A recent public notice issued by the Corporate Affairs Commission (CAC) has introduced an important directive that affects Nigerian companies with foreign shareholders. The notice requires companies with foreign participation to comply with new regulations regarding their share capital.
This article provides an overview of the directive, its implications for newly incorporated and existing companies, and the potential impact on foreign-owned businesses operating in Nigeria.
Who does the new CAC directive apply to?
The directive applies to companies with foreign participation, which can be defined as any company with a foreign shareholder. This includes Nigerian companies that have individual foreign shareholders, as well as those with foreign companies as their shareholders or parent companies. Examples of the latter include Nigerian companies with parent companies based in Delaware/Wyoming, the UK, or the British Virgin Islands.
Implications for Newly Incorporated Companies
For companies in the process of incorporation, the new directive mandates a minimum share capital of ₦100 million, should they have a non-Nigerian shareholder or if they are to become a Nigerian subsidiary of a foreign company.
This requirement emphasizes the need for greater financial investment and stability in such companies, ensuring their ability to operate effectively and contribute to the Nigerian economy.
Impact on Existing Companies with Foreign Owners
Existing companies with foreign owners are given a six-month grace period to comply with the directive. During this time, such companies must raise their share capital from the previous ₦10 million to ₦100 million. This adjustment aims to align existing companies with the new regulations and enhance their financial standing. The increased share capital requirement reflects a commitment to strengthening foreign-owned companies operating in Nigeria and ensuring their long-term viability.
Understanding Minimum Paid-up Capital
The notice refers to “Minimum Paid-up capital,” which is the amount of capital received by a company from shareholders in exchange for shares. While the CAC is responsible for registering companies and does not require proof of a bank inflow of ₦100 million, the Revised Handbook on Expatriate Quota, which applies to companies seeking business permits and CERPAC to operate in Nigeria, may require such proof.
Startups with Nigerian founders and foreign parent companies generally do not need an Expatriate quota, but they must comply with the ₦100 million share capital requirement at the CAC.
Seeking Compliance and Support
To ensure compliance with the new directive and receive support in navigating the regulatory changes, contact Norebase for assistance. Our team of experts can provide valuable insights and assistance in adapting to the new regulations.
Final Thoughts
The CAC’s recent directive regarding share capital requirements for Nigerian companies with foreign shareholders aims to strengthen the financial stability and investment potential of such businesses.
While newly incorporated companies must register with ₦100 million as their share capital, existing companies have a grace period of six months to adjust their share capital accordingly.
Understanding the implications of this directive and seeking appropriate support will ensure companies remain compliant and can continue operating successfully in Nigeria’s business landscape.
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