Why Appoint a Local Director?
Following the passage of the Companies and Allied Matters Act 2020 (“CAMA”), a foreigner can now set up and own a company 100% in Nigeria even if the foreigner is not within Nigeria. Once the requirements are supplied, the required fees are paid and the proposed business of the company is not unlawful or restricted and all other conditions are met, the Corporate Affairs Commission (“CAC”) would approve a foreigner’s application to incorporate a company in Nigeria usually within 48 hours. You can read more about the requirements and costs for company registration in Nigeria here.
However, a Nigerian company fully owned by a foreigner must have a local director for a number of reasons:
- Bank Account Opening: A foreign-owned company may be unable to open a bank account with any commercial bank in Nigeria unless its director/signatory has Bank Verification Number (“BVN”), an 11-digit number that is unique to every Nigerian having or seeking to open a bank account. So, without a local director who has a BVN, it may be impossible to open a corporate business bank account for the company.
- Tax Registration and Tax Return Filings: local tax authorities have designed their tax monitoring and enforcement systems to automatically tie local directors to the relevant tax obligations of a taxable company in Nigeria. Through the aid of technological automation, the federal tax authority (i.e. the Federal Inland Revenue Service) has integrated its tax collection and monitory system to the registration portal of the CAC to ensure that all persons seeking to register a company are not only made to pay for the necessary chargeable stamp duty on the company’s share capital at incorporation but also their contact details are retained for future tax payment and filing obligations.
- Local Address Requirement: As a condition for registering a company, the promoters must present a local address as the company’s registered address in Nigeria. This may not necessary imply the need for appointing a local director but because local address is a mandatory requirement for company registration, it helps to get things done faster if the local director is tied to the same address.
What is the average fee of a local director?
The amount of a local director’s fee depends on a number of factors ranging from the nature of business, associated risks, reputation of the promoters and/or experience of the director to be appointed. Some sectors, like the financial sector and now the real estate sector are heavily regulated in Nigeria. A director in such sector is required to have some minimum experience and faces stiff sanctions, prosecution and potential jail term or huge fine if the company it represents is found guilty of any industry malpractice or any other unlawful act including non-payment of due tax or non-filing of tax returns.
However, local director’s annual fees range from $5,000 to $15,0000 in financial sector (including FinTech sub-sector); $10,000 to $20,000 in gaming/betting industry, $20,000 and above in shipping and maritime business. Whilst these sums are negotiable, many Nigerians weigh the amount payable against the risks associated with directorship role and the release of their BVN, which is linked to their personal bank accounts and can potentially be used to commit fraud on them.
You can read more about the requirements and costs for company registration in Nigeria here.
