Frequently Asked Questions: Company Registration in Nigeria. All you need to know:

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Frequently Asked Questions: Company Registration in Nigeria. All you need to know:

Frequently Asked Questions: Company Registration All you need to know:

So this is a new Company registration Bible for all of you and i have compiled all your questions from the last 6 months and will answer all of them in a simple format from A-Z. So no more questions asking the same thing over and over;

QUESTION: what is the minimum amount of shares to be registered that is extremely popular?

ANSWER: 1 Million shares

QUESTION: How many people can share that 1 Million shares in that company?:

ANSWER: 2-50 people

QUESTION: What do shares mean and precisely what does 1 million shares mean to me?

ANSWER: Shares mean the amount of rights you own in a company usually calculated in money terms. E.g if a company is said to worth 1 million shares and you have 300,000 shares out of that 1 Million shares, automatically you own 30% of that company. So when there is a profit, you get 30% of that profit and if there is a loss, you get 30% of the losses.

QUESTION: Why do people register 1 million shares? Why cant it be higher or lower?

ANSWER: Because it is easier to calculate and round up to 100%. If you register any thing lesser than 1 million shares, you still pay the price for 1 million shares and you might have to upgrade to a million or more shares in future that means paying more money for what you could have done easily today.

QUESTION: How many people can form a company and what’s the popular choices?

ANSWER: 2 or more but not less than 2 people unless it becomes a sole proprietorship or one man business.

QUESTION: These 2 or more people that form companies are called what?

ANSWER: Directors

QUESTION: Can anyone be a director?

ANSWER: NO? People of unsound mind, people declared bankrupt and Minors cannot be a director (Minors are people under 18 years)

QUESTION: But i have a 15 year old financial whiz kid that i want to form a company with. Why cant he be a director?

ANSWER: The minor can be a director in the company as long as there are 2 other Adults listed as Directors in the company e.g Daddy, Mummy and Child but not Daddy and Child alone (So 2 or more adults and Minors can follow)

QUESTION: If i am forming a 1 Million share company, does that mean that i have to have 1 Million Naira to start a company to reflect the share structure?

ANSWER: No! You dont have to have a dime but it is generally assumed that you should have at least 25% of the capital to start the business to procure furnitures, pay rent, utilities etc.

QUESTION: what then does the 1 Million shares truely worth in my company?

ANSWER:   It simply means the value of how profitable and powerful the company is worth. E.g Take Nairaland for example, if Seun Registered Nairaland Nigeria Limited in 2001 for one million shares and started nairaland with just 7 members, the company then, would have been worth that 1 million shares because it is growing and anyone that wanted to buy it wouldnt have valued it beyond 1 Million Naira, but as per today that it has over 200,000 members with a lot of potentials, any one that wants to be a share holder would never value it at 1 million shares but probably 100 million shares at N1 PER SHARE and if N1 PER SHARE was equivalent to 1 Million shares and seun had 50% shares which is equals to 500,000 shares in 2001 now for you to buy a share in his company that is now worth 100 million shares, it will no longer be N1 per share but N10 per share because the company has appreciated in value over the years

QUESTION: OK! I want to form my company, what are the basic things i need to do immediately first?

ANSWER: Choose 3 Unique names for the corporate Affairs commission to choose one during the search for name

QUESTION: Whoa! Slow down! Your confusing me! What is Corporate Affairs Commission, why choose 3 names and what is search for name?

ANSWER: Corporate Affairs Commission is the body responsible for the registration of companies in Nigeria and it is usually known as the CAC as its short form. Just like NAFDAC is responsible for drugs and EFCC is responsible for financial crimes, the CAC is responsible for registration of all companies.

Also, before you start to even register a company, you have to have an idea of what your company will be called. E.g Dangote Nig Ltd or Coca-Cola Nigeria ltd are just example of names of registered companies to do business in Nigeria. If you dont have a name, then you cant have a company, but because there are over millions and millions of registered companies in Nigeria today, it is extremely difficult to find a name that is not already in existence that is why you must choose 3 names that are unique and the CAC will choose one out of the 3

QUESTION: okay i have one name, Kelechi and Bros Nigeria ltd and i like that name so badly, what can i do to have that name?

ANSWER: Absolutely nothing because if someone in Jigawa state in 1995 has registered Kelechi and Co Nigeria Ltd (Remember that this one is not Kelechi and Bros but Kelechi and Co), CAC will reject that name and query it because it sounds too similar to Kelechi and Co and someone somewhere in Ebonyi State has registered that exact name Kelechi and Bros Nigeria Ltd. That is why you have to be unique in choosing a name for search purposes

QUESTION: How long is a name search supposed to take?

ANSWER: In a dream world in the CAC is supposed to take 3-7 days for the name to be approved but in the realworld of the bureaucrats at the CAC, it could take up to 1 month (Dont ask me why, ask the Director General of the CAC)

QUESTION: I have a business name that i registered in 1993 called HOLY GHOST FIRE PURSUE THEM VENTURES and i want to upgrade it to a company, what can i do? I like that name and i cant think of any other Unique name but only this one?

ANSWER: No problem, all you need to do is attach the business name certificate of Holy ghost fire Pursue them ventures with the search for name form and ask the CAC to upgrade it to Holy Ghost fire Pursue them Nigeria limited

QUESTION: I live in Manchester U.K and i have a company or business name called I DISLIKE LABOUR PARTY LIMITED and i want to operate a company in Nigeria using this same name and certificate, can i use them without registering it in Nigeria or what are the Alternatives?

ANSWER: No you cant use I DISLIKE LABOUR PARTY LIMITED U.k To establish a business here with that same certificate. You must register a new company name to reflect that it is in Nigeria it was registered

QUESTION: But i can see that Microsoft is in the U.S and U.K and also in Nigeria? Isnt it the same name they are all using?

ANSWER: No it isnt. Microsoft Ltd U.K was registered in U.K and Microsoft Nigeria Limited was registered in Nigeria. All they did was join the business name certificate of the U.S or U.K branch and attached with with the search form and wrote an application letter asking for the same name to be registered as a branch of a global company using the same name.

QUESTION: Must every company end as Nigeria Limited?

ANSWER: No! Nigeria is not a must but the word LIMITED is a must and not an abbreviated form as LTD. But in most situations, most companies try to add the Nigeria Limited to aid their chances of registering a Unique Name that would avoid a query

QUESTION: What if my unique names are not chosen, what happens?

ANSWER: You have to have to start the whole Process again and pay new fees to the CAC for the search of a new name to be provided by you again. The CAC can reject your names a million times and a million times you pay to conduct a name search again and another extra 2 weeks to get the name out. It could be very frustrating, so pick unique names to save time and money

QUESTION: My Chosen unique company name “I HATE ABACHA NIGERIA LIMITED” was chosen and selected by the CAC but i fell sick for a while and couldnt sign the forms or continue the registration for some time what can i do?

ANSWER; Normally, once the name has been chosen, you have within 60 days to complete the whole registration process of filing and filing out forms but if after 60 days, you fail to continue the registration, you can re-apply for a new name search form to use “I HATE ABACHA NIGERIA LIMITED” again by attaching the first approved search form that approved “I HATE ABACHA NIGERIA LIMITED” with the new form. It is called Revalidation and it takes 2 weeks for CAC to accept that name and allow you to continue that registration with that name for the next 60 days but as usual it costs money as a late penalty fee for filing out of time

QUESTION: Once “I HATE ABACHA NIGERIA LIMITED” Has been chosen, can my friend or anyother person in Nigeria use that name as a business name?

ANSWER: Never! Except you have run afoul with some rules of the CAC by refusing to pay your annual returns (I will come to that later) or the company has ceased to exist

QUESTION: Okay! I understand what the search for name is all about and why i should choose 3 unique names! So what is next after the name selection?

ANSWER: The next thing is to choose your Directors wisely

QUESTION: What do you mean by choosing your directors wisely? If i get you correctly, you said earlier on that between 2-50 can register a company and if my 15 year old child wants to be a director, he can be a director as long as 2 or more adults above 18 are directors. So whats the choose wisely talk again?

ANSWER: It means most people choose directors based on sentiments. Just because they want want to keep it as a closely knitted company where they can control all the shares, they choose wrong people. Some choose fiancées, uncles, step brothers, best friends and a host of people that they are sentimentally attached to at first but later on when the complexities of the business begins to take its toll, they begin to regret why they chose that party to be a director. Being a director of a company is a very very powerful position and no matter how small that director is in terms of the number of shares he or she is holding in that company, the person can do and undo. You cannot wake up one morning and decide that a director who is a share holder should be removed as a director because the person is greedy, lazy, ineffectual or isnt contributing anything tangible and you cannot overpower that director and take over their shares abitrarily overnight.

That director no matter how ineffectual or incompetent will always be entitled to the share profits or loss that accompany the business except you buy him out or he resigns and it has some very strict procedures to be followed before the director can be removed. What about having a finacee you adore today as a director and tomorrow you hate his or her guts, whether you like it or not, you guys are still bound by that company shares until something drastic happens to terminate it. So thats why i say choose wisely.

QUESTION: Okay i get the picture. Actually i was dating this dragon lady 2 years ago and i hate her guts now and i dont want her as a director anymore and to make matters worse, the other director my best friend in University is one Bungling ineffective lazy soil and they are both weighing me down now. I have met other people who i can do business with and would love them to be directors in that company. How do i get rid of those Hacks and replace them with these Business Gurus?

ANSWER: You have to have meeting where the directors have agreed that one or more of them intends to resign. This is called a Special resolution meeting which must be drafted in a minutes form to submit to Cac. Also the Special resolution meeting would approve the appointment of the new director or directors which has to be signed by a Director and Secretary of the company to show that one director has been effectively removed and a new one replaced. Also a new filing registration of a particular form called Form C07 which is a change of directors form has to be purchased and filled and submitted to the CAC to ratify the changes. Also a letter showing that the new directors have consented to become new directors. Payment of the filing fees and the letters of resignation of the former directors with their signature.

Because a new director has been brought in, the share structure must reflect the new changes in favour of the new director, a special resolution meeting signed by at least 2 directors, payment of the filing fee for filing a new change of share structure which is called Form C02 AND THE PAYMENT OF ANNUAL RETURNS and because the new directors have to be reflected in the memorandum and Articles of Association, you have to have a special resolution meeting signed by a director and secretary to be filed within 28 days from the date of the resolution, paying filing fees again, re stamping of the Altered Memorandum at the Federal Inland Revenue Service and show evidence of up to date payment of your Annual Returns.

Now tell me whether all these unnecessary hassles are necessary? The amount of money you will spend will even surpass the original registration fees just to change a director that you sentimentally chose at the beginning who is now a torn in the flesh for your company. In fact CAC will be praying for you to choose Incompetent hacks that you will hate in future so as to bring more money for them. So choose wisely once again your directors.

QUESTION: Okay! Now i am choosing carefully who i want as my director. I have just cancelled PASUMA as one of my directors because i like his music but i am not sure we can do business together and i cant pay all these money to Cac in future. I think i will use my dear wife and Dangote only. What else do i need again?

ANSWER: The full names, ages, year of birth and residential addresses of all the directors must be supplied for filling the registration form and filing to Cac.

QUESTION: But one of the Directors lives in Iraq and the other one in Afghanistan? Can they also be directors too and their addresses be in Baghdad and Kabul?

ANSWER: Of course, as long as one of the directors lives in Nigeria with his residential address listed as a Nigerian Address. But for the sake of clarity and unnecessary Queries, all the directors should just adopt a Nigerian Address to save time and stress at the CAC.

QUESTION: Why do they want to know my age and date of Birth? Do they want to use it for witch craft?

ANSWER: No, its used to determine who is a minor and who is an Adult as directors (Its confidential)

QUESTION: Okay! I feel safe now! You know Naija Pipo and their Juju Mind  . Anyways whats next?

ANSWER: You have to supply the registered Proposed Address of the head office of the company

QUESTION: Haba Lawyer! I dont have the money to rent another shop or office space. My landlord is already disturbing me for this years rent in my apartment, talkless of getting an office space in Ikoyi. We can only do that in future when money begins to flow. What can we do abeg?

ANSWER: This is not a problem per se. You can use your apartment or a known place that you feel comfortable with as your office address and contact address and register that address at the CAC as the contact address for now. No body is going to disturb you but if in future you move to a bigger and better place, you will have to notify the CAC for a change of address by purchasing and completing its application forms, Purchasing the change of address form, write an application for chAnge of address, show evidence of the payment of Annual returns till date and pay the filing fees for change of address.

QUESTION: okay what next! Cac WAHALA too much o if you default in anything!

ANSWER: You and all the directors will have to sign all the filing forms and memorandum of association before filing for stamping and verification.

QUESTION: Which one is Memorandum of Association again? Haba

ANSWERA Memorandum of Association in a very simplified term means is a document that states all the kinds of businesses that you are permitted and entitled to operate and run by the CAC. It provides for the kinds of things you will like to do as a business. These things permitted for you to do as a business by the CAC are called “OBJECTS OF A COMPANY” and it also provides for the name of the proposed company and its head office.

For example, If you are interested in starting your own traveling agency and you have always nursed the idea of being a sucessful travel agent, an example of one the objects in the Memorandum of association could look like this:

(1) To carry on the business of Travels and Tours in all its ramifications, Airline ticket agents, Travel agents and advisors, Tourism agents.

If you have always nursed the idea of going into hotel hospitality, entertainment and lifestyle,an example of an object in the Memorandum of Association relating to the hospitality business could look like this:

(2) To carry on the business of hotel, restaurant, tavern, bar house and lodging-house keepers, wine, beer and spirit merchants, drinking parlor and nightclub operators, to organize carnivals and any branch or subsidiary businesses commonly carried on or connected therewith

The aim of the object is to try as much as possible to include everything that would relate and are in common with that kind of business so that in case one part of the business fails financially, you can also switch to another branch of that department and you wont be penalized by the Cac in case you do a business outside the scope of the objects of the memorandum of association.

QUESTION: What do you mean by being penalized by doing a business outside the scope of the Objects of the Memorandum of my Business?

ANSWER: Simple, if your object of the company only gives you the authority to go into computer sales and maintainance, hospitality business, fashion designing and oil and gas alone and tomorrow you decide to venture into Forex trading and you intend to use that same company Memorandum to chase contracts or clients or present it to a big corporation as your company profile, upon search and Investigation, if it is discovered that you do not have the right to pursue that kind of business with that same company memorandum, you could be heavily fined by the Cac or liquidated and in some instances, criminal charges could be brought against you for falsification and impersonation. Generally it is a major weapon the CAC uses to deal with erring companies who run afoul of its rules. So the best way out of this is to instruct your solicitor on what you specifically want to do as a business and the likely things you want him to add to cover future lapses or suprises.

QUESTION: Okay i get the scenario but how would i know the kind of objects or businesses that are permitted by the CAC that falls within the 1 million shares and not run into their trouble tomorrow?

ANSWER: This is a very wide question but i can list some kinds of businesses that can be done simply with 1 million shares and can be included as its objects without any wahala. They include;

1. Hospitality, entertainment, fashion etc

2. Computer related business (Except as a consultant)

3. Oil and Gas

4. Farming and Agro Allied businesses

5. General Contractors, importers and exporters

6. Transportation, Transport sales and shipping agents

7. Manufacturers and Producers (But sometimes you need a certificate of proficiency here)

There are so many and its left for your solicitor to advise you on which one is appropriate for you to do cheaply and without certificates of proficiencies

QUESTION: Slow down lawyer, which one is Certificate of Proficiency again? I thought everything can go through easily and i noticed you said i cannot go into the computer business as a consultant. Why is this so?

ANSWER: Before you register a company that requires a lot of technical and financial input, the CAC has devised a new means of screening out touts and quacks from proclaiming to be masters in a certain field that requires extreme expertise. E.g while everyone can go into the business of computers easily, for you to be a consultant to represent to people that you can act as a computer consultant, you must have a MBA degree granting you the opportunity to consult. I know this rule is not fair but that is the rule.

Likewise for people that want to go into financial marketing, they must show their degrees and masters’ degree to show that they are well grounded in the art of financial wheeling and dealing. Sometimes the CAC also looks at the number of years of experience the person has before they grant that company to be registered. In short there are so many businesses that the CAC would frown upon that would not succeed in being registered until there is a certificate of proficiency and its left for your solicitor to advise you accordingingly to avoid grave embarrassment and extra registration expenses.

QUESTION: But my brother wants to go into FOREX TRADING and wants to register his company, Forex is done Online so would he need a degree too?

ANSWER: In fact those that want to register a Forex company have a much bigger wahala to face at the CAC than most companies because they treat it as a bureau d’ change and you are required to have licenses from the CAC and a minimum share capital of not 1 million shares but N40 Million shares.

Others include:

1. Issuing Houses: 150 MILLION

2. Stock Exchange: 500 million

3. Private Sector Pension Fund Managers: N50 MILLION

4. Travel Agencies: 2 million

5. Guard/Security Companies: 2 million

6. Registrars: N50 MILLION
And a host of others i can’t remember off hand now. So you have to consult your solicitor to give you a clearer view of what falls within your share capital and what certificate of proficiency you need. Also for every extra Million shares, you pay an Extra N10,000 to the CAC. So if your business is to open a Pension fund Management, apart from the regular CAC filing fees from CAC, you will now pay an extra N10,000 for every other 1 million so if its 50 million shares, you have to pay the regular 1 million shares fees but an extra N10,000 For every other 1 million which is equals to N500,000 to register a Private Pension Fund Management.

You now see why the CAC is one of the richest Organizations in Nigeria? lol

QUESTION: Okay i think i get the whole scope of company registration and its dos and donts, but how much does it cost and what do i need?

Answer; On this note, i will shut my mouth up and keep that secret because if i state the exact fees, i expect a barage of lawyers to kill me for spoiling business but i can confidently tell you this, it depends on the lawyer and how he bonds with you with his legal fees but not filing fees but the CAC filing fees fluctuates every now and then, so you cannot put a specific price on it.

Last year i once advertised that the cost of doing it was N45,000 plus legal fees to assist nairalanders and 5 weeks later i was forced to pull it out because of the sharp increase from the CAC and i was struggling to reconcile the prices i quoted on nairaland for nairalanders and what the CAC charged and i had to use a lot of out of pocket expenses to complete the job since i was the one who blatantly quoted an old fee, so i would still prefer that to be a private thing via email to tell you the price.

QUESTION: So are you telling me that once a fee has been agreed, the next thing is that you will register it today and tomorrow my certificate will be ready abi?

ANSWER: I wish it was that easy but the people at the CAC are from another planet entirely. Normally it starts with paying for the name search which should ordinarily take 1-3 days to be ready but now it can take as long as 30 days for your name to come out. It is not fixed from their side, so you have to put it in prayers. After That, the memorandum of association would be drafted to include all the objects, the directors, share capital and all the information needed and you the directors have to sign each of the forms and memorandums personally with your own signatures because they verify signatures and exclude signatures that do not correspond, after that it is presented for stamp duty and filing of your tax returns for the new company and that takes another 1 week and it is now ready for inspection and verification to see if you have the requisite knowledge, expertise and education to pursue that particular business.

If they see any clerical error or one object has been smuggled in without following due process, the memorandum will be discarded and you have to start all over again to get it right and you spend more money trying to recover from the mistakes. If it sucessfully passes the scrutiny of the egg heads during verification, you paid the final fees immediately for filing and stamping and you now have to wait for the CAC to remember to print your certificate on time and the certified True copy. So we are looking at 3 months to 4 maximum

QUESTION: What is the certified True copy? I thought it was only a certificate you get?

ANSWER: Your quite correct, your only entitled to a certificate, but lawyers have found a way to beat the system on behalf of the clients and it works for the CAC too. A certified True Copy also know as a (C.T.C) is a copy of the memorandum of association that has been verified and stamped as an exact true copy of the memorandum of association in CAC’s possession and file. Normally, the solicitor is supposed to only prepare 2 copies of the memorandum of association because one goes to the Federal Inland Revenue department and the other one goes to CAC and you are left with no copy but with that CTC, you have a copy of the memorandum that has been duly stamped and certified as a true copy from the CAC.

The advantage of this is that with this CTC you can present it to any company to inspect its objects for business, to help you conduct businesses with banks, tender it for auctions or government contracts etc when these big corporate institutions need them. If you dont have a CTC, you will force the company to go and do a search for that company at the CAC to obtain the CTC and inspect the directors and Objects and share capital and you will be billed for that search by the corporation. So imagine how many times you will be shelling out money for company searches? Now the truth is that a CTC is not compulsory or mandatory but common sense dictates that you MUST have it to protect your interest and future because of the above named Hazards. But to obtain it is at a cost to the CAC but it is quite affordable. The disadvantages for not getting it includes the following:

1. If you now want to obtain it after your company has been registered, you have to show your tax clearance, your anual returns, write a letter to the director general of the CAC why you need it, purchase application forms and pay the filing fees for the new CTC which is double the price compared to when you ought to have gotten it cheap during registration and avoiding the hassles involved. This is where CAC makes money because they know you will come back someday for it. So be wise and obtain that copy. Its for your own good!

Source: Ekere Nelson (Legal Practitioner)