1.
Section 650 of CAMA defines an alien as a
person or association, whether corporate or incorporated, other than a Nigerian
citizen or association. The current position of the law is that an alien may
join (partner) in the formation of a company in Nigeria. In other words, such
an alien can join or partner with a Nigerian for the purpose of doing business
in Nigeria.
2.
Section 20(4) of CAMA supports this proposition
as follows: “Subject to the provisions of any enactment regulating the right
and capacity of aliens to participate or undertake in trade or business, an
alien or a foreign company may join in forming of a company”.
3.
A foreigner may also solely engage in business in Nigeria. In this
regard, section 17 of the Nigerian
Investment Promotion Commission (NIPC) Act provides that “except as
provided in section 18 of this Act and subject to this Act,
a non-Nigerian may invest and participate in the operation of any enterprise in
Nigeria”. It is clear that a foreigner is allowed to participate in business in
Nigeria but subject to some exceptions and enactments.
4.
The exceptions are as stated in section 18 of the NIPC Act which mandates that the provision of the
NIPC Act shall not apply to “Negative List as defined in section 31 of the Act”. The said section 31 of the NIPC
Act, which is the interpretation section defines “Negative List” as the list of
those sectors of investment prohibited to both foreign and Nigerian investors,
that is:
a)
Production of arms, ammunition, etc.
b)
Production of and dealing in 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
prisons services,
d)
Such other items as the Federal Execution Council may, from
time to time, determine.
Accordingly, a foreigner
may do any business in Nigeria except those mentioned in the ‘negative list’ supra.
5.
Also, any alien or alien company intending to do business in
Nigeria, must comply with certain regulatory requirements – the First being
Registration/incorporation, with the Corporate Affairs Commission as a
Corporate entity or sole proprietorship/partnership. By section 54(1) of Companies and Allied Matters Act (CAMA), subject
to sections 56-59 of CAMA, every
foreign company which before or after the commencement of this Act was
incorporated outside Nigeria, and having the intention of carrying on business
in Nigeria shall take all steps necessary to obtain incorporation as a separate
entity in Nigeria for that purpose, but 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 notice and other documents, as matters preliminary to incorporation
under this Act. Subsection (2) provides that any act of the company in
contravention of subsection (1) of this section shall be void. The foregoing
position is re-echoed in the case of Unipetrol
Nigeria Plc v. Agip Nigeria Plc (2002) 14 NWLR (Pt. 789) 312.
6.
The foregoing notwithstanding, section 56(1) of CAMA provides that a foreign company may apply to
the National Council of Ministers (Federal Executive Council) for exemption
from registration. The Application is usually made to the President, through
the Secretary to the Government of the Federation and is for exemption from the
provisions of section 54 of CAMA, if
that foreign company belongs to one of the following categories, that is –
a)
Foreign
companies (other than those specified in paragraph (d) of this subsection)
invited to Nigeria by or with the approval of the Federal Government to execute
any specified individual project.
b)
Foreign
companies which are in Nigeria for the execution of specific individual loan
project on behalf of a donor country or international organization.
c)
Foreign
government-owned companies engaged solely in trade export promotion activities;
and
d)
Engineering
consultants and technical experts engaged on any individual specialist project
under contracts with any of the governments in the Federation or any of its
agencies or with any other body or person, where such contract has been
approved by the Federal Government.
Subsection(2)
of Section 56 of CAMA
further provides that an application for exception under this section shall be
in writing addressed to the Secretary to the Federal Government and shall set
out –
a)
The
name and place of business of the foreign company outside Nigeria.
b)
The
name and place of business or the proposed name and place of business of the
foreign company in Nigeria.
c)
The
name and address of each director, partner or other principal officer of the
foreign company.
d)
A
certified copy of the Charter, Statutes or Memorandum and Articles of Association
of the company, or other instrument constituting or defining the constitution
of the company and if the instrument is not written in the English language, a
certified translation thereof.
e)
The
names and addresses of someone or more person resident in Nigeria authorized to
accept on behalf of the foreign company services of process and any notice
required to be served on the company.
f)
The
business or proposed business in Nigeria of the foreign company and the
duration of such business.
g)
Particulars
of any project carried out by the company as an exempted foreign company; and
h)
Such
other particulars as may be required by the Secretary to the Federal
Government.
Subsection (3) thereof allows
exemption to be granted in befitting cases, and the period of exemption granted
as well as the project(s) shall be specified and the exemption order must be
published in the Federal gazette.
7.
The status of an exempted foreign company is as stated in section 58 of CAMA as follows:
Subject to this Act and save as may be stated in
the instrument of exemption, a foreign company exempted pursuant to this Act
shall have the status of an unregistered
company and accordingly, the provisions of the Act applicable to an
unregistered company shall apply in relation to such an exempted company as
they apply in relation to an unregistered company under the Act.
8.
However, by virtue of section
60(b) of CAMA, such an exempted unregistered company is allowed to sue and
be sued in Nigeria (either in its corporate name or that of its agent) and
claims in foreign currency can be made by or against it. See Ritz Pumpen Fabrik GMBH & Co. KG v.
Techno Continental Engineers Nig. Ltd. & Anor (1999) 4 NWLR (Pt. 598) 298,
where the appellant a foreign unregistered company successfully sued the
Respondents in Nigeria for the value of the machineries borrowed by the latter.
9.
The point is emphasized that a foreign company or alien needs
to register in Nigeria with the Corporate Affairs Commission before it can be
qualified to do business in Nigeria: section
54 of CAMA. Again, an alien may
operate alone or in joint venture with Nigerians by means of a company, which
must have been registered by the Corporate Affairs Commission.
10. There are a principally
two modes of alien participation depending on the area of interest. These are: foreign Direct Investment and Foreign Port Folio Investment.
a)
Foreign Director
Investment:
By this mode aliens can participate directly in
business in Nigeria by forming (either solely or with Nigerians) a company (except
an exempted company) by engaging directly in business except those in the
negative list. It is immaterial whether the alien has or does not have an
existing company in his home town. Foreign Direct Investment showcases a
measure of foreign ownership of productive assets, such as factories, mines and
land. Here, the alien participates in the establishment and management of the
company (business).
b)
Foreign Portfolio
Investment:
By this mode, the alien participates indirectly in
business by buying shares in existing Nigerian companies; the foreigner purchases
company stocks and bond in Nigeria. These are usually through a stockbroker
purchasing shares of publicly quoted companies or by private placement of
shares of private companies or direct application for allotment in which case the
Securities and Exchange Commission should be notified. Foreign Portfolio Investment
can be effected with foreign currency imported through an authorized dealer and
converted to naira at the official exchange rate. See sections 12, 13, & 15 of Foreign Exchange (Monitoring and
Miscellaneous Provisions) Act.
Accordingly, an alien
(foreigner or foreign company) may choose to register a business name as a sole
proprietor or partnership. He may wish to incorporate a company with other
aliens or Nigerians. He may wish to buy shares into an existing company. Where
he is incorporating a company, he may do business in any area except the
negative list. However, he must register with the Nigerian Investment Promotion
Commission and Securities and Exchange Commission. But, if he is only buying
shares into an existing company, he only needs to register with the Securities
and Exchange Commission. He must also obtain the necessary permits and
approvals before engaging in business in Nigeria.
© Onyekachi Duru Esq and www.legalemperors.com,
2016 (All Rights Reserved). Unauthorized use and/or duplication of this
material without express and written permission from this site’s author and/or
owner is strictly prohibited. Excepts and links may be used, provided that full
and clear credit is given to Onyekachi
Duru Esq and www.legalemperors.com with appropriate and specific directions to the
original content.