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Incorporating a new business
Casmir Igbokwe
Ichoku (parrot) was an Igbo TV comedy series made popular in the eighties. The setting was a colonial masters’ court. Whenever there was much noise in the courtroom, the kotuma (police) would shout, “Louder!” when what he meant was silence. And when the presiding judge – a white man – made any pronouncement, the court clerk would give it any interpretation he liked.
To the litigants, the clerk might say, “The white man has ordered that you should bring five tubers of yam, two big goats and your wives to my house this night.” Usually, the illiterate parties involved would frown and grumble. But the kotuma would silence them with his shout of, “Louder!”
Ignorance. Some say it is a disease. But it is even worse than a disease when you don’t know but claim or believe you know it all. Even in this jet age, some people see “limited” after a company’s name as a big title conferred on the owners of that company, and that it signifies wealth.
We are not concerned here with the meaning of limited. What we are after are the pre-registration/incorporation requirements for starting a new business.
According to Mr. Yinka Kotoye of Libra Law Office, Lagos, the Company and Allied Matters Act, which is the statutory instrument relating to the registration of business entities, makes provisions for two modes of conducting business activities in Nigeria. These provisions, he says, are contained in Parts A and B of the Act. Part A has to do with registration of business names such as Cass Channels Enterprises. Part B is about the incorporation of limited liability companies such as Punch Nigeria Limited.
Kotoye lists the steps one needs to take in order to register a business name in Nigeria. The first step, he notes, is to conduct necessary searches at the Corporate Affairs Commission on the availability of the proposed name. You do this by obtaining Form CAC 1, which is the availability form.
If the proposed name is available, Kotoye says, you proceed to purchase Form 1A, which is the application form for registration of a business name. You fill the form and return it to the CAC with the registration fee of about N4, 000. In less than three months, he submits, the firm will be registered with a Certificate of Registration issued by the CAC.
The processes for incorporating a limited liability company are more tedious. Like in the registration of a business name, you conduct the necessary searches at the CAC on the availability of the proposed name by obtaining Form CAC 1.
The next step is to obtain incorporation forms CAC 2. But before completing the forms, Kotoye says you have to decide on the number of directors (the law prescribes a minimum of two); those that will serve as directors; total number of shares (the law prescribes a minimum of 100, 000 units) and the share capital.
Others are the share structures (the number of units of shares to allot to individual shareholders); the total number of shareholders; the content of Memorandum and Article of Association and pre-incorporation contract, said to be very important where two or more companies/individuals are coming together to form one company.
The next step to take, according to Kotoye, is to stamp the Memorandum and Article of Association of the company at the stamp duty office in Lagos. Then, you complete the incorporation forms and file at the Registry of the CAC with the appropriate fees.
Kotoye says Memorandum is the constitution of the company while Articles of Association governs and regulates the conduct of the official business of the company, including meetings.
“If the company proposes to engage in designs, creation, inventions and other forms of intellectual work,” Kotoye avers, “it is highly imperative to register with the appropriate agencies. For Patents and Trademark, registration is with the Trademark Registry of the Federal Ministry of Commerce while in the case of Copyright, it is with the Copyright Commission.
“In the same vein, if the company intends to deal in foods, drugs, beverages and other related activities, registration with the National Agency for Food and Drug Administration and Control and the Standard Organisation of Nigeria is mandatory.”
It is important to note that a newly-incorporated company, according to Kotoye, is entitled to tax relief for five years. After this, the company is expected to file its annual returns at the CAC by paying appropriate fees.
He says a foreign company intending to do business in Nigeria must register with the relevant Nigerian authorities such as the CAC, the Nigerian Investment Promotion Council and follow all the steps highlighted earlier. Alternatively, the foreign company may appoint a Nigerian company as an agent.
In all, you need to consult an expert/lawyer to put you through if you are not too sure of what to do. This is to avoid behaving like the litigants in Ichoku who were planning to take their wives to the court clerk when they were simply asked to bring their witnesses to court the following day.
The PUNCH, Wednesday, March 01, 2006
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