HOW TO REGISTER A CONSORTIUM IN NIGERIA

In today’s competitive business environment, many individuals and organizations face challenges executing large-scale projects that require diverse expertise, resources, and funding. Without collaboration, achieving these goals can seem impossible, limiting opportunities for growth and success in your business and vision.

Imagine losing out on lucrative contracts or groundbreaking projects simply because your resources or skills are insufficient. Worse still, entering into informal partnerships without proper legal recognition can lead to disputes, credibility issues, and loss of trust with stakeholders.

In Nigeria, registering a consortium provides a formal legal identity, ensuring credibility and compliance with regulations. By forming and registering a consortium, you can pool resources, share risks, and leverage collective strengths and expertise to achieve what might be impossible individually. This article will walk you through everything you need to know about how to register a consortium in Nigeria, enabling you to maximize opportunities and protect the interests of all members of the consortium.

WHAT IS A CONSORTIUM?

A consortium is a formal collaboration between two or more entities, whether companies or organizations established to achieve a specific objective or undertake a project. Unlike mergers or partnerships, consortium members retain their separate legal identities while working collectively towards their shared goal. For instance, in construction, banking, or technology projects, consortiums often enable resource pooling, risk-sharing, and access to broader expertise. The consortium stands to be dissolved upon achieving the goal (s) of registering it.

Having known the meaning of consortium, some features of a consortium stand to distinguish it from others such as a group of companies and subsidiaries. These features are as follows:

1. Temporary Structure: Consortiums are typically formed for a specific project or purpose and are dissolved upon its completion.

2. Shared Responsibility: Members divide the responsibilities, risks, and benefits based on pre-agreed terms during its formation.

3. Independent Legal Entities: Each member operates independently outside the consortium’s activities. This means that each company carries on its business while the consortium continues simultaneously.

4. Flexibility: The consortium’s structure allows members to collaborate without sacrificing autonomy.

LEGAL FRAMEWORK GOVERNING CONSORTIUMS IN NIGERIA

The formation and operation of consortiums in Nigeria are governed primarily by the Companies and Allied Matters Act (CAMA) 2020. Depending on the industry, consortiums may also be subject to sector-specific regulations, such as the Nigerian Communications Act for telecommunications or the Public Procurement Act for government contracts. Additionally, compliance with tax laws, labour laws, and anti-corruption measures is crucial. Some Key regulatory bodies overseeing consortium activities in Nigeria include:

i. Corporate Affairs Commission (CAC): Responsible for business registration and ensuring compliance with corporate regulations in Nigeria.

ii. Federal Inland Revenue Service (FIRS): This body oversees the taxation requirements of companies in Nigeria.

iii. Sector-Specific Regulators: Agencies like the Central Bank of Nigeria (CBN) or the Nigerian National Petroleum Corporation (NNPC), etc. may regulate consortiums in specific industries.

iv. Understanding these legal requirements is vital to ensure the consortium operates lawfully and avoids penalties.

HOW TO REGISTER A CONSORTIUM IN NIGERIA?

There are key requirements for the registration of consortium in Nigeria which are as follows:

a. Preliminary Agreements Among Consortium Members: Before registration, members need to draft a Memorandum of Understanding (MoU) outlining the consortium’s purpose, roles of each member, profit-sharing arrangements, and dispute resolution mechanisms. This document ensures all parties agree on the consortium’s structure and operations and will enhance the reduction of conflicts to the barest minimum.

b. Legal Documentation Required: Key documents required for the registration of the consortium could be as follows:

i. Articles and Memorandum of Association: The article will specify the rules governing the consortium’s internal operations. This article will also provide a winding-up clause upon the completion of the object upon which the consortium was formed. On the other hand, the memorandum will clearly state the object of the company sought to be registered.

ii. Memorandum of Understanding (MoU): Details the purpose and scope of the collaboration of the consortium.

iii. Board Resolutions: For corporate entities, resolutions authorizing participation in the consortium from each of the companies forming the consortium is a prerequisite for the registration of the consortium with the CAC.

c. Minimum Capital Requirements: While CAMA does not specify minimum capital requirements for consortiums, specific industries may impose financial thresholds. For instance, a consortium bidding for government contracts may need to demonstrate financial capacity. And also ensure they meet the minimum capital requirement for registration of different companies in Nigeria based on their objectives and areas of operation.

d. Compliance with Regulatory Bodies: The consortium must meet all requirements set by regulatory bodies such as tax registration with the Federal Inland Revenue Service (FIRS), obtaining necessary permits or licenses, and fulfilling sector-specific obligations like the banking sector, insurance companies, etc. Which are required to furnish with CAC a statement of affairs as prescribed in Schedule 14 of the Companies and Allied Matters Act.[1].

It is also paramount to note that the companies forming the consortium must ensure that they file their annual returns up to date with the CAC, to ensure the companies coming together to form the consortium are active under the CAC portal.

i. Minimum Number of Companies Required to Form Consortium: The companies forming the consortium must show evidence of not less than 3 companies coming together to form the consortium.

ii. Where a foreign company is involved in the formation of the consortium, the foreign company will provide evidence of registration in the home country.

iii. Application for Consent to Register the Consortium: This is done through the application and reservation of name. And if the name is approved when it is reserved, the registration will proceed in the same way other companies are registered with the provision of all other requirements for the registration of the company in Nigeria.

Upon satisfying the above requirements, the applicants may proceed to register the consortium.

WHAT ARE THE POST-REGISTRATION COMPLIANCE REQUIREMENTS FOR CONSORTIUMS IN NIGERIA?

It is important to state that there are other major things the consortium is required to do as long as the consortium continues, and some of them are as follows:

a. Compliance with Tax and Financial Regulations: Once registered, the consortium must comply with all tax obligations, including filing and paying corporate taxes, and Value Added Tax (VAT), where applicable. Non-compliance can result in penalties.

b. Submission of Annual Returns: The consortium is required to submit annual returns to the CAC to maintain its active status. These returns provide updates on the consortium’s operations and financial standing.

c. Maintaining Proper Records: Accurate record-keeping of financial transactions, operational decisions, and member contributions is essential for transparency, regulatory compliance, effective management, and continuation of the consortium without any conflict among the companies involved.

CONCLUSION

Registering a consortium in Nigeria involves several essential steps, from drafting key documents to obtaining regulatory approvals. Proper planning, compliance with legal frameworks, and adherence to post-registration requirements are critical to ensure a successful registration and continuation of the consortium in Nigeria.

Engaging experienced Corporate legal practitioners is highly recommended. This expert provides valuable insights, ensures regulatory compliance, and mitigates risks, allowing the consortium to focus on achieving its objectives efficiently.

This comprehensive guide ensures consortium members are equipped with the knowledge to navigate the registration process and establish a legally sound and operationally effective consortium in Nigeria. It is also important to state that this article “How to register a consortium in Nigeria” provides general knowledge about the registration process in Nigeria. For your specific legal advice on how to register a consortium in Nigeria, do well to contact us for proper legal advice.

 

[1] Section 733, CAMA,2020

Cynthia Tishion
Cynthia is a lawyer and currently serves as Head of Corporate / Commercial Services at LEX – PRAXIS. With her passion for business and entrepreneurship, she is actively engaged in creating awareness on the legal aspect of businesses through various platforms such as writing, public speaking engagements.
Cynthia Tishion

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