Now for those entrepreneurs who are interested in registering a limited liability company in Nigeria, it is important you know that the CAC is in charge of such task. Now what is CAC and what is its function? The Corporate Affairs Commission (CAC) is the governmental body responsible for registering business names and companies in Nigeria. Without wasting your time, here’s how to register a limited liability company in Nigeria.
What is a Limited Liability Company?
A limited liability company is simply a company where the liability of the shareholder is limited to the quantity of share capital of each shareholder if ever the Company is liquidated. The shareholders all concur to bear responsibility only up to the number of their shares in that Company. Meanwhile, a company is an association of people who agree to contribute their capital to start a business that is different from themselves. They could choose to form a limited liability company.
Types of Limited Liability Companies in Nigeria
There are two types of limited liability companies in Nigeria. They are a company limited by guarantee and Company limited by share. Companies limited by guarantee are established not for profit but to promote science, art and religion. The shareholder’s liability is limited to their promise or guarantee.
While in a company limited by share, the liability of members is limited to the amounts they contributed to form and manage the Company. At liquidation, shareholders lose their nominal shareholding only. Note that the law guiding company formation in Nigeria is the Companies and Allied Matters Act, (CAMA) 2020.
What is CAMA?
The CAMA is the guideline for any company name registration in Nigeria and other ancillary matters. Unlike the United States of America where each state maintains its own company registry and can individually register companies, the company registration in Nigeria is central and a company can only be registered with the Corporate Affairs Commission (CAC) only.
The procedure for foreign-owned company registration in Nigeria is virtually the same as the procedure for local company registration. Howbeit, each company with foreign participation is expected to be capitalized with a minimum of N10 Million share capital, so as to enable such a company obtain the expatriate quota required to obtain a Nigerian work permit for all its expatriates including the directors.
The cost of company registration in Nigeria depends on the number of share capital of the proposed company to be registered. The higher the share capital of a company, the higher the filing fee and stamp duty payable to the government. The processing or professional fee that may be charged by an accredited agent for processing the registration differs from one agent to another.
The New Method to Register a Limited Liability Company in Nigeria
Have it in mind that registering a limited company in Nigeria has been revamped by the Companies and Allied Matters Act 2020 and Companies Regulations 2021 made according to the Act. Formation of an Ltd in Nigeria currently can be carried out online by the company laws.
The Corporate Affairs Commission (CAC) is the body charged with the responsibilities of regulating and supervising the formation and incorporation of companies in Nigeria. Under the Companies Regulations 2021, the following steps are the procedures involved in the registration of a private limited company in Nigeria starting from January 2021.
Choose a Suitable Name
First and foremost, the applicant is expected to choose two suitable names for the company, after which he has to check for availability of the proposed name, this will be conducted on the CAC online portal to find out if the name is available and has not already been used.
An example of a name format you can use is XYX Global Ltd or XYZ Nigeria Ltd. If one of your chosen names is found suitable and unregistered, it will be assigned to you. You have up to 60 days to complete the whole registration by filling and filing the forms.
Complete Pre-registration form CAC1.1
Currently, this can only be done Online using the Company Registration Portal, the applicant will have to fill in all the required information, such as the approved company name, after which he is expected to click the type of company, in this case private company limited, the applicant is to show the trade classification code number, or where he cannot determine that, provide a brief description of the company’s business activity.
The applicant is also expected to provide the registered office address and it is expected to be easily traceable, the company’s email address and phone number, the company’s head office address where this is different from the registered office address. In completing the form, the applicant is expected to follow the following procedures:
- The applicant will have to put together the Company’s Memorandum and Article of Association (MEMART) advisable to be drafted professionally by a Legal Practitioner. Howbeit, the CAC has provided a generic MEMART, which can be adopted entirely or with addition/amendments by the new company.
- The applicant is to proceed to the section for proposed officers. The appointment of a secretary is now optional for a small company, but where the company chooses to appoint a secretary, the applicant is expected to provide the required details of the secretary. Where the secretary is an individual, the applicant is required to fill Section B1 while for corporate secretary section C1.
- The applicant will also have to fill section D1, by providing the particulars of at least one Director for small companies, this is by virtue of Section 271 of Companies and Allied Matters Act (CAMA) 2020, which excludes small companies from the previous requirement of having a minimum of two (2) directors and Section 18 of CAMA 2020, which provides that one person can form and incorporate a private company, the combine implication of these provisions is that a single person can be the sole director and also the only shareholder in a private limited company.
- The applicant is to proceed to Part 3 of the form, where he will have to fill in the statement of issued share capital which includes the class of shares, nominal values of issued shares, total numbers, aggregate nominal value, the total aggregate amount to be unpaid if any.
- The applicant is to proceed to part 5 of the pre-incorporation form where he will have to fill in the particulars for natural persons and for legal entities (if any) who is a person of significant control.
- The details of the person who presented the registration for filing is expected to also be completed on the form.
Pay All Necessary Fees
At this point, the applicant will have to pay filing and Stamp duty fee as prescribed by CAC and the Federal Inland Revenue Service (FIRS).
Upload Documents for Processing
The applicant will then have to prepare the signed document and scan copy of pre-registration documents for upload and processing. In all, the following documents are expected to be uploaded:
- Form CAC1.1
- Memorandum and Article of Association (MEMART).
- Recognized form of identification for Director(s)/Subscriber(s) or Secretary where appointed.
- Evidence of payment to the Corporate Affairs Commission.
This is where you have to collect your pre-incorporation Certificate and the Certified True Copies of the documents.
Other Important Tips for Registering a Limited Liability Company
- After the name search, you need to choose your directors. That is after dividing the share ratio among the directors.
- A minimum of two people is required to start a company. The maximum is 50. These people are referred to as directors.
- A minor (someone below the age of 18) can only be a director in a company provided that there are two other adults listed as directors.
- The full names, ages, year of birth and residential addresses of all the directors must be supplied for filling and filing the forms to the CAC.
- A foreigner can also be a director provided that one or more directors reside in Nigeria. But to avoid unnecessary query, it’s advisable that all directors adopt Nigeria addresses.
- You must supply the proposed address of your company’s head office.
- All directors must sign the filled forms and memorandum of association before filing for stamping and verification.
Documents Required to Register a Limited Liability Company in Nigeria
The documents required to register a Limited Liability Company in Nigeria include:
- A form of identification of the Directors and Shareholders if different from the Directors. You could use (a) National ID (b) Driver’s License (c) Voters Card (d) International passport.
- A copy of Memorandum of Understanding and Articles of Association (usually drafted by the Lawyer or consultant handling the incorporation process,) allotment of share capital form, particulars of the company secretary and particulars of directors.
- Proficiency certificate if the object is a professional service, consultancy, legal services, Hospital, School, and Media, training, and so on. Examples include a certificate of a professional body, trade association, and academic Certificate.
- Notice of approval for name Reservation from CAC
- Payment receipt from CAC
- Stamp Duty Certificate from FIRS
- Residence Permit (if a Foreigner shareholder is a member)
- The statement of nominal capital is the amount of the Company’s capitalization shared among the subscribers. For example, you can divide N1,000,000 share capital into two parts of 49% and 51% each between 2 shareholders.
- Provide the proposed address of your Company’s head office.
- All directors are expected to sign the filled forms and memorandum of the association before you file, stamp, and verify them.
Indeed, there are commendable innovations in the new CAMA 2020 and Companies Regulations 2021, which have made registration of private limited companies quite easier and accessible. With these new methods, an individual may easily undertake the incorporation process directly.
However, it is always preferable to engage a CAC accredited agent for the process since they have the expertise on such process. An accredited agent who is a legal practitioner may advise on the type of business structure suitable for the applicant, the drafting of Articles of Association and also share capital threshold applicable to the type of business.
- How to Register a Limited Liability Company in Nigeria in 5 Steps - February 26, 2021
- How to Start a Cement Distribution Company (Dangote, BUA, Ibeto) - February 9, 2021
- Writing a Cement Distribution Business Plan [Sample Template] - February 9, 2021