, but the liability of all partners is limited to their capital contributions. This type of partnership is suitable for professional firms such as law firms, accounting firms, and consulting firms. An LLP may acquire, own, hold and dispose of property, as well as bring and defend actions in its own name. A partner in an LLP could be a Company. Each LLP must have a minimum of two authorized partners, at least one of whom must be a Nigerian national. LLPs are managed by a membership agreement or a partnership agreement and do not have any share capital.
To register a partnership in Nigeria, the appropriate forms and fees must be submitted to the Corporate Affairs Commission (CAC). Additionally, the partnership must have at least two partners and must be registered with the CAC.
It is strongly recommended that partners enter into a partnership agreement to govern the relationship between themselves and the partnership. It is also worth noting that Partnership is not taxed as an entity, but the partners are taxed on their own income.
In conclusion, understanding the nuances of the different types of partnerships and the registration process is crucial in ensuring the smooth running of the partnership business in Nigeria. It is advisable to seek legal advice before entering into a partnership agreement or registering a partnership with the CAC.
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Starting a new business is an exciting and challenging endeavor, but it can also be risky. Legal and tax mistakes are common among startups and can lead to significant financial losses and legal trouble. In this article, we will discuss five common legal and tax mistakes made by startups and how to avoid them.
1. NOT INCORPORATING: One common mistake made by startups is failing to incorporate their business, which can lead to personal liability for the company’s debts and legal issues.
2. NOT PROTECTING INTELLECTUAL PROPERTY: Startups often overlook the importance of protecting their intellectual property, such as trademarks and patents, which can lead to legal disputes and financial losses.
3. NOT KEEPING ACCURATE FINANCIAL RECORDS: Many startups fail to keep accurate financial records, which can lead to legal issues and difficulty in obtaining funding.
4. NO UNDERSTANDING TAX LAWS AND DUE DATES: Startups often make the mistake of not understanding the tax laws and regulations that apply to their business, which can lead to penalties and fines.
5. NOT HAVING A CLEAR EQUITY SPLIT AMONG FOUNDERS: Startups often make the mistake of not having a clear equity split among the founders, which can lead to disagreements and legal issues. It is important to have a clear agreement in place from the beginning.
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A convertible note is a type of debt financing that allows investors to loan money to a company in exchange for the option to convert their loan into equity at a later date. This type of funding is often used by early-stage companies that have not yet reached a point where they can issue traditional equity.
Here are five features of convertible notes:
1. Convertible notes have a maturity date: The notes are typically issued with a maturity date of one to three years from the date of issuance. At the maturity date, the company will either have to pay back the loan or convert the notes into equity.
2. Convertible notes have a conversion price: The conversion price is the price at which the notes will convert into equity. This price is typically set at a discount to the price of future equity rounds.
3. Convertible notes accrue interest: The notes accrue interest at a rate that is typically lower than the rate for a traditional loan.
4. Convertible notes have a cap: A cap is the maximum valuation at which the notes can convert into equity. This cap is typically set at a higher valuation than the current valuation of the company.
5. Convertible notes are typically used by early-stage companies: Convertible notes are often used by companies that are in their early stages of development and have not yet reached a point where they can issue traditional equity.
It’s worth noting that the terms of convertible notes may vary depending on the company’s situation, the stage of the company, and the investors.
A hypothetical scenario where a convertible note is used.
A startup company, called “ABC Inc.” is looking for $500,000 in funding to help them develop their product and expand their team. They decide to issue a convertible note to a group of angel investors.
The maturity date of the note is set at 18 months from the date of issuance.
The conversion price is set at a 20% discount to the price of the next equity round.
The interest rate on the note is set at 5% per year.
The cap is set at $5 million, which is higher than the current valuation of the company.
The angel investors loan $500,000 to ABC Inc. in exchange for the convertible notes. The company uses the money to develop their product and expand their team.
After 18 months, the company has made significant progress and is ready to raise more funding. They hold a Series A round and are able to secure a valuation of $10 million. At this point, the angel investors have the option to convert their notes into equity at a 20% discount to the Series A price. So, the conversion price would be $8 million (10 million * 0.8). Since the cap is set at $5 million, the angel investors can convert their notes into equity at $5 million.
It’s important to note that this is a simplified example and in reality the terms of convertible notes can be more complex depending on the company’s situation, the stage of the company, and the investors.
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A certificate of Capital Importation (CCI) is a document issued by the Central Bank of Nigeria (CBN) to foreign investors in Nigeria as proof of their capital investment in the country. The CCI serves as a key tool for foreign investors to access various benefits and incentives the Nigerian government provides to encourage foreign direct investment (FDI) in the country. In September 2017, the CBN introduced the electronic CCI (e-CCI) which replaced the paper CCI. In this article, we will discuss the relevance of the CCI to foreign investors in Nigeria.
The CCI serves as proof of investment for foreign investors, providing them with a legal document that confirms their Investment in Nigeria. This can be used as evidence of investment for various purposes, such as opening a bank account, obtaining a loan, or applying for a Nigerian visa. Additionally, the CCI is a requirement for foreign investors to access various incentives and benefits provided by the Nigerian government, such as tax holidays and duty waivers.
One of the main benefits of the CCI is that it enables foreign investors to access the Nigerian foreign exchange market. The CCI is required to open and operate a foreign currency account in Nigeria, which allows foreign investors to transact in foreign currency without restrictions. This is particularly important for foreign investors who need to make payments or receive income in foreign currency.
The CCI also enables foreign investors to repatriate their capital and profits out of Nigeria. The Nigerian government has put in place strict regulations to ensure that capital is not moved out of the country illegally. The CCI serves as proof of legal capital importation and is required to process the remittance of capital and profits out of Nigeria.
Another relevance of the CCI is that it helps track Nigeria’s foreign investment. The CBN issued the CCI and kept it in the bank’s records, providing a clear picture of the amount of foreign investment in the country. This helps the Nigerian government to monitor and track the inflow of foreign investment and make necessary adjustments to attract more foreign investment.
In conclusion, the CCI is a vital document for foreign investors in Nigeria as it enables them to access various benefits and incentives provided by the Nigerian government and enables them to transact in foreign currency without restrictions, repatriate their capital and profits, and track the inflow of foreign investment in the country. Obtaining a CCI is a key step for foreign investors looking to invest in Nigeria and should be done as soon as possible after the investment is made.
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The Corporate Affairs Commission (CAC) of Nigeria is a government agency responsible for the registration and regulation of companies and businesses in Nigeria. It is tasked with the responsibility of regulating the formation, registration, incorporation and management of companies and businesses in Nigeria. Its aim is to ensure compliance with the laws and regulations that govern the formation, registration and operation of companies and businesses in the country. The commission also maintains a database of registered companies and businesses and makes this information available to the public. The CAC also has the power to deregister companies that do not comply with the laws and regulations or that have become dormant.
There are several benefits of registering a company with the Corporate Affairs Commission (CAC) in Nigeria, including:
1. LEGAL RECOGNITION: A registered company is legally recognized as a separate entity from its owners and has the ability to enter into contracts, borrow money, and sue or be sued in its own name.
2. LIMITED LIABILITY: Shareholders of a registered company are typically only liable for the debts of the company to the extent of their unpaid share capital.
3. CREDIBILITY: Registering a company with the CAC can enhance the company’s credibility and reputation, as it demonstrates a commitment to compliance with legal and regulatory requirements.
4. ACCESS TO FUNDING: Registering a company with the CAC may be a requirement for accessing certain forms of funding, such as bank loans or venture capital.
5. EASE OF DOING BUSINESS: Registering a company with the CAC can make it easier to do business, as it can streamline the process of opening bank accounts, applying for permits and licenses, and other administrative tasks.
In conclusion, registering a company with the Corporate Affairs Commission (CAC) in Nigeria offers several benefits that can help a business to operate legally and efficiently. These benefits include legal recognition, limited liability, increased credibility, access to funding, and ease of doing business. By registering with the CAC, a company is demonstrating its commitment to compliance with legal and regulatory requirements, which can enhance its reputation and make it easier to do business. Overall, registering with the CAC is an important step for any business looking to establish itself and grow in Nigeria.
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Yes, it is possible for a foreigner to register an NGO in Nigeria, but they must first obtain a Combined Expatriate Residents Permit and Aliens Card (CERPAC) before registering the NGO. It is also recommended to use local trustees for the registration process. The registration of an NGO in Nigeria is regulated by the Corporate Affairs Commission (CAC). The process includes conducting a name and availability search, completing and submitting incorporation application forms, publicizing intentions of registering in three newspapers, and submitting required documents to the CAC. The entire process can take around 2 months to complete.
Non-governmental organizations (NGOs) in Nigeria are independent organizations registered by the government but operate outside government control. They are typically non-profit and focus on a variety of social and economic issues, such as poverty reduction, education, healthcare, and human rights. Some well-known NGOs in Nigeria include ActionAid, the Nigerian Red Cross Society, and the International Committee of the Red Cross.
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1.1 The Nigerian Investment Promotion Commission (NIPC) Act 16 of 1995 established the Nigerian Investment Promotion Commission established by law to encourage, promote, and coordinate all investments in Nigeria. This act also regulates the participation of foreign businesses in the country.
1.2 The NIPC Act allows foreign nationals to own up to 100% equity and invest in any business in Nigeria except those indicated on the negative list as defined by section 31 of the Act such as the production of arms, ammunition, narcotics and related substances.
1.3 Section 20 of the NIPC Act requires all enterprises in which foreign participation is permitted to apply to the Commission for business registration.
2.1 To apply for NIPC Business Registration Certificate, the following documents are required:
2.1.1 Duly completed NIPC Form I;
2.1.2 Memorandum & Articles of Association;
2.1.3 Certificate of Incorporation;
2.1.4 CAC Form 1.1 (or CAC Forms CO2 and CO7 for old companies);
2.1.5 Power of Attorney/ Letter of Authority (where applicable);
2.1.6 Approved Remita payment receipt of N15,000.00 only (Non- refundable)
2.1.7 NIPC payment receipt
3.0 PROCEDURE FOR PROCESSING
3.1 The NIPC Business Registration takes 24 hours to process once all required documents are submitted.
3.1.1 Applicant downloads NIPC Form 1 from the website at https://www.nipc.gov.ng;
3.1.2 Applicant pays a non-refundable processing fee of N15,000.00 only, via Remita online portal at www.remita.net;
3.1.3 Applicant submits all required documents (see 1.4 above) at the One Stop Investment Centre in NIPC or scanned copies sent to firstname.lastname@example.org;
3.1.4 NIPC Business Registration Certificate issued to the applicant.
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The idea of launching a franchise in Nigeria might become easy but it is not easy and simple to launch one. The concept of establishing a franchise in Nigeria can be abused in some instances, and this is why it calls for massive cooperation with the franchisor and franchises. As a result, this could be the only way such a franchise could thrive in the Nigerian business industry.
What is the Legal Definition of a Franchise?
It should be noted that there are laws relating to franchises in Nigeria. This also includes the legal definition. However, the franchise is defined by the Nigerian International Franchising Association as a business arrangement or setting where the franchisor grants the franchise operator the right to make distribution of certain products or services in a specific way or sequence, at a particular location and period. As a result of this service, the franchisee pays the franchisor estimated fees and royalties.
As far as Nigeria is concerned, there are several franchises ranging from local and international. These include; Mr. Biggs, Dominoes, Chicken Republic, Pizza Hut, Shoprite, McDonald’s, etc. For the sake of this article, you will be given a brief guide on how to start a franchise in Nigeria, as well as the laws regulating the offer and sale of franchises.
Laws Regulating The Offer and Sale of Franchises?
As mentioned previously, there is no Nigerian law that regulates the offer and sale of franchises. However, some enabling statutes seem to play a crucial role in regulating the transfer of foreign technology to Nigeria. Therefore, this includes the National Office for Technology Acquisition and Promotion Act, stated in Chapter N62, Laws of the Federation of Nigeria, 2004. Note that where there is the involvement of the transfer of technology, then there is a franchise arrangement, which is regulated by the provisions of the NOTAP Act.
A Step-By-Step Guide on How To Start A Franchise in Nigeria
Firstly, to start a franchise in Nigeria, business registration with the Corporate Affairs Commission must be compulsory. As a result of this The Companies and Allied Matters Act, 2020 Provides that whoever wants to create or establish a business in Nigeria must first register their entity for whatever purpose they would want to run and operate such business.
In a similar vein, there are circumstances where the business owners are not nationals but foreigners. As a result of this, the Immigration Act 2015 and the Nigeria Investment Promotion Commission Act provide that every foreigner must register their business with the Nigeria Investment Promotion Commission and must also obtain a business permit to effectively run their business within Nigeria under the supervision of the municipal laws.
On the other hand, if the new business seeks to employ foreigners, then the such business must apply for an Expatriate Quota which is stated in Section 34 of the Immigration Act.
Secondly, when it comes to starting a franchise in Nigeria, every business owner must register such a franchise agreement with the National Office for Technology Acquisition and Promotion (NOTAP).
However, according to the provisions of the NOTAP Act, every agreement intended for the transfer of technology between a foreign transferor and a Nigerian transferee must be registered by the NOTAP. This is the policy since the agreement involves technology transfer if necessitates the NOTAP registration as a franchise agreement. It should be noted that agreements for foreign technology transfer shall be registrable if its purpose or zeal conforms with the NOTAP wholly or partially which is based in connection with any of the following;
Basic or Detailed Engineering Supply
Patented Inventions Usage Act
Machinery and Plant Supply
Operating Staff or Managerial Assistance and Personnel Training Provision
Technical Expertise Supply
Importantly, every business owner should note that when registering a franchise agreement, the Federal Competition and Consumer Act (FCCPA) states that any provision based on an agreement for the sale of certain goods that seems to establish minimum prices for the resale of goods in Nigeria shall be void.
Additionally, trademarks are very essential when it comes to business recognition and management. As a result, every franchise must have one registered in Nigeria. As far as Nigeria is concerned, it will be the first to file jurisdiction for the protection of any trademark. This is why the franchise has to be registered in Nigeria even if the trademark is being registered in other jurisdictions.
Securing a lease agreement for the franchise store in a suitable location is very important for every franchisee. Other actions required to be taken include; employing local staff, registering the franchise company with Federal Inland Revenue Service for sake of taxing, and registering for some industry-specific permits. Take for instance how a franchise intends to operate in the Oil and gas sector. One of the actions such businesses must undertake to get involved is to obtain a license from the Department of Petroleum Resources (DPR.)
Frequently Asked Questions
What Forms of Business Entities are Typically Used By Franchisors?
It should be noted that as far as Nigeria is concerned, the business entities which are mostly used by franchisors are limited liability companies. These companies may either be private or public.
Are there any Registration requirements Or Other Formalities Applicable to a New Business Entity As A Pre-condition to Being Able To Trade in Your Jurisdiction?
Trading is common in Nigeria, and to begin such an operation, a new business entity must meet the following requirements;
The company must be registered with the Nigerian Investment Promotion Commission. This registration applies only to companies with foreign participation.
Must be registered with the Federal Inland Revenue Service for tax-related purposes.
A corporate bank account must be opened in a commercial bank in Nigeria, which supports capital.
Must have a business permit and expatriate quota from the Ministry of Interior. Only companies with foreign participation and in cases where other foreigners are employed are entitled to this feature.
Are There Restrictions on the ability of the Franchisor to Impose Minimum Resale Prices?
Yes, NOTAP has the authority to deny the registration of a franchise agreement if it contains resale price clauses that are against the Price Control Act or any other law governing prices imposed for internal use or export.
Additionally, any clause or condition in a contract for the sale of commodities that purports to set minimum prices for the resale of products in Nigeria is invalid under the FCCPA.
Is There a Maximum Permitted Term For Any Related Product Supply Agreement?
Yes, the NOTAP Act specifies that a technology transfer agreement’s duration does not exceed ten years. In reality, however, NOTAP typically accepts a franchise agreement for a term of three years, after which it may be extended for additional three-year periods.
Is Membership in Any National Franchise Association Mandatory or Commercially Advisable?
No, it is not necessary to be a member of a national franchise group. Belonging to a national franchise group has no commercial benefit either.
Is There A Requirement for Franchise Documents or Disclosure Documents To Be Translated Into The Local Language?
The necessity that documents be translated into the local language is not mandated by law. However, because English is Nigeria’s official language, all documents must be written in English.
FIVE (5) REASONS WHY NIGERIAN STARTUPS ARE INCORPORATING A PARENT COMPANY IN DELAWARE, UNITED STATES
Why do Flutterwave, Paga, Paystack, Kuda, Cowrywise, Andela, Ulesson, Shuttlers and a host of others have their Parent/Holding Company in Delaware, United States?
Interestingly, over 70% of StartUps that are incorporated outside Africa are based in Delaware, United States (Disrupt Africa).
According to Forbes Advisor, Delaware has become internationally recognized as a corporate paradise and is “home” to such famous firms as Amazon, Google, Tesla, Walmart, American Express and Disney, to name just a few. Interestingly, 68% of Fortune 500 companies and 93% of all U.S.-based initial public offerings are registered in Delaware United States.
So, what is the fuss about Delaware, United States?
1.CONDITION PRECEDENT TO FUNDING: To get funded, most Venture Capital (VC) requires your Company to be incorporated outside Nigeria, and form a Holding-Subsidiary Relationship, the Delaware Company becomes the Holding Company and the Nigeria Company a subsidiary.
If your company is already incorporated somewhere other than the United States, Canada, Singapore or the Cayman Islands, in order to participate in YC you will need to create a parent company that is in one of those jurisdictions. The existing company will then become a subsidiary of the new United States, Canada, Singapore or Cayman parent company.
Undoubtedly, the US has the biggest funding institution, with $63 billion in 2022 and positioning is synonymous with funding. So, asides from being a condition precedent, the need to attract investors and VC firms will drive StartUps to incorporate in the US and perhaps Delaware.
3. TAX BENEFITS
According to Forbes Advisor, the most famous reason Delaware has attracted the eye of corporations across the world is the lenient taxes imposed by the state. Corporations registered in Delaware that do not do business in the state do not pay corporate income tax. Delaware also does not have a sales tax, investment income taxes, inheritance taxes or personal property taxes. While companies do have to pay a franchise tax to register in Delaware, this can be pennies compared to the income tax other states would charge. Nationwide companies that do conduct business in Delaware can still skirt the in-state income tax by establishing subsidiary or shell companies that hold various intangible assets but do not directly run business operations.
4. CORPORATION COURT
Instead of a traditional trial system, corporate lawsuits in Delaware are resolved by the Court of Chancery, a court made up of judges who specialize in corporate law. Because of this, Delaware has well-developed and predictable legal precedents that may benefit corporations. While the average civil lawsuit may take a number of years to resolve, Delaware’s use of judges instead of juries and prioritization of corporate-related cases means similar cases can be decided more quickly.
As with registering a business in most states, companies must assign a registered agent who maintains a physical address to be the official address and to receive mail and collect paperwork. Unlike most states, however, in Delaware, the registered agent is the only name that must be disclosed in association with the company. Other officers and directors are not required to disclose their names, allowing an extra degree of anonymity. Because of this lack of reporting, officers, directors and shareholders are also not required to maintain residency in Delaware.
For Delaware Company Formation and how to form the Holding-Subsidiary structure between the Delaware Company and the Nigeria Startup, feel free to contact us.