REQUIREMENTS AND COSTS FOR OBTAINING CROWDFUNDING INTERMEDIARY LICENSE IN NIGERIA

1. What is Crowdfunding Intermediary License?

 Crowdfunding is the process of raising funds from the public to finance a project or business (in exchange for the issuance of shares, debentures, or such other investment instrument) through an online platform called crowdfunding portal.

In order to set up and operate a crowdfunding portal in Nigeria, a crowdfunding intermediary license must be obtained from the Securities and Exchange Commission (“SEC”). The SEC has directed that all crowdfunding platforms in Nigeria must register and obtain license by 30^th June 2021 or cease operation.

2. What is the First Step in Setting up a Crowdfunding Platform?

 The first step in setting up a crowdfunding business in Nigeria is to register a 100 million share capital company limited by shares with the Corporate Affairs Commission (“CAC”). The object clause of the company must be in line with a crowdfunding business.

To register a company for the operation of a crowdfunding portal, the promoters would need the following requirements:

1. Two proposed names for the company (chosen names are subject to availability check and reservation);
2. Names, addresses, phone numbers, emails, signature specimen and a means of identity (the CAC now requires National Identity Card) of the Subscribers/Shareholders and Directors;
3. Information about the division of the shares amongst the shareholders;
4. Registered address of the company;
5. A total of N1,345,000 (One Million Three Hundred and Forty-Five Thousand Naira) as registration cost, which is broken down as follows:

• Filing Fee of N505,000 payable to the CAC (Five Hundred and Five Thousand Naira) for 100million share capital company (This is because the CAC charges N10,000 for the 1million of the 100million share capital, and N5,000 for every subsequent 1million of the remaining 99million share capital);
• Stamp duty of N750,000 payable to Federal Inland Revenue Service (“FIRS”) (This is because the FIRS charges 0.75% of the 100million on the share capital of the company).
• Certified True Copy cost of N15,000 payable to CAC (This is because the CAC charges N5,000 for the certified true copy of the Certificate of incorporation, the Memorandum and Articles of Association (“MEMART”) and the Extract of the Shareholders/Directors’ History of the Company all of which would be needed for the crowdfunding intermediary license application).
• N75,000 facilitation and miscellaneous fee to cover fast track of the process, Remita charges for all payments to CAC and FIRS, courier and other expenses relating to incorporation and application for certified true copy of the Certificate of incorporation, the MEMART and the Extract of the Shareholders/Directors’ History.

Where the applicant company is already registered with the CAC but perhaps for a different business and or with a share capital below 100million, then it would be necessary for the company to pass necessary resolutions and file necessary documents with the CAC for the increment of the company’s shares to 100million and to amend the MEMART and its object clause to reflect crowdfunding business. Please note that this process of increase of share capital and amendment of the MEMART would attract some or all of the costs mentioned above.

3. What is the Next Step?

Upon the registration of a new company (or increase of share capital and amendment of the MEMART of an existing company), an application for crowdfunding intermediary license can then be made to SEC. The application is to be submitted with the following documents:

1. Certified true copy of the certificate of incorporation of the company;
2. Certified copy of the MEMART (or amended MEMART) of the company;
3. Latest copy of audited accounts or statement of affairs signed by its auditors and management accounts that are not more than thirty (30) days old as at time of filing with the Commission;
4. CAC Form(s) showing Statement of Share Capital, Return of Allotment, and Particulars of Directors;
5. Two copies of existing or proposed by-laws or rules, and such other document governing the conduct of subscribers on the crowdfunding platform;
6. Sworn declaration to promptly furnish the Commission with copies of any amendments to its by-laws, rules, or codes;
7. Information relating to market facilities;
8. Detailed information about the crowdfunding system to be adopted by the company;
9. Profile of the company including structure and profile of its Management and postal addresses of previous employers, bankers and nominated referees of sponsored individuals. It must also include the name(s) and address(es) of the company’s subsidiaries/associated companies/related entities, the type of their business and percentage holding in them;
10. Detailed Curriculum Vitae and profiles of the promoters/shareholders, sponsored individuals and principal officers of the Crowdfunding Portal with a chronology of activities from Secondary School to date, all gaps in their employment and educational history should be explained;
11. Copies of credentials and relevant certificates, originals will be required for sighting by the SEC;
12. An application for registration of at least three (3) principal officers of the Crowdfunding Portal occupying the offices of managing director and two other officers. We usually advise that the two should be the chief operations officer (or compliance officer) and chief financial officer.
13. Police clearance report for each Sponsored Individual and directors;
14. Copy of a valid means of Identification of the Directors and the Sponsored Individuals of the Company;
15. Sworn declaration to keep such records and render such periodic returns as may be specified by the Commission;
16. Evidence of meeting the minimum paid-up capital requirement of N100 million in the audited accounts or statement of affairs of the company. The cash assets ratio shall be a minimum of 30% liquid assets and 70% fixed and other assets.
17. Current Fidelity Insurance Bond valued at a minimum of 20% of the paid-up capital (i.e. N20,000,000).
18. Operational manual of the company;
19. Business plan;
20. Bank statement of accounts operated by the Company for the last 6 months for existing company.
21. Any other information required by the SEC.

Please note that the Applicant is required to have an operational office which may be inspected by SEC before the grant of the Crowdfunding Intermediary Licence.

4. What are the applicable fees payable SEC for the crowdfunding intermediary license?

At the time of submission of the license application to SEC, the applicant company would be required to pay to SEC the following:

1. Filing/Application Fee – N100,000 (One Hundred Thousand Naira);
2. Processing Fee – N300,000 (Three Hundred Thousand Naira);
3. Registration Fee – N1,000,000 (One Million Naira);
4. Sponsored Individual Fee – N100,000 (One Hundred Thousand Naira) for each sponsored individual (not less than 3 sponsored individuals, i.e. N300,000 for the three persons).
5. Miscellaneous Expenses may apply for Police clearance for the three sponsored individuals, Remita charges courier and other expenses. 

5. What are the timelines for completing registration and obtaining the crowdfunding intermediary license?

The incorporation of the company usually takes 24 hours (i.e. 1 day). The crowdfunding intermediary license may take between 3 to 6 months given our experience on the procedure of SEC.

Please note that the SEC may require the sponsored individuals to be tested by written or oral examination (where applicable) before the grant of the license.

Please contact Koriat & Co. through admin@koriatlaw.com or 09067842241 if you require additional information about or assistance in making the application for crowdfunding intermediary license.