NEPZA

The free Trade Zones (FTZ) scheme was conceived in 1992 to provide an attractive operational climate for local and foreign investments. The location of industrial and commercial enterprises in specially defined zones is, among other things, intended to encourage: 

·        Industrial production;

·        Offshore banking;

·        Insurance and re-insurance;

·        International stock, commodities and mercantile exchanges;

·        Industries research centers;

·        Agriculture and agro-allied industries;

·        Mineral processing;

·        International tourist resort development and operation.

In Nigeria today, foreigners can invest or hold shares in any company, with the exception of the following:

Companies on the government’s black list. Foreigners and also Nigerians cannot invest in the companies manufacturing:
- Narcotic drugs and psychotropic substances
- Arms and ammunitions
- Military and paramilitary wears and accoutrements including those of police, customs, immigration and prison services.

Petroleum Enterprises, that is companies producing petroleum or natural gas or a combination of both – however joint ventures between the Nigerian government and foreign oil companies are allowed.

The capacity to set up a company in Nigeriais granted by the Company and Allied Matters Act of 1990. A foreign investor who wishes to get established in  Nigeria must first set up a Nigerian company that is distinct and independent of the foreign company. Otherwise, the foreign company will not be able to carry on its operations in Nigeria.

A foreign investor can establish a Nigerian branch or subsidiary of the foreign company by giving Power of Attorney to a Nigerian lawyer. In this case, documents registering the company must give evidence of the lawyer’s capacity as an agent.
The name of the agent must be written on the documents. It is important to state on the document that the Power of Attorney shall lapse after the registration of the company.
After registration, it is necessary to apply to the Nigerian Investment Promotion Commission. This will enable you get a Business Permit, expatriate quota, etc.

The procedure to follow in creating a company in Nigeria is as follows:

Validity of the Name

To start with, the validity of the company’s name is confirmed with the Corporate Affairs Commission (CAC). The name of the company must not be similar to that of a company already registered.

• In Nigeria, the statutes of each company are summarised into the Memorandum and Articles of Association.
• This little booklet describing the activities which the company wishes to pursue, as well as the outline agreement with the shareholders, must be drawn up by a lawyer.
• It is mandatory to register two copies of the Memorandum and Articles of Association with the CAC in  Abuja, as well as all other documents relating to the Company’s registration.
• These two copies must have been stamped by the Commissioner for Stamp Duties after payment of the agreed stamp. The fee paid depends on the company’s issued share capital. The amount to be paid is summarised in a table.
• The Memorandum and Articles of Association must be signed by at least 2 Nigerians or two foreigners possessing their Business Permit.

However, while waiting to get a Business Permit, a foreign investor may, through the Power of Attorney, authorise a Nigerian citizen to sign the Memorandum and Articles of Association for him.

A copy of the Business Permit if the applicants are foreigners .

Form CAC 2.2 /C 06 completed – giving notice of the address of the company’s registered office– a P.O. Box is not acceptable.

Form CAC 2.3 / C07 completed- which contains the list and particulars of the company’s first directors (minimum number of directors is two.

Statement of consent of persons who are to be the company’s first directors.

Form CAC 2.4 completed – which is a statement of the authorised share capital, signed by at least one director, on which stamp duty has been paid. The form must be signed by the Commissioner for Stamp Duties.

Form CAC 2.5 / C02 completed – containing the allotment of shares.

A statutory declaration in the prescribed form by a legal practitioner that the requirements for the registration of a company have been complied with.

A certified cheque for the payment of registration fees. The amount paid varies according to the company’s share capital and can be obtained from the table.

 Registration with the Nigerian Investment Promotion Council (NIPC)

The following documents must be submitted to NIPC for the registration of the business concerned, the outcome of which must be determined within 14 working days from the date of receipt of completed registration forms.

I. Certificate of Incorporation.
II. Completed NIPC Registration Form.
III. Memorandum and Articles of Association.
IV. Certified True Copy of Forms CO2 (Return on Allotment of shares to Directors) and CO7 (Particulars of Directors or any change therein).
V. Copy of Feasibility Report.
VI. Copy of proposed agreement in the case of joint venture.
VII. Enterprises between Nigerians and Foreign Investors.

A Business Permit must be obtained if any of the shares of the proposed company will be held by foreigners. The proposed company may be a branch or subsidiary of the foreign company.

The Expatriate Quota gives a company the power to employ foreign experts to occupy certain positions, for a fixed period of time. The Quota forms the basis for the issuance of the work permit for expatriates. Normally, the Quota is made for 2 or 3 years renewable.

A PUR (Permanent Until Reviewed) quota is issued to the Chief Executive Officer under the following conditions :
- where the majority of the share capital is owned by foreign shareholders
- where the share capital is at least N5,000,000 (five million naira).

The NIPC also has the responsibility to grant the Approved Status for imported capital in new ventures.

This may be in the form of financial investment or equipment. The goal of the ‘Approved Status’ is to facilitate the repatriation of capital.

Provisions relating to investment: Among the provisions relating to investment are the following:

• A foreigner may invest and participate in the running of any company in  Nigeria
• A company in which foreign interest is authorised must, after its formation, register with the NIPC.
• A foreign company may buy the shares of any Nigerian company in convertible foreign currency.

A foreign investor in an approved company is unconditionally allowed to transfer funds, in convertible currency, through an authorised institution.

These may be:

• Dividends or profits (after tax) related to investment
• Where a loan was obtained, bills in respect thereof
• Profits (after all taxes) and other debts in case the company is being sold or liquidated, and all interests attributable to the investment

Transfer of Profits: The foreign investor has an unqualified guarantee to transfer, in convertible currency, through an authorised dealer the following:

• Dividends and profits (after tax) attributable to the investment
• Payment in respect of a foreign loan used for the investment
• Payment of a sum (after tax) and other obligations occurring in case of a sale or liquidation of the company

• Dividends and profits (after tax) attributable to the investment.
• The Nigerian Government is restrained by law from expropriating or nationalising any company
• Any person holding the whole or part of the capital of a company must not be restrained by law from transferring his interest in the capital to other persons.
• The Nigerian government does not hold the right of acquisition of interest in a company except where the acquisition is in the national interest or for public good. In addition, the following provisions are made:
   
• The compensation paid must be equitable and adequate
  II. The investor has right of access to the tribunal to decide on the interest and compensation payable

The compensation must be paid without any delay and authorisation granted for repatriation in convertible currency.

A foreign company may buy shares in a Nigerian company with any convertible currency. As a general rule, a foreigner can invest and hold a share in any company in Nigeria.

The founders of companies in Nigeria are free to appoint as director any person of their choice, whether foreigner or Nigerian. The directors appointed may be resident or non resident. However, the application to the NIPC (Nigerian Investment Promotion Council) must include the name of the proposed director – (whether Nigerian or non-Nigerian – resident or non-resident).

Payment of foreign directors’ fees can be effected in the same manner as payment of dividends belonging to a foreign company – foreign investors have the right to pay the fees of foreign directors in any convertible currency.

The fees payable to the government for the registration of a company depend on its share capital. For the quotas, the fees to be paid would depend on the number of quotas. However, the fees payable to the lawyers for registration can be negotiated.

• The foreign investor must ensure that the company name is different from that of any other company already registered in Nigeria.
• The business carried on by the company must be legal.
• The persons signing the Memorandum and Articles of Association must have the legal capacity to do so.
•  Finally, use the services of a lawyer to facilitate the process and avoid any pitfalls.