Legal Requirements for Incorporation of Companies in Nigeria

The legal requirements for the incorporation of substantive Companies, subsidiaries and holding companies are contained in the Companies and Allied Matters Act (CAMA) Cap 59 LFN1990. They are mentioned hereunder as:

The legal requirements for the incorporation of Companies are contained in the Companies and Allied Matters Act (CAMA) Cap 59 LFN1990. The operational requirements of companies are governed by CAMA and several other laws such as the Nigerian Investment Promotion Act, the Companies Income Tax Act, Investments and Securities Act 1999, Foreign Exchange Act of 1995 etc. The requirements are listed hereunder:

(1)Legal Requirements for incorporation of company.
There are several legal requirements stated by the Companies and Allied Matters Act 1990 in Sections 18 to 40 for the incorporation of new Companies.

(A) Name of Company
It is the responsibility of the promoters of the company to select a name for their company. The company must have a name which must not be identical with another registered company or offensive or contains chambers of commerce, Nigeria or federal. Availability must be conducted at the Corporate Affairs Commission to verify the availability and suitability of the selected name.

(B) Registered office address
The company must have a registered business address within Nigeria.

(C) Type of company
The law allows for registration of companies for companies limited by shares, limited by guarantee, unlimited and partnership. Under those companies limited by shares, a company can be a private company limited by shares or a public limited liability company. At incorporation, all the legal objects of the company must be contained in it memorandum and articles of Association. The legal objects are the major business objectives of the company and the framework which it intends to run its business within the acceptance of the law.

(D) Share capital.
There are several types of shares such as ordinary shares, preference shares and deferred shares. The most popular shares are ordinary shares. Non voting shares are prohibited and it is one vote per share except for preference shares. The currency allowed for shares is the Naira. Minimum authorized share capital for private companies is N10, 000, while for public companies is N500, 000. A minimum of 25% of the authorized share capital must be subscribed and paid for. Shares can be paid for in cash or value meaning the directors of the company must have at least 25% of the total issued share capital in terms of cash or property as the time of incorporation.

(E) Objects of the company
The objects of the company must be legal and lawful. Nigerians and Non- Nigerians can undertake all forms of legal businesses. Non Nigerians cannot undertake certain businesses such as production of arms, ammunition, narcotic drugs, military wears, national security etc.

(F) Directors.
They run the day to day management of the company. The minimum number of directors is two and maximum number 50 for private companies. There is no maximum for public companies. Alternate and shadow directors are allowed. The powers, appointment and removal of directors are contained in company’s articles of association.

(G) Subscribers.
These are the persons that subscribe to the memorandum and articles of association. They must be adults of over 18 years, of sound mind, not bankrupt, and must have the capacity to form a company. They eventually become directors of the company in private limited liability companies.

(H) Expatriates.
Expatriates are subjected to the provisions of certain other laws such as the Nigerian Investments Promotion Act, Foreign Exchange Monitoring Act 1995, Investment and Security Act 1999, Immigration Act etc.

(2) Required documentation.
Before a company is registered by the Corporate Affairs Commission, certain documents need to be provided by the promoters of the company to the Commission. These documents are contained in section 35 of CAMA. The documents are:

(A)A set of memorandum and Articles of Association of the company (6).

(B)A set of incorporation forms containing the notice of registered office address, particulars of directors, statement of authorized share capital any other document required y the Commission.

(C)An availability of name form showing that the suggested name of the company is available at the Commission registers.

(D)A statutory statement by a legal practitioner stating that all the requirements of CAMA have been complied with.

(E)Payment of the Commission’s statutory registration fees of N10, 000 for every N1million.

(F)Payment of Stamp duty fees.

(G) Any other document that may required by any relevant law statute.

3. Tax requirements.

(A) Company Taxes.
Under Nigerian tax laws, companies are subject to taxation under the Companies Income Tax Act 1990 at the rate of 30% per annum. There is also Capital Gains tax under the Capital Gains Tax Act, 1990 which is 10% levy on disposal of company’s assets. Then there is value added tax for goods and several services including telecommunications which is a standard 5% under the Value Added Tax Act of 1993. Then there is a withholding tax for dividends earnings at the rate of 10% under the Company Income Tax Act 1990. There is also education tax at the rate of 2% under the Education Tax Decree No. 7 of 1993. There is also the personal income tax applied to employees of companies under the Personal Income Tax Act of 1993 charged on pay as you earn basis.

(B) Incentives.
There are several incentives for companies operating under Nigerian tax laws. There is a tax free holiday for 5 years for companies that produce goods considered to have pioneer status under the Industrial Development Act 1990 LFN 579. There is a tax holiday of 100% for 7 years for companies cited in disadvantaged areas under the same Act for pioneer status. There is a tax waiver for 5 years approved status for companies with non resident investment where the original investment was imported in form of equity under the CITA 1990.

There is import duty tax incentive under the duty drawback suspension scheme which allows importers claim on refund on duties for imports under the Customs and Excise Management Act Cap 84, LFN, 1990. Investment incomes imported in Nigeria are not taxable if through authorized dealers. There is also capital assets depreciation allowance under the Companies Income Tax Act 1990. There is investment allowance of 10% for companies who incur capital expenditure on plant and machinery under the Finance Taxation Act.

Other incentives under the Company Income Tax Act are claims for local value added is 10% allowance for 5 years, labour intensive production is 15% allowance, local content material utilization is 60% allowance for engineering and chemicals, 70% for petrochemicals, 12% for research and development, plan training is 2%, investment in infrastructure is 20% etc.

4. Foreign Investment requirements
Under Nigerian law, foreigners are allowed to wholly owed companies or part own companies with Nigerians. The laws that govern foreign investments are the Nigerian Investment Promotions Act 1995, the Foreign Exchange Act 1995, the Investment and Securities Act 1999, the Immigration Act Cap III 1990 etc.

Under the Nigerian Investment Promotion Act 1990, non Nigerians are permitted to own businesses wholly or partly with Nigerians in spheres of businesses except production of arms, ammunition, production of narcotic drugs, production of military wears equipments etc.

Under the NIPC Act, the said foreign investor is required to incorporate a company under the Companies and Allied matter Act 1990, register with the NIPC, comply with the requirements of the Immigration Act 1990, apply and obtain the relevant license of the sector it intends to invest, apply for business permit, expatriate quota and residence permit from the Federal Ministry of Internal Affairs, apply for all other relevant approvals such as capital importations etc.

On repatriation of proceeds from Nigeria, under the NIPC Act and the Foreign Exchange Act 1995, a foreigner can repatriate all business proceeds or even capital income from Nigeria without restrictions. Income earnings can also be repatriated from Nigeria subject to personal income tax and 10% withholding tax on share dividends. Foreigners are permitted to convert their currency and operate domiciliary accounts.

5. Voting pattern of private limited liability company in Meetings.
There are no restrictions on venue of Board meetings but it must be held in Nigeria. Attendance of meetings can be personal or by proxy. Then filing of annual returns is mandatory within 42 days after annual general meetings.

For private companies, the subscribers to the memo usually constitute the voting shareholders of the company. Except as required by law, voting patterns under Nigerian corporate law are usually by a simple majority, that is a majority of the directors at Board of director’s meetings or at annual general meetings of shareholders. However, for special resolutions in matters affecting fundamental changes in the company such as change of name and alteration to Memo and Articles, a majority of ¾ is required by voters in annual general meetings.

The procedure for voting at meetings is by a show of hands unless a poll is demanded by the Chairman or a major shareholder of the company or three other members present in person at the meeting. There is also the requirement of issuing meeting notices to shareholders or members of annual general meeting who are entitled to vote.

ABOUT THE AUTHOR: Barrister Onjefu Adoga
Barrister Onjefu Adoga is a Nigerian lawyer. He is the managing Partner of Brooke Chambers Law Firm and a member of several International Law Committees.

Copyright Brooke Chambers
More information about

Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.

Find a Local Lawyer