Doing business in Nigeria is easy if business promoters are properly guided on the requirements for company incorporation, licensing procedures, applicable taxes and related costs. For example, as parts of the efforts of the Federal Government of Nigeria to promote investment opportunities, the Business Facilitation (Miscellaneous Provisions) Act, 2023 (which amended about 21 business-related laws), the Copyright Act 2023 (which repealed the Copyright Act 2004, ratifying outstanding copyright treaties and introduced some new provisions on copyright protection) and the Nigeria Startup Act (for the promotion and development of tech startups) are amongst some critical legislation passed to provide several incentives including tax reliefs and special protection for businesses as well as the removal of bureaucratic constraints to doing business in Nigeria.
Based on our experience in advising and assisting clients in processing business incorporation and operational licence in Nigeria and to help prospective investors take the right decision, the under-listed are the relevant questions that we have raised and answered on company incorporation requirements, costs and procedures as well as the notable mandatory regulatory registrations and applicable taxes and charges imposed on business by the Government of Nigeria. Please read more below:
1. What are the Requirements for Registration of a Private Limited Liability Company (also known as “LLC”)?
A private limited liability company is the most common type of company for business undertakings in Nigeria. By virtue of section 18 of the Companies and Allied Matters Act 2020 (“CAMA”), one or more shareholders can form a small company limited by shares. A company is small if, amongst others, the turnover is less than N25,000,000 (about US$50,000) and it has no foreigner or government or government corporation as a shareholder.
So, unless for financial institutions like banks, mortgage institutions, payment systems companies etc. regulated by the Central Bank of Nigeria (“CBN”) or gaming companies like sports betting business, casino companies, etc. regulated by the National Lottery Regulatory Commission (“NLRC”) which require provisional approval the CBN or NLRC (as the case may be) before they can be registered, any other company can be registered without any delay.
Incorporation of companies can now be completed within 24 hours using the Same Day Incorporation desk of the Corporate Affairs Commission (“CAC”). The CAMA 2020 requires a company to have at least two (2) directors though small companies may have one (1) director pursuant to section 271 of CAMA 2020.
The following are particulars required for incorporation of a company limited by shares:
i. Name of the Company: Two preferred names for the proposed company to be presented to CAC for Name Availability Search and Reservation (via https://pre.cac.gov.ng/name-reservation/new-application). A name approved by the CAC is reserved for 60 days to enable the promoters enough time to complete registration (even though the registration can now be completed on the same day of application if all the requirements are submitted).
ii. Amount of Share Capital: A private company limited by shares (LTD.) is required to have a minimum issued share capital of 100,000 whilst a publicly quoted company (PLC) must have 2,000,000 minimum issued share capital (all shares must be issued). However, where a foreigner is a shareholder, then the company must be registered with not less than 10,000,000 issued share capital.
– Please note that certain designated businesses have industry-prescribed minimum share capital (see the Table below).
– Please note also that a company’s issued share capital is the basis for calculating the relevant government charges that may be payable for the incorporation. The charges comprise registration cost (payable to the CAC) and stamp duty, payable to the Federal Inland Revenue Service (“FIRS”).
iii. Registered Address: Every company registered with CAC is required to have its registered address in Nigeria. A proposed company can use a virtual office in Nigeria as its registered address unless the sector of business requires physical office address which regulators will verify and inspect. At Koriat & Co., we usually offer our offices as registered address for our clients who do not have any office to meet this requirement and for mailing address only.
iv. Company’s Email and Telephone Number: The CAC requires an email to designated for the proposed company for future correspondence. A Gmail or Yahoomail will suffice.
v. Particulars of shareholders, directors and company secretary: The names, address, occupation, date of birth, distribution of shares amongst the shareholders, a government-issued means of identity, as well as electronic signature of shareholders, directors and company secretary are required for incorporating a company.
Although section 330 of CAMA makes the appointment of company secretary optional for small companies, it is nevertheless important to have a lawyer or law firm appointed as a company secretary to guide the company on compliance with the law and statutory obligations. Also, the CAC portal still requires the details of a company secretary when filing for incorporation.
– Please note that by section 18 of the CAMA 2020, one (1) individual can be a sole shareholder and sole director of a small company. However, there are some sector-specific businesses that may be required to have more than one (1) director.
– Please note also that directors and shareholders can hide their personal information from the public members who may later conduct search into the company using the CAC online portal. This privilege costs N25,000 (about US$50) per person.
– Please note also that where a foreigner with a Nigerian address is a director, proof of his or her Combined Expatriate Residence Permit and Aliens Card (CERPAC) must be uploaded into the CAC portal. CERPAC can be obtained from the Nigerian Immigration Service (NIS) for $2000.
vi. Certificate of Proficiency (if any): where the proposed company is being set up for a professional service such as engineering, accounting, legal, engineering, etc., the CAC may require one or more of the promoters to present a copy of their qualifying certificate in the field of business the proposed company is being set up to operate.
2. What are the Costs of Registration of a Company Limited by Shares?
The process of incorporation of a company starts from the name availability search and reservation. The cost of Name Availability Search and Reservation is N500 (less than US$2). Upon approval of the name, the CAC registration cost is in accordance with the amount of the company’s issued share capital.
For example, the CAC charges the sum of N55,000 (about US$110) to register a company of 10,000,000 issued share capital (the formula for calculating the CAC cost is N5,000 for every 1,000,000 of the 10,000,000 issued share capital though the initial N1,000,000 of the share capital attracts N10,000 cost).
Also, the FIRS charges N75,000 (about US$150) as stamp duty to register a company of 10,000,000 issued share capital (the formula for calculating FIRS stamp duty is 0.75% of 10,000,000). Please note that the foregoing costs are exclusive of consultant’s or lawyer’s professional fees.
The Table below shows some designated businesses with prescribed minimum issued share capital and their respective CAC cost for registration and stamp duty on the share capital:
| Sector or Business Object | Required Share Capital | Applicable CAC Costs in Naira (US$)* | Applicable Stamp Duty in Naira (US$) | Total Costs Excluding Professional Fees |
| Money Lender company | 20,000,000 | 105,000 ($253) | 155,000 ($3,735) | 260,000 ($627) |
| Corporate Investment Adviser (Registrar) | 150,000,000 | 755,000 ($1,819) | 1,125,000 ($2,711) | 1,880,000 ($4,530) |
| Underwriter | 200,000,000 | 1,00,5000 ($2,422) | 1,500,000 ($3,735) | 2,505,000 ($6,157) |
| Venture Capital Manager | 20,000,000 | 105,000 ($253) | 155,000 ($374) | 260,000 ($627) |
| Consultant (individual) | 500,000 | 5000 ($25) | 3,750 ($18) | 8,750 ($43) |
| Consultant (Partnership) | 2,000,000 | 15,000 ($36) | 18,000 ($43) | 25,000 ($79) |
| Consultant (Corporate) | 5,000,000 | 25,000 ($60) | 37,500 ($90) | 65,500 ($150) |
| Issuing House | 200,000,000 | 1,00,5000 ($2,422) | 1,550,000 ($3,735) | 2,505,000 ($6,157) |
| Broker/Dealer | 300,000,000 | 1,505,000 ($3,627) | 2,250,000 ($5,422) | 3,755,000 ($9,049) |
| Trustee | 300,000,000 | 1,505,000 ($3,627) | 2,250,000 ($5,422) | 3,755,000 ($9,049) |
| Stockbroker | 200,000,000 | 1,00,5000 ($2,422) | 1,550,000 ($3,735) | 2,505,000 ($6,157) |
| Stock dealer | 100,000,000 | 505,000 ($1,217) | 750,000 ($1,807) | 1,255,000 ($3,024) |
| Corporate Investment Adviser | 5,000,000 | 25,000 ($60) | 37,500 ($90) | 65,500 ($150) |
| Market Maker | 2 Billion | 10,005,000 ($24,108) | 15,000,000 ($36,145) | 25,005,000 ($60,250) |
| Fund/Portfolio Manager | 150,000,000 | 755,000 ($1,819) | 1,125,000 ($2,711) | 1,880,000 ($4,530) |
| Commodities Broker | 40,000,000 | 205,000 ($494) | 300,000 ($723) | 505,000 ($1,217) |
| Capital Trade Point | 20,000,000 | 105,000 ($253) | 155,000 ($374) | 260,000 ($627) |
| Rating Agency | 150,000,000 | 755,000 ($1,819) | 1,125,000 ($2,711) | 1,880,000 ($4,530) |
| Corporate/Sub-broker | 5,000,000 | 25,000 ($60) | 37,500 ($90) | 65,500 ($150) |
| Commercial Bank with Regional Authorization | 10 Billion | 50,005,000 ($120,494) | 75,000,000 ($180,723) | 125,005,000 ($301,217) |
| Commercial Bank with National Authorization | 25 Billion | 125,005,000 ($301,217) | 187,500,000 ($451,807) | 312,505,000 ($753,024) |
| Lottery (other than Sports Betting) | 5,000,000 | 25,000 ($60) | 37,500 ($90) | 65,500 ($150) |
| Agricultural Seeds, production, Processing Marketing | 10,000,000 | 55,000 ($133) | 75,000 ($181) | 130,000 ($324) |
| Payment Service Bank | 5 Billion | 25,005,000 ($60,253) | 37,500,000 ($90,361) | 62,505,000 ($150,614) |
| Private Security Company/Consultant | 10,000,000 | 55,000 ($133) | 75,000 ($181) | 125,000 ($314) |
| Pension Fund Administrator | 1 Billion | 5,005,000 ($12,060) | 7,500,000 ($18,072) | 12,505,000 ($30,132) |
| Shipping Company/Agent | 25,000,000 | 130,000 ($313) | 187,500 ($452) | 317,500 ($765) |
| Freight Forwarding | 5,000,000 | 25,000 ($60) | 37,500 ($90) | 65,500 ($150) |
| Bureau de Change | 35,000,000 | 180,000 ($434) | 262,500 ($632) | 442,500 ($1,067) |
| Air Transport (Local) | 500,000,000 | 2,505,000 ($6,036) | 3,750,000 ($9,036) | 6,255,000 ($15,072) |
| Cabotage Trade | 25,000,000 | 130,000 ($313) | 187,500 ($452) | 317,500 ($765) |
| Sports Betting | 30,000,000 (NLRC) | 165,000 ($398) | 225,000 ($542) | 390,000 ($1,040) |
| Travel & Tours | 30,000,000 | 165,000 ($398) | 225,000 ($542) | 390,000 ($1,040) |
| Super Agents Licence Company | 50,000,000 | 260,000 ($626) | 375000 ($904) | 635,000 ($1530) |
| Payment Solutions Service (PSS) Company | 250,000,000 | 1,255,000 ($2,550) | 1,875,000 ($3,750) | 3,130,000 ($6,300) |
| Financial Technology Company (also known as Payments Solution Providers (PSSP) Licence) | 100,000,000 | 505,000 ($1,217) | 750,000 ($1,807) | 1,255,000 ($3,024) |
*Note: the foreign currency exchange rate in Nigeria fluctuates and may occasion changes to the US Dollar equivalents in the table above.
** National Lottery Regulatory Commission (NLRC) requires that sports betting companies should be incorporated with N30 Million share capital.
*** Lagos State Lotteries Board (LSLB) requires that sports betting companies should be incorporated with 20m share capital. In view of the fact that the NLRC licence is indispensable, it is safe to incorporate a sports betting company in Nigeria with N30 Million share capital.
Please note that the above costs do not include professional fees or any costs that may be applicable for processing business licence where the business of a proposed company falls amongst any of the regulated sectors.
3. What is the Timeline for Completing Incorporation of a Company Limited by Shares?
The registration of a company can now be completed on the same day of application (24 hours). On the same day, the company gets its electronic certificate of incorporation, the business number (known as RC number) and tax identification number.
4. What other information do Promoters need to know about company incorporation?
Incorporation of companies is now done end-to-end online using the CAC portal. So, upon completing incorporation, the promoters will be able to download an electronic certificate of the company (with RC number and Tax Identification Number) for free and the e-Certified Status Report or Extract (for a fee) showing the directors and shareholders as well as other information about the company. The e-Certified Status Report or Extract can be downloaded about a week after registration upon paying N5,000 (about US$10). The Memorandum and Articles of Association of the company are only obtainable by making application for a certified true copy to the CAC for a fee. Application for certified true copy of the Memorandum and Articles of Association is N5,000 (about U$10).
5. Are there any mandatory regulatory registration and filings for a registered company?
Yes. Regardless of the sector or nature of business, a registered company is required to register with the following bodies and file statutory returns:
i. Special Control Unit for Money Laundering (“SCUML”) to which all suspicious transactions must be reported periodically;
ii. Federal Inland Revenue Service (“FIRS”) to which all Federal taxes are to be paid and tax returns filed, such as:
– Company Income Tax (CIT): 0% for small companies with turnover less than N25,000,000 ($50,000); 20% for medium companies with turnover above N25,000,000 ($50,000) but less than N100,000,000 ($200,000) or 30% for large companies, if the Company’s annual turnover is above N100,000,000 ($200,000). Income Tax Return is due for filing not later than 18 months post registration or 6 months after the end of the accounting period.
– Value Added Tax (VAT): 7.5% upon goods and services rendered by the company.
– Education Tax: 2.5% of the company’s assessable profit.
– The National Information Technology Development Levy: 1% of profit before tax (PBT) for companies with annual turnover above $200,000.
– There are other taxes like Petroleum profit tax, capital gain tax, stamp duty, etc. that are chargeable depending on the sector or transactions undertaken by the company.
iii. Industrial Trust Fund (ITF): 1% of the annual payroll for development of industrial training.
iv. National Social Insurance Trust Fund: 1% of employee’s monthly payroll.
v. Television and Radio License Fee: A Local Government Council in charge of the business address of the company may charge about N250,000 ($500) annually for big companies in the urban area.
vi. Pay As You Earn (PAYE) Tax: The State Inland Revenue Service charges personal income tax on salaries of employees.
vii. Pension Fund Administrator (PFA): PFAs are private companies licensed by the Pension Commission (PenCom) to receive mandatory monthly pension contributions from companies with 5 or more employees. Mandatory monthly pension contributions are made by both the employer (which contributes 10% of the employee’s monthly emolument) and the employee (which contributes 8% of his or her monthly emolument). The Pension Reform Act 2014 mandates every eligible employer to deduct monthly pensions and remit to the employee’s PFA. Penalty for default is 2% of the unpaid amount.
viii. National Health Insurance Scheme (NHIS) Contribution: 10% (by employer) and 5% (by employee) of the monthly basic salary of every employee must be contributed towards health insurance.
ix. National Housing Fund (NHF) Contributions: Employers are required to register with NHF and deduct 2.5% of employee’s monthly basic salary and remit to NHF.
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About KORIAT & CO.
KORIAT & CO. is a commercial law firm in Lagos Nigeria with versed experience and a network of lawyers in Ghana, Kenya, Uganda and Rwanda helping clients on business establishment, regulatory compliance and dispute resolution.
Please contact us via admin@koriatlaw.com or +2349067842241 if you have any question or require any assistance on any aspects of the above article.
The above article is for information only and not to serve as legal advice to readers.
