A SIMPLE GUIDE TO FOREIGN INVESTORS DOING BUSINESS IN NIGERIA

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A SIMPLE GUIDE TO FOREIGN INVESTORS DOING BUSINESS IN NIGERIA

• INTRODUCTION

Globalization has made it increasingly necessary for Companies and individuals to conduct business across international borders. The laws of each country regulate the modalities for foreigners seeking to conduct business within their territories. Nigeria has one of the friendliest legal frameworks for foreign participation in business.

The Companies and Allied Matters Act, 2020 (CAMA 2020) along with other laws including the Nigeria Investment Promotion Commission Act and the Immigration Act regulates the participation of foreigners in business or trade in Nigeria. The Nigerian Investment Promotion Act provides that a Non-Nigerian may invest in and participate in the operation of any enterprise in Nigeria except those sectors of investment prohibited to both foreign and Nigerian investors, that is – (a)Production of arms and ammunition, etc; (b)Production of and dealing with narcotic drugs and psychotropic substances; (c)production of military and para-military wears and accoutrement, including those of the Police and the Customs, Immigration and Prison Services; and (d) such other items as the Federal Executive Council may, from time to time, determine.[1]

• BUSINESS FORMATION BY FOREIGN INVESTORS IN NIGERIA

A Foreigner or Foreign Investor seeking to do business in Nigeria is required by law to register a suitable and acceptable legal platform for the business in Nigeria. Section 20 (4) of the Companies and Allied Matters Act, 2020 provides that “Subject to the provisions of any enactment regulating the rights and capacity of aliens to undertake or participate in a trade or business, an alien or a foreign company may join in forming a company.”

A foreign company is not permitted by law to carry on business in Nigerian until it has taken all steps to obtain incorporation as a separate legal entity in Nigeria for its business.[2] 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.

It is an offence for a foreign company to carry out business in Nigeria without registration under the relevant laws. Any act of the foreign company in contravention of the requirement for incorporation will be void and any contract entered into will be deemed void. However, a foreign company can apply for exemption from incorporation under the right circumstances.

A foreigner seeking to establish a business in Nigeria can adopt any of the following options

• Company
• Limited Liability Partnership
• Limited Partnership
• General Partnership and
• Sole Proprietorship.

1. COMPANY

A company is an artificial personality created by law usually to engage in a business or commercial venture. A company has a separate legal personality distinct from its shareholders. Under Nigerian law, there are three types of Companies. These are;

1. A Limited Liability Company

The liability of the shareholders of this type of company is limited to the amount, if any, unpaid on the shares held by them in the Company.

1. A Company Limited by Guarantee

The liability of the shareholders of this type of company is limited to such amount as the shareholders may respectively undertake to contribute to the assets of the company in the event of it being wound up.

1. An Unlimited Liability Company.

The liability of the shareholders of this type of company is unlimited.

Any of these three types of companies can either be a private company or a public company.[3]

1. LIMITED LIABILITY PARTNERSHIP (LLP)

A new type of business entity created under the Companies and Allied Matters Act, 2020 is the Limited Liability Partnership. By nature, it is a body corporate and enjoys a legal entity separate from the partners. Essentially, LLP is a partnership that enjoys the status and benefits of an incorporated company.[4] A partner is not personally liable, directly or indirectly for the obligations or liabilities of the limited liability partnership. Any change in the partners of a Limited Liability Partnership does not affect the existence, rights, or liabilities of the limited liability partnership. Every duly registered limited liability partnership has “LLP” as the end of its name. it is a criminal offence to have LLP as the last part of a business name if not registered as such.

Any individual or body corporate may be a partner in a limited liability partnership provided that such individual is not of unsound mind or an undischarged bankrupt. Every limited liability partnership shall have at least two partners who could either be individuals or bodies corporate. It is also required that LLPs shall have at least two designated partners who are individuals and at least one of them must be resident in Nigeria. If all the partners are bodies corporate or in which one or more individuals are bodies corporate, at least two individuals who are partners of the LLP or nominees of the bodies corporate shall act as designated partners.

A designated partner is responsible for the doing of all acts, matters, and things as are required to be done by the limited liability partnership in respect of compliance with the provisions of CAMA 2020 including the filing of any document, return, statement, and other reports under the Act and as may be specified by the LLP Agreement. The designated partners are also liable to all penalties imposed on the LLP for contravention of those provisions.

A foreign limited liability partnership having the intention of carrying on business in Nigeria is required to take all necessary steps to be incorporated as a separate entity in Nigeria and until so incorporated, the foreign LLP shall not carry on business in Nigeria.

• LIMITED PARTNERSHIP

A limited partnership is also a new creation under Nigerian law by the Companies and Allied Matters, 2020. Essentially, a limited partnership is a partnership comprising at least one general partner and one or more limited partners. A limited partnership is not a body corporate and so does not have a legal personality. The general partner(s) is responsible for all the debts or obligations of the partnership including that of the limited partner incurred in the course of the business of the partnership.

An unregistered partnership is deemed to be a general partnership. A limited partner is not permitted by law to take part in the management of a limited partnership. If a limited partner takes part in the management of the partnership, he is liable for all the debts and obligations of the partnership incurred while he takes part in the management, as though he were a general partner.

The name of a limited partnership must with the words. “Limited Partnership or LP”.

1. GENERAL PARTNERSHIP

This refers to a partnership business by two or more persons who each bears full liability for the debts and obligations or liabilities, if any, of the business. It does not have a corporate personality distinct from the partners.

1. SOLE PROPRIETORSHIP

A Sole Proprietorship is otherwise referred to as a one-man business. In terms of structure, it is the simplest business formation. A sole proprietorship is a business enterprise established by a single individual who owns all the assets of the business and enjoys all the profit accruing therefrom. The business does not enjoy a separate legal personality from the owner of the business and as a result, the sole proprietor’s personal assets are not protected from the liability associated with the business. The sole proprietor bears the sole responsibility for all the debts arising from the business.

• BUSINESS PERMIT

After the incorporation of a company or registration of the business with the Corporate Affairs Commission, the law requires that any enterprise in which foreign participation is permitted shall, before commencing business, apply to NIPC for registration to obtain a business permit. In other words, before any such enterprise (company) in which there is foreign participation can commence business in Nigeria, it must obtain a business permit from the Nigerian Investment Promotion Commission.

Such a company must have at least 10,000,000 shares to be eligible for the grant of business permit. The application for a business permit shall be accompanied by the following

1. Duly completed NIPC form
2. Copy of Certificate of Incorporation
3. Copy of CAC Incorporation documents for Return of Allotment of shares and Particulars of Directors
4. Copy of Memorandum and Articles of Association
5. Certificate of Capital Importation
6. Proof of acquisition of business premises.
7. Tax Clearance Certificate.
8. Technical Services Agreement
9. Feasibility Report.

• IMMIGRATION REQUIREMENTS

The Nigerian Immigration Service established by the Immigration Act is saddled with the responsibility of granting necessary approvals and Visas for the entry and exit of non-Nigerians to and from the country.

1. Entry Visas

The following are the categories of Visas available for persons seeking entry into Nigeria

1. Transit Visa

      This is granted to persons who are on transit through Nigeria.

1. Business Visa

      This is for persons who are on business trips to Nigeria

1. Visa on Arrival

This is issued at the point of entry with the approval of the    Comptroller General of Immigration.

1. Tourist Visa

       This is issued to persons on a tourist visit to Nigeria.

1. Subject to Regularization (STR) Visa

The STR visa is issued to foreigners who have secured employment with a company in Nigeria. Such a company must have approved expatriate quotas. The STR is valid for 90 days. Upon entry of the foreigner into the country, the employer is expected to apply to the Immigration Service for the regularization of the employees’ stay in the country.

The application for the regularization of the STR Visa will lead to the issuance of the Combined Expatriate Resident Permit and Aliens Card (CERPAC).

1. Expatriate Quota

By Section 36 (1) and 38(1) of the Immigration Act, 2015, anyone or company in Nigeria who is desirous of employing a person who is a national of any other country shall, unless exempted, make an application to the Comptroller-General of Immigration in such manner as may be prescribed and no such person shall be employed without the permission of the Comptroller-General of Immigration given on such terms as he thinks fit.

Expatriate Quota refers to the approval usually granted by the Ministry of Interior to a company registered in Nigeria to employ a certain number of expatriates (foreigners) for specific job designations as authorized by the Minister. The expatriate quota is granted for a specific number of years and is renewable.

• Residence Permit

A residence permit allows none Nigerians to live and work in Nigeria. Section 37 of the Immigration Act provides the Comptroller-General of Immigration may grant residence permit for a period not exceeding two years, subject to renewal, to foreign National. A person, not a citizen of Nigeria, desirous of entering Nigeria for residence shall, unless exempted under the Act, show evidence of immigration responsibility or any other security on his behalf, and shall supply such information as the Comptroller-General of lmmigration may reasonably require, and if the Comptroller-General of Immigration is satisfied he may issue a residence permit accordingly.

Also, a person who has been lawfully allowed entry into Nigeria, may upon application to the Comptroller-General of Immigration in the prescribed manner, be issued with a resident permit. This applies to persons who may have entered Nigeria through any other visas of a temporary nature, such as Transit Visa, Business Visa, or Tourist Visa.

Subsection 11 further provides that the Comptroller-General of lmmigration may authorise the issuance of Permanent Residence Visas to foreign nationals who are investors who have imported an annual minimum threshold of capital over a period of time as may be specified from time to time in the National Visa Policy or any other such policy, provided that the Residence Permit can be withdrawn whenever the investor withdraws his investment.

Meanwhile, the provisions of the Act relating to foreign nationals requiring visas, work permits, and residence permits shall not apply to nationals of the Member States of the Economic Community of West African States who are exempted from requiring entry visas and are allowed to reside, work and undertake commercial and industrial activities within Nigeria provided that such citizens shall register with the Service as nationals of the Economic Community of West African States.

1. LAND ACQUISITION BY FOREIGNERS

In Nigeria, all lands are vested in the Governors of each State, while the land in the Federal Capital Territory is vested in the Federal Government, and in both cases, the lands are held in trust for the use and common benefit of all Nigerians.

The right of foreigners to own or acquire land in Nigeria is limited and restricted to leasehold. In other words, the maxim title that a foreigner can have over land in Nigeria is leasehold. Before the enactment of the Land Use Act, every state in the federation has laws that regulate the right of foreigners to acquire or own land. The Land Use Act did not abolish those states’ laws unless to the extent that any one of them may be inconsistent with the Act. In the Old Western States and the Mid-Western States, the maximum leasehold that can be granted to a foreigner is 99 years, and while in the North, it is 90 years.

One way to overcome the restriction placed on the right of foreigners to acquire land in Nigeria is acquisition through companies registered in Nigeria. Since a foreigner can register a company in Nigeria and such a company, upon registration is deemed a Nigerian company, the company is entitled to acquire land its name.

1. CONCLUSION

There is no doubt that the Nigeria economy has great potentials for growth and the Lagos stock exchange has outperformed many others since the onset of the Covid 19 pandemic. More so, the legal framework for foreign participation in Nigeria encourages investment as it places no limit or restrictions on the right of Foreigners to repatriate profit or their investments, if and when the need arises.

 

[1] Sections 17, 18, 20 and 31 of the NIPC Act.

[2] Section 78 CAMA 2020

[3] Section 21 CAMA 2020

[4] Section 756(d)