Can a foreign-owned business in Nigeria be registered as a business name? In this article, we will examine the laws, regulations, and policies governing business registration in Nigeria, especially by foreigners to provide an elaborate answer to the above question.
To create a business-friendly environment for foreigners interested in operating in Nigeria, the Nigerian government has implemented various legislation and policies aimed at promoting and attracting foreign investments. Notable laws include the Companies and Allied Matters Act (CAMA) 2020, the Nigerian Investment Promotion Commission (NIPC) Act 2004, the Expatriate Quota Act, and the National Office for Technology Acquisition and Promotion (NOTAP) Act. These laws govern the establishment, operation, and management of foreign businesses in Nigeria. It is essential for foreigners wishing to do business in Nigeria to understand these legal provisions, particularly regarding the permissible legal structures, to avoid any queries, sanctions, or potential deregistration by government-approved regulatory agencies.
CAN A FOREIGNER START A BUSINESS IN NIGERIA?
Generally, Nigeria operates are free market economy. In other words, there are no laws restricting foreigners from doing business in Nigeria. Foreigners can invest or participate in the operation of a business in Nigeria either through foreign direct investment or foreign portfolio investment.
Foreign Direct Investment (FDI): A foreign direct investment (FDI) is the acquisition of an ownership stake in a company by another organization or investor domiciled outside of the country’s jurisdiction. This can be achieved through either: buying a significant stake in, buying a foreign company outright to expand its operations to a new region, or starting a business in a foreign country.
Foreign Portfolio Investment (FPI): This entails the indirect participation in a business by purchasing Shares in an already incorporated Nigerian company, typically through Nigerian capital markets. It is the passive ownership of securities, with no active management or control by the investor.
CAN A FOREIGN-OWNED BUSINESS IN NIGERIA BE REGISTERED A BUSINESS NAME?
No, a foreign-owned business in Nigeria cannot be registered as a business name. It has been ascertained that foreigners are allowed to own businesses in Nigeria. Under our Nigerian Corporate laws, business entities can be registered as either of the following:
- Business name
- Private Company Limited by Shares
- Public Company Limited by Shares
- Company Limited by Guarantee
- Limited Liability Partnership
Therefore it is necessary to determine what kind of business entity can be registered by foreign-owned businesses under Nigerian law.
To answer this question, we will consider the relevant laws and regulations below;
NIGERIAN INVESTMENT PROMOTION ACT (NIPC) 2004:
Section 17 of the Act provides:
“Except as provided in Section 18 of this Act and subject to this Act, a non-Nigerian may invest and participate in the operation of any enterprise in Nigeria’’
Section 19 provides –
“An enterprise in which foreign participation is permitted under Section 17 of the Act shall not commence business except it is incorporated or registered under CAMA”
Section 20 (1) –
“An enterprise in which foreign participation is admitted under Section 17 of this Act shall before commencing business apply to the Commission for registration”
Although the NIPC Act does not explicitly state whether a foreigner can register a business name or company in Nigeria, it can be inferred from Section 17 of the NIPC Act that foreigners are allowed to operate any type of enterprise. In this context, “enterprise” refers to:
“.. an industry, project, undertaking or business to which this Act applies or an expansion of that industry, undertaking, project or business or any part of that industry, undertaking, project or business and, where there is foreign participation, means such an enterprise duly registered with the Commission;” (See Section 31 of the NIPC Act)
It can be inferred from Section 19 of the NIPC Act that a foreigner may only begin business operations after registering that business under the Companies and Allied Matters Act (CAMA). The Act does not specify whether the business should be registered as a business name or a Limited Liability Company.
COMPANIES AND ALLIED MATTERS ACT (CAMA) 2020
The Companies and Allied Matters Act is an important piece of legislation that outlines the process for foreign businesses to register in Nigeria. In this discussion, we will analyze the relevant provisions of the Act to understand the types of businesses that foreigners are allowed to register in Nigeria.
Section 650 of the Companies and Allied Matters Act 2020 (CAMA), defines “an alien (foreigner) as a person or association, whether corporate or incorporated, other than a Nigerian citizen or association”.
The Companies and Allied Matters Act 2020 put this in proper perspective as it provides in Section 20 (4) that, “subject to the provisions of any enactment regulating the rights and capacity of aliens to participate or undertake in a trade or business, an alien or a foreign company may join in forming of a company”.
In addition, the Companies and Allied Matters Act, 2020 (“CAMA”) it provides in Section 78 as follows:
“Subject to sections 80 – 83 of this Act, every foreign company which before or after the commencement of this Act was incorporated outside Nigeria, and having the intention of carrying on business in Nigeria, shall take all steps necessary to obtain incorporation as a separate entity in Nigeria for that purpose, but until so incorporated, the foreign company shall not carry on business in Nigeria or exercise any of the powers of a registered company and shall not have a place of business or an address for service of documents or processes in Nigeria for any purpose other than the receipt of notices and other documents, as matters preliminary to incorporation under this Act.”
According to the joint provisions of the aforementioned sections of the Companies and Allied Matters Act, foreigners are permitted to register a company. It is important to note that the Act does not specify the type of company a foreigner may register. Therefore, it can be concluded that the term “company” encompasses private, public, limited, and unlimited companies.
Section 26 provides:
“Foreign nationals may hold 100 percent equity in enterprise and undertake any type of business in Nigeria except the following:…”
Section 788 provides:
“A foreign limited liability partnership which before or after the commencement of this Act was incorporated outside Nigeria, and having the intention of carrying on business in Nigeria, shall take all steps necessary to be incorporated as a separate entity in Nigeria for that purpose, but until so incorporated, the foreign limited liability partnership shall not carry on business in Nigeria or exercise any of the powers of a corporate body registered under this Act and shall not have a place of business or an address for service of documents or processes in Nigeria for any purpose other than the receipt of notices and other documents, as matters preliminary to incorporation under this Act….”
From the above Section, it can be deduced that foreign-owned businesses can undertake any type of permissible business activity and hold 100% equity in an enterprise. Equity is common to companies. It is the value returned to shareholders when all assets and debts have been paid. A business name does not have equities or shareholders.
A foreign owned businesses can also be registered as a Limited Liability Partnership in Nigeria. A limited liability partnership is a type of business entity that has both the benefit of a company and the flexibility that comes with a partnership. The partners are only liable for the amount of money they invest and undertake liability to the partnership based on the extent of the amount they undertake to contribute in the event of an occurrence. This type of entity in practice is relied on by professional service providers such as law firms, accountants, etc.
Therefore, a foreign-owned business in Nigeria can undertake any type of business activity and the same can be done through a company as only companies have equities or a limited liability partnership.
CONCLUSION:
The Nigerian economy affords foreigners the liberty of doing business in any part of Nigeria. The operations, registrations, and management of the business are regulated by the relevant laws and policies of the country. The NIPC Act encourages and promotes investments in the Nigerian economy. Under this Act, foreigners are allowed to register any business venture so long as it complies with the Act. However, in CAMA 2020, a foreigner can only register a company or a limited liability partnership. Although the CAMA is silent on the type of “company” a foreigner or foreign-owned business can register, it is safe to say, having examined the above regulations, that a foreign-owned business in Nigeria cannot be registered as a business name.
For further inquiries or legal advice, please contact us through the Whatsapp icon on this page or HERE, and we’ll respond to you.
