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Minimum Share Capital Requirement For Companies Under The Nigerian Law

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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).

 

  1. 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

 

  1. 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.

 

  1. 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

 

Conclusion

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.

Tel: 08063321721

Email: meetmrezra@gmail.com

Legal Business

The Legal Lore: Taking us from the bench to the fireside

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Photo Credits: Tonkin Clacey Inc

In the complex and intricate world of law, where every case is a story waiting to be told, the wisdom passed down from seasoned legal professionals holds immeasurable value. Within the hallowed halls of law firms and legal institutions, an age-old tradition persists-one that transcends formal training and case law. It’s the tradition of fireside chats, where senior legal practitioners weave narratives of their experiences, trials, and triumphs, igniting the flames of inspiration in the hearts of their junior counterparts.

In these intimate gatherings, the rigid walls of hierarchy crumble, and the barriers between senior and junior practitioners’ dissolve. Here, amidst the flickering glow of the fire, stories untold-stories of courtroom battles won and lost, negotiations that sealed deals or unraveled, and ethical dilemmas faced with unwavering resolve. Through these stories, senior legal practitioners impart not just legal knowledge but invaluable lessons from the trenches of practice.

For junior practitioners, these fireside chats serve as a beacon of guidance, illuminating the path ahead with the collective wisdom of those who’ve walked it before. They chats provide insights that textbooks can’t convey, painting a vivid picture of the complexities and nuances of legal practice. From navigating tricky client interactions to finding creative solutions to legal challenges, the stories shared in these informal gatherings offer a treasure trove of practical advice.

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Moreover, fireside chats help to build   a sense of fellowship and community within the legal profession. They create spaces where junior practitioners feel seen, heard, and valued—not just as legal novices, but as aspiring storytellers in their own right. Through the exchange of anecdotes and experiences, bonds are forged, mentorship relationships blossom, and a culture of continuous learning thrives.

Most importantly, these chats have the power to shape the trajectory of junior practitioners’ careers. By exposing them to diverse perspectives and real-world scenarios, these informal gatherings expand their horizons, instilling in them the confidence to navigate the complexities of the legal landscape. They inspire them to dream bigger, reach higher, and aspire to leave their own indelible mark on the legal profession. 

Photo Credits: Baker McKenzie

In a profession where the stakes are high, and the journey is fraught with challenges, storytelling becomes a guiding light—a compass that points towards excellence, integrity, and justice. The Advancing Women in the Workplace (AWW) program- a program to support women in leadership in South Africa adopted this approach of storytelling as a model. So, let us gather around, dear practitioners, and share our stories. For in the flicker of the flames lies the power to shape not just individual careers, but the future of the legal profession itself.

Acknowledgements

The AWW program, a program sponsored by Vance Centre in partnership with the South African Legal Fellows Network and the US mission.

 

Written by: Adaobi Adaobi Egboka and Dr Kim Lamont-Mbawuli. Africa Program Director, Cyrus R. Vance Center for International Justice, Vance Center Consultant and Director of KLM attorneys.

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Legal Business

Data Privacy and How It Affects Your Business

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Data privacy, defined by Tech target is a discipline intended to keep data safe against improper access, theft or loss. One of the triads of cybersecurity is confidentiality and this has to do with data privacy. The world has become a global village and data privacy issues are now more relevant than they ever were before.

In 2009, a popular brand in America had a serious breach of its systems. For 18 months, hackers had access to the brand’s data and were able to get customers credit card details and personally identifiable information undetected. How did this happen? and how can you make sure that this doesn’t happen to your organization? The answer is simple, you need to pay attention to data privacy. As long as your business collects personal identifiable information, your business has a duty to protect the confidentiality of the people who have given you that information.

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Sometimes, the obligation to protect data is beyond a moral right. In Europe for example, you have the GDPR (General Data Protection Regulation), in America you have applicable laws like Health Insurance Portability and Accountability Act of 1996 (HIPAA) which demand data privacy. In Nigeria, privacy rights draw from the Constitution of the Federal Republic of Nigeria (1999) (as amended) and can also be found in the  Nigerian Data Protection Regulation, 2019.

All these laws show you that as a business owner, you are not only expected to protect data, you are under an obligation by law in some cases to protect certain types of data. The question is, how do you protect data and ensure that the privacy rights of your customers are respected?

  1. Employ a CISO: You should consider employing a Chief Information Security Officer (CISO) if your organization is large, who would be in charge of formulating policies to protect data privacy as well as other valuable data in your organization. Actions like these can prevent competitors from getting valuable data from your company, ensure your company complies with relevant laws on data privacy and thus win customers’ confidence in your brand.
  2. Implement good information security policies and procedures: You would also need to create good policies on information security. Ensure documents with sensitive data on customers are password protected, ensure that firewalls and anti-malware software are installed to fight off malicious cyber-attacks aimed at stealing customer data and create trainings for staff handling sensitive data.
  3. Don’t collect data you don’t need: Where you don’t need to collect customer data, don’t do it. Only ask customers to give you the information relevant to the service you are providing for them. 
  4.  Don’t keep data longer than you need it: Where you don’t need data anymore, and no law requires that you keep it, destroy it. Where a customer has indicated that they want their account deleted, or they don’t want to share their data with your company anymore, ensure that the data is destroyed.
  5. Properly destroy data that is no longer useful to you: The same way you receive data through a process, you need to understand that destroying data is also a process. Data is not destroyed simply because you put it in the recycle bin and deleted it from the recycle bin. Ensure that data is properly destroyed when it’s no longer useful. 

At the end of the day, data privacy is important for businesses in the world today. I hope these tips would help you choose to take steps to protect your customers data in every part of your business and ensure the data privacy rights of your customers are respected.

 

Article by: Morenike George-Taylor CDMP, County Support Director & Data Governance Expert 

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Kenya: Country-by-country reporting thresholds introduced from 1 January 2023

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Tax image credit: Getty

The Kenyan Government, in its latest Finance Act 2022, has enacted some key changes in the area of direct tax, including an important update on the country-by-country (CbC) reporting threshold for multinational companies.

What is country-by-country reporting?

Corporates and connected persons, such as groups of companies and multinational entities (MNEs) usually face complex compliance risks. To address the potential gaps and mismatches in various tax systems globally, the Organization for Economic Co-operation and Development (OECD) introduced Action 13 CbC reporting as part of its Base Erosion and Profit Shifting (BEPS) Action Plan. Under BEPS Action 13, MNEs are required to prepare a CbC report with aggregate data on the allocation of income, profit, taxes paid and economic activity amongst all the jurisdictions in which they operate. This report must be shared with the tax administrations in these jurisdictions, for use in high-level transfer pricing and BEPS risk assessments. Part of the solution provided by Action 13 is to require countries to adopt legislation dealing with the filing of CbC reports in their jurisdiction. 

Finance Act 2022 updates of CbC

The Kenyan Government has introduced a threshold for CbC reporting with the effect from 1 January 2023. The threshold introduced in the Finance Act is for companies with gross revenues of KES 95 billion (EUR 790 million approximately) or more, including extraordinary and investment income. From 1 January 2023, a parent entity or a constituent entity of a MNE group that is tax resident in Kenya, and that has a gross turnover of over KES 95 billion, will be required to file a CbC report of its financial and economic activities in Kenya, as well as all  other jurisdictions in which the MNE has a taxable presence.

The report must contain all information of the group’s aggregate revenue, profit or losses before tax, income tax paid, income tax accrued, accumulated earnings,  number of employees, tangible and intangible assets, cash and cash equivalents and any other information as requested by the Kenya Revenue Authority (KRA).

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Information to be contained in the master and local bundle.

The Finance Act requires a master file that must contain the following:

  • A detailed overview of the group and the group’s growth engines.
  • A description of the supply chain of the key products and services.
  • The group’s research and development policy.
  • A description of each constituent entity’s contribution to value creation.
  • Information about intangible assets and the group intercompany agreements associated with them.
  • Information on any transfer of intangible assets within the group during the tax period, including the identity of the constituent entities involved, the countries in which those intangible assets are registered and the consideration paid as part of the transfer.
  • Information about financing activities of the group.
  • The consolidated financial statements of the group.
  • Tax rulings made in respect of the group.
  • Any other information requested by the KRA.

The local file must contain:

  • Details and information of the resident constituent activities within the multinational enterprise group.
  • The management structure of the resident constituent entity.
  • Business strategies, including structuring, description of the material-controlled transaction, the resident. constituent entity’s business and competitive environment.
  • International transactions concluded by the resident constituent entity.
  • Amounts received by the entity.
  • Any other information requested. 

Exceptions to the CbC report filing requirement

The Finance Act provides certain exceptions to the filing requirements for a resident constituent entity of an MNE group. If a non-resident surrogate parent entity already files a CbC report for the group with the tax authorities of its tax jurisdiction, the jurisdiction in which the non-resident surrogate parent entity is resident requires a CbC report in terms of its domestic legislation, under the following conditions:

  • The tax authorities of the jurisdiction where the non-resident surrogate parent entity have an exchange of information agreement with the KRA.
  • The tax authority in the jurisdiction where the non-resident surrogate parent is resident has not notified the KRA of a systematic failure.
  • The non-resident parent entity has notified the competent authority in the jurisdiction of its tax residence and that the entity is the designated surrogate parent entity of the group.

Concluding remarks

The reporting requirements brought by the Finance Act 2022 are consistent with the OECD’s BEPS Action Plan 13 guidelines and the three-tiered documentation approach, which is relevant to the reporting of related-party transactions and aligns with the four minimum standards under the OECD’s BEPS project.

It is important for parent entities of MNEs operating in Kenya to note the additional compliance burden which is imposed by this new legislative update. Multinationals that would be affected by the new legislative update should review their current transfer pricing documentation and compliance processes to ensure that they are in line with the new reporting requirements under the Finance Act 2022, by 1 January 2023. Failure to comply with the CbC reporting requirements will be an offense in Kenya and subject to a fine not exceeding KES 1 million (EUR 8200 approximately), a prison term not exceeding three years, or both, upon conviction.

By: Francis Mayebe, Candidate Attorney, overseen by Virusha Subban, Partner and Head of the Tax Practice, Baker McKenzie Johannesburg

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