The required minimum share capital of a company is dependent on either the objects of the company, type of company or statutory provisions regulating that company. The primary law on the registration and regulation of companies in Nigeria is the Companies and Allied Matters Act, 2004 (CAMA) while the Corporate Affairs Commission (CAC) is the body empowered to ensure that the provisions of the CAMA are complied with during pre-incorporation and post incorporation stages.
As interesting as it may sound, the CAMA is not the only law that regulates the minimum share capital of a company as there are other laws, policies and regulations that dictates what the minimum share capital of certain companies should be. The CAC being the regulator at the initiation stage must ensure the compliance of companies before issuing a certificate of incorporation.
This article attempts to list regulated business activities and their required minimum share capital. It also discusses the laws and the regulatory agencies that ensure that the provisions of the law are complied with during the post-incorporation stage.
Minimum Share Capital By Category of Company
In this regard, a company’s nature determines its required minimum share capital. In general, the required share capital of companies is set at a very low amount in order to make registration of companies attractive to everyone. Thus it is stated in Section 27 (2) of the CAMA that the minimum share capital of a Private company shall be N10,000 whereas a public company cannot fall below N500,000.
Private Company: N10,000
Public Company: N500,000
Minimum Share Capital By Classification
By virtue of the CAMA, a company can also either be a company limited by shares, an unlimited company or a company limited by guarantee. A company limited by shares is required to have a share capital as earlier discussed whereas an unlimited company which is also required to have a share capital had hitherto and before the act not fallen under the type of companies required to have a share capital.
A company limited by guarantee, however, is not required to have a share capital. This provision is contained in section 26 (2) which states that a company limited by guarantee shall not be registered with a share capital; and every existing company limited by guarantee and having share capital shall, not later than the appointed day, alter its memorandum so that it becomes a company limited by guarantee and not having a share capital.
It is worthy to note that a company limited by guarantee is also defined in the section as a company formed for promoting commerce, art, science, religion, sports, culture, education, research, charity or other similar objects, whose income and property are to be applied solely towards the promotion of its objects and no portion thereof is to be paid or transferred directly or indirectly to the members of the company except as permitted by the Act.
Private Company Limited by Shares: N10,000
Public Company Limited by Shares: N500,000
Private Companies Limited by Guarantee: N0
Public Companies Limited by Guarantee: N0
Private Unlimited Company: N10,000
Public Unlimited Company: N500,000
Minimum Share Capital Of Regulated Objects
There are certain businesses activities and ventures that are regulated by specific laws that provide guidelines for the registration, licensing and regulation of the business activities or ventures. These rules, policies and guidelines place an obligation on promoters of certain types of companies to ensure that the minimum share capital requirement of these types of companies are met. Failure to meet the required share capital will result in the registration being queried by the CAC. The rationale behind setting a higher threshold for certain companies is to provide a means of assurance that in the event of liquidation of the company, the assets of the company will be sufficient to pay a substantial part of any debt owed. This means that any company which purports to carry out the activities under the regulated list whether public or private would not be registered by the Corporate Affairs Commission unless it complies with the minimum share capital requirement by law.
The regulated objects, the enabling law and the post-incorporation regulatory agencies are discussed below for better understanding of the minimum share requirements of the different categories of companies under this umbrella.
- COURIER BUSINESS
By virtue of its power to regulate Courier Business in Nigeria as contained in Section 43 of the Nigerian Postal Service Act, 1992 the Nigerian Postal Service has set its guidelines for registration, licensing and operation of courier companies in Nigeria. The requirements which must be complied with before a courier company can commence operations includes registration of the company with a minimum share capital of N2 Million.
Courier Company: N2 Million
- CAPITAL MARKET OPERATORS
The Securities and Exchange Commission (SEC) is empowered by section 8 of the Investment and Securities Act, 2007 to regulate investment and securities business in Nigeria as defined in the Act. Below are the list of investment companies regulated by the SEC and their required minimum share capital.
Issuing House: N200 Million
Brokers/dealers: N300 Million
Trustees: N300 Million
Fund/ Portfolio Managers: N150 Million
Stock Brokers: N200 Million
Stock Dealers: N100 Million
Inter- Dealer Broker (IDB): N50 Million
Corporate Investment Adviser (Registrar) : N150 Million
corporate Investment Adviser: N5 Million
Individual Investment Adviser: N2 Million
Market Maker: N2 Billion
Consultant Partnership: N2 Million
Consultant Individual: N500,000
Consultant Corporate: 5 Million
Under Writer: 200 Million
Venture Capital Manager: 20 Million
Commodities Exchange: 500 Million
Commodities Broker: 40 Million
Capital Trade Point: 20 Million
Rating Agency: 150 Million
Corporate/Su Broker: 5 Million
- BANKS AND OTHER FINANCIAL INSTITUTIONS
The Central Bank of Nigeria (CBN) is empowered by the Banks And Other Financial Institutions Act, 2004 to regulate the Banking Industry and by virtue of section 2 of the Act, No person shall carry on any business in Nigeria except it is a company duly incorporated in Nigeria and holds a valid banking license issued under the Act.
Through its powers to regulate the banking business, the CBN from time to time make policies relating to the minimum share capital of the type of companies under its purview. Below is a list of the companies and their minimum share capital.
Commercial Bank With Regional Authorization: N10 Billion
Commercial Banks With National Authorization: N25 Billion
Commercial Banks With International Authorization: N50 Billion
Merchant Banks: N15 Billion
Micro Finance Bank (Unit): N20 Million
Micro Finance Bank (State & Fct): N100 Million
Micro Finance Bank (National): N2 Billion
Primary Mortgage Institutions: N2 Billion
Finance Company: N20 Million
Bureau De Change: N35 Million
Non-Interest Banks (Regional): N5 Billion
Non-Interest Banks (National): N10 Billion
- REGISTERED INSURANCE BROKERS
The Nigerian Council of Registered Insurance Brokers is the body empowered in Nigeria to regulate the enrolment and operation of Registered Insurance Brokers. Section 15(1) of the Nigerian Council of Registered Insurance Brokers Act, 2003 empowers the Council to make rules while subsection (1) (a) mandates the council to ensure that a Practicing Insurance Broker business should have a working capital of not less than N5 Million made up of verifiable movable and immovable assets and cash in proportion as the council may decide. Below is a list of insurance-related businesses and their required minimum share capital.
Insurance Brokers: N5 Million
- INSURANCE BUSINESS
The National Insurance Commission Act, 1997 empowers the National Insurance Commission by virtue of section 6 to regulate insurance business in Nigeria. The section provides that the principal object of the commission shall be to ensure the effective administration, supervision, regulation and control of insurance business in Nigeria.
The commission through its powers has issued guidelines regulating the insurance business in Nigeria.
Life Insurance: N2 Billion
General Insurance Business: N3 Billion
Re-Insurance Business: N10 Billion
Life Microinsurance Business: N150 Million
General Microinsurance Business: N200 Million
General Takaful/Family Takaful: N200 Million
- PRIVATE GUARD BUSINESS
The requirements for registration of Private Guard Security Companies are contained in policies made by the Civil Defence Corps made pursuant to Nigeria Security and Civil Defense Corp Act, 2003. According to section 3 of the Act, the Civil Defense Corps (the Corps) has the power to recommend to the Minister the registration of private guard companies. The Corps is also to supervise and monitor the activities of all private guard command and keep a register for that purpose.
Private Security Company/Consultant: N10 Million
- PENSION FUND MANAGERS
The Pension fund business is regulated by the provisions of the Pension Reform Act 2004. The minimum share capital required for Pension Fund business is as follows:
Pension Fund/Asset Custodians: N2 Billion
Closed Pension Fund: N500 Million
Pension Fund Administrators: N1 Billion
- NATIONAL HEALTH INSURANCE BUSINESS
Health Insurance Business is regulated under the National Health Insurance Scheme, HMO Accreditation Guidelines. Under this scheme, the following are the required minimum share capital.
Health Maintenance Organisations (HMOs) (National): N400 Million
Health Maintenance Organisations (HMOs) (Zonal): N200Million
Health Maintenance Organisations (HMOs) (State): N100 Million
- LOTTERY, CASINO AND BETTING BUSINESS
Setting up a lottery business in Nigeria requires compliance with the regulatory authority which is the National Lottery Regulatory Commission. The commission is empowered by the National Lotteries (Amendment) Regulations, 2007. Also, the Lagos State has its own Lottery Regulatory Commission with a different set of permit requirements. Below are the required minimum share capital for Lottery Businesses.
Non-Sports Lotteries: N5 Million
Sport Lottery Businesses: N30 Million + Approval In Principle (AIP).
- AIR TRANSPORT BUSINESS
The air transport business is regulated by the Nigerian Civil Aviation Authority which issues guidelines to the operators in the sector. Section 32 of the Civil Aviation Act gives the Authority the power to regulate and issue licenses to aircraft operators. The Authority from time to time have issued guidelines and directives to airline operators and some of the guidelines relate to the minimum share capital.
Air Transport (International): N2 Billion
Air Transport (Regional): N1 Billion
Air Transport (Local): N500 Million
Air Ambulance/Fumigation/Private Jet: N20 Million
Aerial Aviation Services: N20 Million
Aviation (Ground Handling Services): N500 Million
Aviation (Air Transport Training Institutions): N2 Million
Agents Of Foreign Airlines: N1 Million
- AGRICULTURE BUSINESS
Generally, the agriculture business is not strictly regulated. However, the National Agriculture Seeds Act, 2004 regulates the business of Agricultural Seeds, Productions, Processing And Marketing. The Act establishes a National Agricultural Seed Council and gives it oversight functions over any business, actions, or activities regarding seed development and the seed industry in general including legislation and research on issues relating to seed testing, registration, release, production, marketing, distribution, certification, quality control, supply and use of seeds in Nigeria, importation and exportation of seeds and quarantine regulations relating thereto.
Thus any business relating to seed business is within the purview of the council and the minimum share capital is as stated below:
Agricultural Seeds, Productions, Processing And Marketing: 10 Million.
- SHIPPING AND MARITIME BUSINESS
The maritime business is controlled and regulated by the Nigerian Maritime Administration and Safety Agency (NIMASA) which was created by the enabling law, the Nigerian Maritime Administration And Safety Agency Act, 2007.
By virtue of section 22 of the Act, the agency is saddled with the responsibility of pursuing the development of shipping and regulatory matters relating to merchant shipping and seafarers.
Shipping Company/Agent: N25 Million
Cabotage Trade: N25 Million
Freight Forwarding: 5 Million
Notwithstanding, a company can choose to increase its share capital above the required minimum either at the time of registration or subsequently. However, the same company cannot reduce its share capital below the minimum either at the time of registration or subsequently unless it alters its object clause to exclude the activities requiring the required minimum share capital.
ABOUT THE AUTHOR
Ezra Akintonde is a lawyer with over six years of court room and non-courtroom practice experience. He is seasoned in many areas of law including civil and criminal litigation, business registration, company secretariat services, corporate compliance and the general practice of law.
He has won several cases for his clients both in court and in alternative dispute resolution. He is a writer and has written several legal articles.
CORE PRACTICE AREAS: Civil Litigation, Criminal Defence, Corporate Practice, Divorce & Matrimonial Matters.
Email: [email protected]
Legal Issues Entrepreneurs Should Consider Before Starting A Business | Morenike Okebu
There are so many legal issues that a business owner has to consider before setting up a business. In this article, I have identified some basic but essential legal things to consider before you start a business irrespective of the country you reside.
1. What’s my idea exactly?
It is very important for you to have a clear vision of what you want to do and how you want to do it. This is your business idea after all. The idea should be beyond a casual thought on a Monday morning, write it down, and write down all the things you need to make it work. Determine whether the idea if feasible, even if you cannot start on a large scale you may be able to start on a smaller scale.
2. How can I protect my idea, is it unique to me or did I copy it from someone else?
After you know exactly what your idea is and how it works, you need to determine whether your idea needs intellectual property protection. I cannot understand why someone would put so much work into creativity then forget to protect their work. You must remember that creativity is quite expensive and costly; to create a new drug in the pharmaceutical industry for instance could cost millions of dollars. Imitation on the other hand is quite cheap. So really think about whether your idea is something you can protect and if so consult your lawyer.
3. Are there any legal regulations for governing my idea? Is this idea allowed in my country?
Once you have thought about protecting your idea, the next thing you need to think about is whether there are any government regulations you need to comply with in your country to execute your idea. If you look carefully you may find that parts of your idea may be illegal in your country or you need a license to carry out the activity. If the idea is related to food you may need approval from the food regulation authorities for example.
4. What legal entity would execute the idea for me?
After you have confirmed that your idea can legally be done in your country and that you can meet the requirement to get any license required you now need to think of the legal entities you want to operate through. You have options:
- Sole Proprietorship.
- Partnership -this could be limited or otherwise.
- Business name.
Which is the best for you? You can consult your lawyer to determine which best suits you.
5. What legal documents do I need to make my idea a reality?
The last question I have time to deal with today is what are the legal documents you need to make your idea a reality. You may need a non – disclosure agreements to pitch to investors, partnership agreements with your partners, shareholders agreements for your investors as well. You should try to list them out and consider getting a retainer with a lawyer to help you with all of them in order to prepare you for business.
I hope this has helped you realise some of the legal issues you need to consider before starting your business.
Morenike Okebu is an attorney with several years of experience. She graduated top of her class and is the founder of www.renilegal.com a law business focused on smes and start ups. She worked for several years at a top law firm in Nigeria owned by a Senior Advocate of Nigeria. She is now a partner in the law firm GM George Taylor & Co. You can contact her by sending an email to [email protected]
This Is Why Terms And Conditions Is Very Crucial For Business Transactions
Tola runs a beauty consultancy outfit where she helps ladies look their best by choosing the rights outfits, in the right colours, shapes and sizes, to suit them. She also runs an academy where she teaches young ladies how to make a living from beauty consultancy.
She offers different training packages with the longest spanning 12 months. Vee enrolls in the training and pays the requisite fees. Midway into the program, she gets a job and decides she’s not completing the program again.
She asks Tola to give her a refund of the fees. Tola refuses and says she’s not entitled to pay her a refund. After a lot of threats, including a threatened visit to the police station with Vee making a scene at Tola’s academy, she is forced to make the refund.
After the incident, she meets her friend and recounts what happened to her. Her friend tells her, that early in business, she learned to draw up terms and conditions for her clients who use her services.
That way refund policy, delivery policy, and other scenarios are expressly stated an agreed upon beforehand. She ensures that all the clients sign it to avoid problems in the future.
Tola, now wiser, has drawn up a written standard terms and conditions for her beauty consulting academy.
Do you have one for your business? What are your thoughts about a standard contract for your transactions with your clients and customers? Are they necessary?
Tosin Omotosho is a business lawyer. She helps business owners give legal structure to their business and avoid liabilities caused by legal mistakes. With a career spanning more than a decade, she has acted as counsel to organisations in the agriculture, advertising, real estate industries among others. An avid reader and writer, she is the Principal Partner, Charis Legal Practice, a law firm based in Lagos. Contact her here, to read more of her articles, click here.
5 Essential Contracts You Need To Protect Your Business Legally
The Big Five, what are they?
Contrary to what you may think, having a written contract doesn’t mean you don’t trust the other party. Rather it is to state what each party expects and understands from the contract expressly in writing, so the other party can review it and make sure they are both on the same page. Pronto. These contracts are basic and very essential and will protect your business from unnecessary liabilities, lawsuits, and embarrassments.
Occupying the top of the list is a Co-founders’ Agreement (or a shareholders’ agreement). Every company in Nigeria has at least two shareholders or co-founders, upon registering it. Among other things, a co-founders’ agreement spells out remuneration, duties, decision making, succession planning, profit sharing, etc for the co-founders of the company. What happens if they want to sell the company, how much power would each co-founder wield? What happens if a co-founder wants to pull out of the company? Can he sell his shares to anyone he/she chooses? These and many more are stated in black and white. We don’t want disputes between shareholders to mar the smooth running of our business right? Then get a well-drafted co-founders’ agreement.
Another important contract is the Employment Contract. Your business should have a standard employment contract for its employees. What are the terms of employment? What are the duties of each employee? Will some employees be allotted shares over time, how many shares and on what basis? Is the company’s confidential information, which the employee will be exposed to in the course of working in the company, protected? All these and more are what a standard employment contract spells clearly.
Third on the list is a Sales or Service Contract. What is the company selling? Tangible goods or intangible services? What are the terms of sale, any policy on refunds, can physical goods be returned and on what ground? What service packages are available, what are the details of each package? What is the delivery policy for the goods you produce? Who owns the intellectual property of products of the company? Every company should have a standard sales or service contract for the goods and services that it produces.
A Website Terms and Conditions. The internet has changed the way we do business. Transactions are being concluded online without the parties meeting physically. Almost every company has a website which serves as its online shop, store or office. A website’s terms and conditions state the terms of using your website for business. It is similar to a service or sales contract, the only difference is that it relates to transacting online or using your business website.
Lastly and very important is Rent or Land Purchase Agreement. Despite the rise of online businesses, most companies still have a physical address. The property could be rented or bought. Either way, ensure you have the proper documents entitling you to use the property.
Which of these contracts does your company have? To get started with these big 5, click here to contact me right away.
Photo by rawpixel on Unsplash
About The Author
Tosin Omotosho is a real estate and business lawyer. She helps business owners give legal structure to their business and avoid liabilities caused by legal mistakes. She has a decade of experience of active legal practice specializing in real estate and business law. An avid reader and writer, she is the Principal Partner, Charis Legal Practice, a law firm based in Lagos, which provides legal services for businesses. Contact her here, to read more of her articles, click here.
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