1.
The
Requirements For Setting Up A Subsidiary In Nigeria By A Foreign Company
Foreign
Company has been defined to mean a company incorporated elsewhere than in
Nigeria[1].
It suffices to say that a foreign company is a legal fiction yet to be
registered in Nigeria, but already existing in another jurisdiction.
Before
a foreign company can function effectively in Nigeria, i.e. be foisted with the
powers of a natural person as guaranteed under the Companies and Allied Matters Act hereinafter referred to as CAMA[2],
it must be duly incorporated[3].
However, this position is subjected to various exceptions and exemptions
provided for under the enabling laws[4].
The
Appeal Court in the celebrated case of Protocol
& Gamble Co v. G.S & D Ind. Ltd[5]held
as follows;
“in order for a
conglomerate to carry on business in Nigeria, it must incorporate a company in
Nigeria as prescribed under section 54 of Companies and Allied Matters Act”
The
following, backed up with statutory provisions are the requirements for setting
up a subsidiary by a foreign company in Nigeria;
·
Incorporation/Registration:
Section 54(1) CAMA stipulates
“...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, and 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 receipt of notice and other documents as matters
preliminary to incorporation under this Act”.
Moreso,
a registered company has been defined as;
“a
company incorporated or deemed to be incorporated under this CAMA”[6]
In
furtherance, the Companies Regulation
2012[7],
provides for other requirements which must be fulfilled by any company (whether
foreign or not), seeking incorporation/registration. They include;
“Form of approval for
name, Duly completed set of
incorporation forms, Duly stamped
memorandum and articles of association,
Photocopy of information page of international passport or national identity
card for each director and subscriber,
Evidence of consent letter where applicable Proficiency certificate where
applicable, Residence permit in case
of resident foreigners, Photocopy of duly verified Particulars of Directors, Statement of Share Capital and Return
of Allotment of Shares together with memorandum and articles of association for
certification as true copies, An
affidavit stating circumstance of cancellation or alteration in the signature
on any document or any difference in the name on stamp duty receipt and name on
other documents”.
Having
stated incorporation/registration as a requirement, it is imperative to state
that the president has a discretionary power to grant applications for
exemption from incorporation by a foreign company, if in his opinion, the
circumstances are such that renders the granting of the application expedient.
For
a foreign company to apply for exemptions, it must satisfy the following;
i.
Foreign companies
invited to Nigeria by or with the approval of the Federal Government to execute
any specified individual project.
ii.
Foreign companies which
are in Nigeria for the execution of specific individual loan project on behalf
of a donor country or international organization
iii.
Foreign government
owned companies engaged solely in export promotion activities; and
iv.
Engineering consultants
and technical experts engaged on any individual specialist project under
contract with any of the governments in the Federation or any of their agencies
or with any other body or persons, where such contract has been approved by the
Federal Government.
·
Requirement
as to Share Capital: The terms ‘share
capital’ has not been succinctly defined in our laws. However, it refers to the
portion of a company’s equity that has been obtained by trading stock to a
shareholder for cash[8].
Share capital can be distinguished into authorised or nominal, issued, paid-up,
reserved or equity share capital[9].
The
share capital required varies, as it is determined by the type of subsidiary to
be incorporated by the foreign (Parent) company. Section 27(2) CAMA, stipulates that the share capital of a Private
Company shall not be less than N10,000.00 (ten thousand naira) while that of a
public company (PLC) shall not be less than N500,000.00 (five hundred thousand
naira). Where the company to be formed is a company limited by Guarantee, share
capital shall not be required, the members merely undertake to contribute the
subscribed amount (not less than N10,000 00 ) in the event of winding up.
2.
Whether
Or Not A Subsidiary Can Be 100% Foreign Owned, Circumstances That Stipulates
Such.
It
is undisputable that a company can be 100% foreign owned. Section 26(1) of the Company Regulations[10]
provides as follows:
“Foreign nationals may
hold 100 percent equity in business enterprise and undertake any type of
business in Nigeria except the following:
(a) Production of arms,
ammunitions, etc
(b) Production of and
dealing in narcotic drugs and psychotropic substances
(c) Production of military
and Para-military wears and accoutrement, including those of the Police and
Customs, Immigration and Prison Services
(d) Such other items as
the Federal Executive Council may from time to time determine in the negative
list.”
This in essence is res ipsa that a foreign company whether a subsidiary or parent
company, can be totally owned by foreigners if its object clause does not fall
within those prohibited by the relevant legislations in Nigeria.
3.
Difference
Between A Public Limited Liability Company (Plc) And Private Limited Liability
Company (Ltd)
This
question borders on Sections 21, 22, 24, 27 and 99 of the Companies and Allied Matters Act 2004.
The
Distinguishing factors between a private limited liability company (Ltd) and a
Public Limited Liability Company (PLC) although not exhaustive, includes the
following;
(1.) An
Ltd by its Articles of Association restricts the transfer of its share while a
PLC can offer its shares and debentures to the public, thereby making access to
funds and liquidity of cash readily available.
(2.) An
Ltd shall possess a minimum of 2 members and a maximum of 50 members, while a
PLC has no restrictions as to the maximum number of members
(3.) An
Ltd cannot offer its shares or debentures to the general public. This does not
apply to a PLC.
(4.) The
name of a Private Limited Liability Company must end with the word (Ltd), while
that of a Public Limited Liability Company must end with (PLC).
(5.) An
Ltd has no restrictions as to appointment of over aged directors; a PLC has
restrictions as to appointment of overage directors above 70years. (Except here,
special notice is given to members).
In conclusion, a general overview of the questions
asked will reveal that it borders on Modes of Foreign participation in Nigeria.
It is therefore apt to delve a bit into these modes which are determined by the
interest area of the foreign investor.
The various modes of foreign participation are;
(a)
Foreign
Direct Investment (FDI)
They are direct investments by foreigners who invest
in Nigeria via registered companies. They may either be subsidiaries of already
existing parent companies, or a newly incorporated company.
A foreign company planning on carrying on business
in Nigeria through its subsidiary must obtain relevant permits from the
relevant agencies such as; Nigeria Immigration Service (NIS), Corporate Affairs
Commission (CAC), Nigeria Investment Promotion Commission (NIPC), National
Agency for Technology Acquisition & Promotion (NOTA),[11]
Central Bank of Nigeria (CBN),[12]Securities
and Exchange Commission (SEC) etcetera.
(b)
Portfolio
Investment (PI) and
These relates to investors who intends to purchase
shares in existing companies through the capital market.
(c)
Unregistered
exempted companies.
These are foreign companies ho carry on their
business as unregistered companies in Nigeria having satisfied the exemptions
in the relevant legislations[13]
REFERENCES
·
Companies and Allied
Matters Act (vol. 3) LFN 2004.
·
Companies Regulation
2012.
·
Nelson C.S. Ogbuanya
(Essentials of Corporate Law Practice in Nigeria)
·
Dr. J Olakunle
Orojo (Company Law and Practice in Nigeria).
·
Legalpedia, Wikipedia
& Google Search Engine.
