FOREIGN INVESTMENT AND PARTICIPATION IN BUSINESS IN NIGERIA ~ Group4-LegalHub

INTRODUCTION

Foreigners willing to do businesses in Nigeria can participate subject to the provisions of Nigerian law-SECTION 20(4) CAMA;Reg.26(1)CR 2012.

HISTORY OF FOREIGN PARTICIPATION IN NIGERIA

· In 1972, Nigerian Enterprises Promotion Decree (NEPD) was enacted.

· This law provided that 60% of every foreign business in Nigeria must be owned and controlled by Nigerians.

· In 1977, there was a Nationalization Of all foreign companies in Nigeria. However, this led to capital flight as investors left the country and stated investing in neighboring countries with a more relaxed law for foreign investments.

· In 1989, the law as revisited and provided for partial deregulation of foreign participation.

· In 1995, the Nigerian Investment Promotion Commission Decree was enacted, It liberalized and fully deregulated business ownership in Nigeria by foreigners.-S. 17 NIPC Act (nb-)

· As such, foreigners can invest and own companies in Nigeria without participation by Nigerians.

· S. 25 NIPC Act provided that there would no longer be expropriation of capital investments by foreigners.

· S. 31/33 NIPC Act prescribes the NEGATIVE LIST which foreigners (even Nigerians Companies) are prohibited to engage in.

ASSURANCES FOR INVESTMENT PROTECTION OF FOREIGNERS UNDER THE CURRENT REGIME

1. No enterprise shall be nationalized or expropriated by FG

2. Effective dispute resolution not subject to local courts

3. No one shall be compelled to surrender his interest in the capital to other persons

4. No acquisition of enterprise by FG unless it is for national interest/public purpose under a law that makes adequate provision for prompt and adequate compensation and access to courts-S.25 NIPC ACT

5. Execution and entry of bilateral investment promotion and protection agreements

6. Investment incentives and reliefs

STATUTORY RESTRICTIONS ON FOREIGN PARTICIPATION IN NIGERIA

1. All foreign companies intending to do business in Nigeria are to register as a Nigerian company. S. 54 of CAMA

2. All foreign companies must register with NIPC-S.17 NIPC ACT

3. Foreigners can own any business except those in the Negative List which are:

Production of arms and ammunition
Production of military and paramilitary wears
Production of narcotics -S. 31/33 of the NIPC Act; Rule 409 sec rules 2013

MODES OR CATEGORIES OF FOREIGN PARTICIPATION IN BUSINESS IN NIGERIA

1. An alien (foreigner) may choose to register a business name as a sole proprietor (or partnership),

2. Unregistered Exempted companies. S. 56 of CAMA.

3. Foreign Portfolio investors having shares in a Nigerian company. See S. 26 Foreign Exchange Monitoring Act.

4. Foreign Direct investors who bring in foreign currencies to do business in Nigeria.

LEGAL FRAMEWORK & REGULATORY AUTHORITIES ON FOREIGN PARTICIPATION IN NIGERIA

	ENABLING LAW	REGULATORY AGENCY	PERMIT/APPROVAL/FUNCTIONS
1	Companies and Allied Matters Act (CAMA),cap C20 LFN 2004 S. 54	Corporate Affairs Commission (CAC)	Incorporation of Nigerian Companies for FDI and companies without exemption
2	Nigerian Investment Promotion Commission Act,CAP NII7,LFN 2004	Nigerian Investments Promotion Commission (NIPC)	Regulates & Promotes investment activities. Registers a foreign company after incorporation in Nigeria and before start of business-s.17NIPC act
3	Investment Securities Act (ISA)	Securities & Exchange Commission (SEC)	Regulates the registration of securities, records of FPI and FDI-s.8
4	Immigration Act	Nigerian Immigration Service (NIS)	Regulates the entry of aliens into the country. supervises and grants visa, Business Permits, Residence perm, expatriate quota and work permit-s.8
5	National Office for Technology Acquisition Promotion Act	National Office for Technology Acquisition & Promotion (NOTAP)	Registration of technology transfer from foreigners to their partners in Nigeria. Gives Certificate of Approval
6	Customs & Excise Management Act	Board of Customs	Regulates importation and exportation of goods. Imposes import & export duties
7	Federal High Court Act	Federal High Court	Resolution of disputes arising from company matters
8	Foreign Exchange (monitoring & miscellaneous provisions) Act	Central Bank of Nigeria (CBN)	Capital importation through an Authorized Dealer. Issues Certificate of Capital Importation
9	Industrial Inspectorate Act	Ministry of Trade & Investment	Supervises activities of manufacturing industries in Nigeria that wishes to incur capital expenditure – issues Certificate of Acceptance
10	Companies Income Tax Act (CITA)	Federal Inland Revenue Board - Thisis the main body set up by the law. Federal Inland Revenue Service (FIRS) is the operative arm which collects the taxes from companies	Regulates the taxation of company operating in Nigeria. Located in the ministry of Finance.
11	Stamp Duties Act	Federal Inland Revenue Service	Prescribes the quantum of duties or taxes to be paid before registering certain document for incorp =èmemo & Art
12	Constitution of Federal Republic of Nigeria	Administered by all the court in Nigeria	Regulates every activity
13	Land Use Act (1978)		Regulates the allocation of lands for commercial purposes in Nig.
14	National Insurance Commission Act	National Insurance Commission (NICOM)	Guides the insurance activities of companies
15	BOFIA	CBN	Regulates Banking activities of companies
16	EFCC Act
17	Money Laundering Act

FOREIGN DIRECT INVESTMENT

This is direct investments by investors in Nigeria. The investors may or may not have already existing company in their home country. In either case, a Nigerian company must be formed and registered in Nigeria (unless the company is exempted).

STEPS TOWARDS ESTABLISHING A NIGERIAN COMPANY WITH FOREIGN DIRECT PARTICIPATION

1. Obtain from the Nigerian embassy a cable visa subject to regularization for owners and officers of the company.

2. Securing an address in Nigeria for service of documents and other pre-formation of the company.-

3. Prepare and execute Joint Venture agreement and other pre-incorporation contracts if in partnership with Nigerians.

4. Incorporate the company with CAC and obtain original certificate in Incorporation and other documents.

5. Importation of capital through an Authorized Dealer (i.e. Approved Bank and obtain certificate of capital importation issued by CBN.-S.12&13

6. Register the company with Nigerian Investment Promotion Commission-S.19 NIPC ACT

7. Apply to the Securities and Exchange Commission (SEC) for registration of interest of foreigner in the shares of the company.

8. Obtain relevant permits from the relevant Regulatory Agencies.

9. Apply to obtain relevant incentives and reliefs available for foreign investors in Nigeria.

FOREIGN PORTFOLIO INVESTMENT

Portfolio investors participate by purchasing shares in existing Public Companies (Listed/not listed) through the Nigerian capital market.-S.21 NIPC ACT

STEPS TOWARDS ACQUISITION OF SHARES OF A NIGERIAN COMPANY BY FOREIGN INVESTOR (FPI)

1. Application for allotment of shares by the Foreign Investor or a capital market operator to the Nigeria Company directly at primary market (during public offer) or through the stock broker for shares quoted at the Stock Exchange (Secondary market) or private placements-

Rule 406&410 SEC rules 2013

2. Approval of Allotment of the shares to the foreign investor by the Board of Directors, subject to requisite approvals.

3. Importation of the capital through an authorized dealer (Approved Bank) and obtain certificate of capital importation issued by CBN, and pay for the shares.-

RULE 408 SEC RULES 2013

4. Obtain share certificates from the company’s Registrar, enlist the shares in the electronic stock holding at the Central Securities Clearing Systems Ltd (CSCS) and obtain Statements of Stock holding from the CSCS.

5. Apply to the Securities and Exchange Commission (SEC) for registration of security IN FORM SEC 6F accompanied by prescribed fee-RULE 415 SEC RULES 2013.

FOREIGN PARTICIPATION UNDER THE COMPANIES AND ALLIED MATTERS ACT

Every foreign company intending to carry on business in Nigeria must take all steps necessary to incorporate as a Nigerian company and until such incorporation, the foreign company must not have a place of business in Nigeria for any purpose other than the receipts of notices and other documents, as matters preliminary to incorporation.-

S. 54(I) CAMA ;

UNIPETROL NIG. PLC V. AGIP (NIG) PLC.

PROCEDURE FOR INCORPORATION

i. Engage the services of a corporate lawyer; give him all relevant instructions/information e.g name of the company, business of company, particulars of the foreign investor, share capital; 1^st Directors, Proposed Registered office, subscribers to Memo and Articles etc.

ii. Obtain incorporation forms.

iii. Availability and Reservation of name to be carried out on line or at any CAC office.

iv. Prepare Incorporation documents.

v. Submit 2 copies each for memo and Articles with two copies of the statement of share capital at the Federal Board of Inland Revenue Service for sampling.

vi. File incorporation documents (stamped) at the CAC.

vii. The Certificate of Incorporation is issued by CAC.

==è This is a prima facie evidence of incorporation.

EFFECT OF CARRYING ON BUSINESS WITHOUT REGISTRATION

Any foreign company which fails to comply with the requirements of S. 54 CAMA

a. shall be guilty of an offence and liable on conviction to a fine of not less than N2,500.00

b. Every officer or agent of the company who knowingly and willfully authorize or permits the default or failure to comply shall, whether or not the company is also convicted of any offence be liable on conviction to a fine of not less than N250.00

c. Where the offence is a continuing one to a further fine of N25 for every day during which the default continues-

SECTION 55 CAMA;

E.I.I.A v. C. I. E

FOREIGN COMPANIES QUALIFIED FOR EXEMPTION

S.56(1)(a-d) CAMA;

R.27(1) CR 2012

The class of foreign companies qualified for exemptions are:

1. Foreign government-owned companies involved exclusively in export promotion activities –s.56(1)c

2. Engineering consultants and technical experts on the invitation of the President or Government agency or individuals –s.56(1) d

3. Foreign companies invited to carry out specific loan project for donor countries or international organizations/bodies.-S.56(1)b

4. Foreign companies on the invitation of the Government of Nigeria to execute a specified individual project. - S. 56(1)a of CAMA.

Note-The “specified project” here may not be technical in nature or require special skill, unlike the exemption under S. 56(1)(d) which is based on technical skill/expertise.

APPLICATION FOR EXEMPTION

1. An application for exemption shall be in writing addressed to the president through the Secretary to the Government of the Federation and shall set out the 8 documents listed in S.56(2) CAMA;

R.27(2) CR 2O12

2. Upon the receipt of the application for exemption, the Federal Executive Council (FEC) considers the Application and upon its Recommendation, the President grants the exemption which is usually for a specified period.- S. 56(3)

DOCUMENTS TO BE ATTACHED TO AN APPLICATION OF EXEMPTION

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, a certified translation of the instrument where necessary.

e. The names and addresses of some one or more persons resident in Nigeria authorized to accept on behalf of the foreign company service of process and any notices required to be served on the company.

f. The business or proposed business in Nigeria of the foreign company and the duration of such businesses.

g. Particulars of any project previously carried out by the company as an exempted foreign company.

h. Such other particulars as may be required by the Secretary to the Federal Government.-s. 56(2) CAMA

REVOCATION OF EXEMPTION ORDER

Exemption Order can be revoked by the President for good or sufficient reason etc.

STATUS OF AN EXEMPTED COMPANY

· An Exempted Foreign Company has the status of an UNREGISTERED COMPANY.S. 58 CAMA. The effect is that the company is exempted from payment of all company taxes.

· An exemption is not a license to disregard any enactment or rule of law except as stated in Ss. 55, 56, 57 & 58.

· Thus, An exempted company must deliver/file Annual Reports with the CAC in the prescribed form- S.57

LEGAL PERSONALITY OF FOREIGN COMPANIES

An unregistered foreign company can sue and be sued in Nigeria where liable (either in its corporate name or that of its.-RITZ PUMEM FABRIK & CO KG V.TECHNO CONTINENTAL ENGINEERING NIG. LTD where the plaintiff was a German company which supplied machinery to the Nigeria company which refused to pay.

WATANMAL (SINGAPORE PTE) V.LIZ OLOFIN CO. LTD ;

SECTION 60(b) CAMA

NIGERIAN INVESTMENT PROMOTION COMMISSION

A foreign company after incorporation as a Nigerian company must apply for registration with the NIPC before commencing business.- S. 20 NIPC Act

APPLICATION TO NIPC MUST BE MADE

a. AFTER INCORPORATION and

b. BEFORE START OF BUISNESS

NIPC is a federal Government Agency that coordinates and monitors all investment promotion activities in Nigeria. it has set up a One Stop Investment Centre (OSIC) in its office.

This goes to co-ordinate the activities of the relevant Regulatory Agencies in granting various permits/approvals/licenses and rendering investment advice to foreign investors.

THE FUNCTIONS OF THE NIGERIAN INVESTMENT PROMOTION COMMISSION (NIPC) ON FOREIGN INVESTMENT ARE:

1. To register all foreign investors/companies in Nigeria

2. To promote both local and foreign investments in Nigeria

3. To introduce the incentives/reliefs to foreign investors

4. To act as a liaison between foreign investors and the Government-S. 4 of the NIPC Act.

PROCEDURE FOR REGISTRATION WITH THE NIGERIAN INVESTMENT PROMOTION COMMISSION

1. Pay application fees of N10, 000.00(Non refundable) to the Commission

2. Fill and submit NIPC Form 1-Application for Registration

3. Attach the following documents with the NIPC Form 1:

· A copy of the Certificate of Incorporation.

· Copies of receipt for purchase of NIPC Form (Original copy)

· The memorandum and articles of the company (CTC)

· Receipt for payment of stamp duties on the authorized share capital of the company as at the date of application.NB -N10 million is the minimum share capital

· Tax clearance certificate of the Applicant Company.

· Joint Venture Agreement unless 100% foreign ownership.

· Feasibility Report and Project Implementation Program of the company for its proposed business.

· Title deeds of land evidencing firm commitment to acquire requisite business premises for the company’s operations.

· CTC of FORM CAC 2 & 7 i.e. statement of share capital and return of allotment and particulars of Directors including non – resident directors “NRD”.

· Job title designations of expatriate quota positions required and the academic/working experience (i.e CV) of management /technical staff.

· Copies of Information Brochure on the foreign partner as testimony of Int’l expertise and credibility in the line of business.

· A copy of certificate of capital importation.

· 90-Evidence of having sourced the plant and machinery to be used in the company’s business.

4. After the submission of the NIPC Form 1, the Commission will register the applicant company WITHIN 14 DAYS OF the receipt of the application.

FOREIGN PARTICIPATION UNDER INVESTMENTS AND SECURITIES ACT

The Securities and Exchange Commission (SEC) keeps and maintains separate register for:

i. Foreign Direct Investment

ii. Foreign Portfolio Investments

Once foreign investor has participated in Nig. Corp, there is need to apply to SEC for entry of the security interests of the foreigner EXCEPT securities of private companies-rule 406 sec rules 2013.

NOTE-RULE 418 SEC RULES 2013-EXEMPTION in event of reciprocal agreements with international org. of securities commission(I.O.S.C.O)members

IMPORTATION OF CAPITAL BY FOREIGN INVESTORS.

MODES OF IMPORTATION OF FOREIGN CAPITAL

After a foreign company /investor have obtained registration with the NIPC, its capital can be imported by any of the following:

1. Importation of equipment/ raw materials

2. Importation of cash

3. Importation of cash indirectly through the Debt-Equity conversion programme.(DMO)

IMPORTATION OF CAPITAL THROUGH FOREIGN EXCHANGE (MONITORING & MISCELLANEOUS PROVISIONS) ACT

A foreign investor wishing to buy shares or import foreign capital/loan for doing business in Nigeria should freely import the capital through an Authorized Dealer, which currency is convertible into the Naira at the official foreign exchange market.- S. 12, 13, 15 Foreign exchange (monitoring &miscellaneous provisions Act)

PROCEDURE

· This can be done by buying Nigeria Debt instrument abroad from any Stock Exchange at a discount rate.

· A Certificate of Capital Importation will be issued to the Foreigner.

· The foreign company/investor will then present the CCI-Certificate of Capital Importation to the Central Bank of Nigeria through authorized dealers usually Banks.

· The CBN will pay the face value of the Certificate of Capital Importation in naira.

ADVANTAGES OF USING THE CERTIFICATE OF CAPITAL IMPORTATION (CCI)

1. It enables the opening of foreign currency domiciliary accounts with Banks in Nigeria

2. Open a special non – resident Naira Account.

3. Buy shares in Nigerian companies out of the naira account.

4. It aids repatriation of capital, dividends and incomes without restrictionsat autonomous market rates minus taxes.; Rule 408(2)a-d SEC Rules 2013.

5. Unconditional transferability of funds through an authorized dealer in freely convertible currency S. 24 of the NIPC Act

6. The company will be exempted from money laundering investigations.

7. If the purpose is to finance foreign loan; the company will be allowed to purchase foreign currency at the official rate for servicing of the foreign loan.

IMMIGRATION REQUIREMENTS TO BE FULFILLED BY FOREIGN INVESTORS-S.8

A foreigner must obtain the following in order to do business in Nigeria as follows:

1. VISA

· This is a permit to enable a foreigner to enter a country. This is a major immigration requirement of a foreigner that intends to do business in Nigeria especially FDI. Application shall be.

There are two types of visas;

a. Cable visa (Temporary Work Permit)(TWP) and

b. Business Visa /STR(subject to regularization) Visa for Residence Work

CABLE VISA

Cable Visa can be issued by the Comptroller-General of Immigration and it is subject to regularization.

PROCEDURE FOR APPLICATION-

Application Letter (2 copies) accompanied by a valid Passport of the Alien. made to the appropriate Diplomatic Nigerian Mission abroad where applicant reside and referred to the Comptroller General of immigration for approval

EXAMPLES OF TEMPORARY ASSIGNMENTS FOR GRANT OF CABLE VISAS

1. Erection/installation work

2. Feasibility studies

3. Repairs of machinery/equipment

4. Auditing of accounts

5. Research work

BUISNESS/STR VISAS

A foreigner who is granted cable visa to visit Nigeria WITHIN THREE MONTHS on Subject to Regularization (STR) is to regularize the visa by changing his status from that of a visitor to that of a Resident by converting it into CERPAC- Combined Expatriate Residence Permit and Alien Card WITHIN 56 DAYS.

APPLICATION

S.33 IMMIGRATION ACT

1. Must be made to the COMPTROLLER GENERAL by the PROSPECTIVE EMPLOYER in writing confirming that

· He/she has a vacancy on the expatriate quota

· State the position in which the prospective employee is to be employed

· Confirm acceptance of immigration responsibility.

2. The employer company applies to the Nigerian embassy or consular office in the country where such intending employee lives requesting grant of STR for him and his family.

3. STR visa is given to last 90DAYS/THREE MONTHS

PERSONS EXEMPTED FROM HOLDING CERPAC

a. Diplomatic envoy

b. Children below 15 years of age who live with their parents unless the parents specifically request the card.

c. ECOWAS citizens

THE ECOWAS TRADE LIBERALIZATION SCHEME

· The citizens of the member-States of ECOWAS- Economic Community of West African States- are exempted from payment of duties and taxes on the importation or exportation of persons/ product across the borders of a member State.

· Also, Visa is not needed before a citizen of a member State enters into the territory of another member State but an ECOWAS passport is needed.

· However, a citizen of an ECOWAS country wishing to do business in another member country is to obtain a Business and Residence permits WITHIN 3 MONTHS OF HIS

ENTRY.

4. RESIDENCE PERMIT

An alien desirous of entering Nigeria for the purpose of residence shall, UNLESS EXEMPTED may be issued a residence permit subject to the payment of any prescribed security by the minister and information supplied to the director of immigration-

S. 10 (2) Immigration Act;

Reg26(2) CR 2012.

NOTE- Separate application for Work Permit and Resident Permit are no longer necessary. This is based on the introduction of Combined Expatriate Residence Permit and Aliens Card (CERPAC).

CERPAC IS COMPULSORY FOR ALIENS STAYING FOR MORE THAN 56 DAYS.

APPLICATION

2 COPIES OF APPLICATION LETTERS ACCOMPANIED BY VALID PASSPORT OF THE ALIEN.

The alien cannot work until residence work permit is granted.

CERPAC FORMS can be obtained from participating banks.

5. EXPATRIATE QUOTA AND WORK PERMIT

WORK PERMIT IS GRANTED TO

A. the expatriate employee to enable him fill the expatriate quota(RESIDENCE WORK PERMIT)

B. Casual expatriate staff engaged to execute specific temporary assignment(TEMPORARY WORK PERMIT)

Expatriate quota- is a permission given to a business concern to employ NON NIGERIANS.

It is the duty of the Company employing a foreigner to obtain the expatriate quota/WORK PERMIT.

OLIVER V. DANGOTE INDUSTRIES.

S.34 IMMIGRATION ACT

It is issued by the Director of Immigration or the Citizenship and Business Department of Immigration Services.-

S. 8-10 of the Immigration Act

The number of expatriates allowed to be brought into Nigeria depends on the authorized share capital of the company which is as follows:

a. N15 million – 2 allowed

b. N30 million and above- 4 automatic positions allowed.

TYPES OF EXPATRIATE QUOTA

a. Permanent until reviewed(PUR) issued to the Chairman/Managing Directors of the company

b. Temporary granted FOR A MINIMUM OF 5 YEARS renewable for 2 years.-S. 34 OF THE IMMIGRATION ACT.

Application for expatriate quota

S. 34 IMMIGRATION ACT

Made on immigration form T/2 accompanied with

6. CTC of memarts

7. Form CAC 2 and 7

8. Evidence of non availability of expertise in the country

9. A copy of training programme or personnel policy of the company(incorporating succession schedule)

10. Particulars of proposed director

11. Job title designations of expatriate quota positions and required work and academic experience.

6. BUSINESS PERMIT

Applies to wholly foreign companies. Who intend To form or takeover a company or practice a profession in Nigeria.

An expatriate professional who comes to Nigeria to practice his profession as an individual or firm whether or not in partnership with Nigerians

Issued by the ministry of interior

Consent of the minister of internal affairs must be sought and obtained- s.8 (1) a&b Immigration act ,cap I1

NOTE-OILFIELD SUPPLY CENTRE LTD V. JOSEPH LLOYD JOHNSON where the Court held that the FAILURE TO OBTAIN THE PERMITS WHICH IS A DEPORTATION ORDER(S.8(1)B) cannot be used as a defence to evade lawful contract between a company and a foreigner, it cannot void the contract.

OTHER LEGAL REGIMES TO BE COMPLIED WITH BY A FOREIGN COMPANY/INVESTOR

A-THE INDUSTRIAL INSPECTORATE ACT

· A company intending to incur capital expenditure(importation of machinery) not less than NGN 20,000must give notice to the Director of the Industrial Inspectorate Division of the Ministry of Industries.

The notice is in FORM1-SEE 1^st Schedule IIA and S. 3 IIA

· The Director on receipt of the notice will verify the information contained in the application. If satisfied, he shall prepare and issue the company with a Certificate of Acceptance.

· The bench mark for capital expenditure(pioneer status) is N500,000.00.

The Industrial Inspectorate Division will conduct an inspection of the company; then recommend the company to the NIPC to enjoy pioneer status.

B-NATIONAL OFFICE OF TECHNOLOGY ACQUISITION AND PROMOTION ACT (NOTAP ACT).

The principal function of NOTAP is to monitor continuously the execution of contracts and agreements so registered under it. -S. 4 of NOTAP Act.

Any foreigner in an agreement to transfer technology to an agent in Nigeria must register with NOTAP.

OBLIGATION TO REGISTER

· The obligation to register the Agreement is on both the Transferor andTransferee of such technology.

· NOTAP registers contracts/agreement which deal with the transfer and acquisition of foreign technology.

It issues a CERTIFICATE OF APPROVAL OR CERTIFICATE OF REFUSAL OF REGISTRATION. S. 6(1) of NOTAP Act.NOTAP certificate of Approval is valid for a period between 1 – 10 years.

WHEN SHOULD THE APPLICATION BE DONE

The Registration is expected to be done WITHIN 60 DAYS of execution or conclusion of the Agreement.

REGISTRABLE CONTRACTS/AGREEMENTS

i. Use of trade – marks

ii. Right to use patented inventions

iii. The supply of technical expertise.

iv. The supply of basic or detailed engineering drawing

v. The supply of machinery and plant.

vi. The provision of operating staff or managerial assistance and training of personnel.

vii. Contract involving transfer of technology to Nigerian partners-S. 4(d) of NOTAP Act

GROUNDS FOR REFUSAL OF REGISTERATION

The Office may refuse the application for registration based on the following grounds:

a. That the technology is readily available in Nigeria

b. The price of the technology is not commensurate with market prices

c. There is a term of the contract permitting the supplier to regulate or intervene directly in its execution which is unnecessary -S. 6 (2) of NOTAP Act

EFFECT OF NON-REGISTRATION WITH NOTAP

a. It does not void the contract

b. Repatriation of fees and profits in respect of the contract cannot be done through the CBN except it submits the Certificate of approval with NOTAP. -S. 7of the NOTAP Act.

PROCEDURE- FOR APPLICATION

a. Complete Form NOIP 1 – 84

b. CTC of the contract

c. Attach application fee

d. Memo & Articles & Certificate of Incorporation.

e. Two CTC of the Agreement to be registered

f. Two copies of duly completed Questionnaire (Revised FORM NDIP 2 – 84)

g. Relevant feasibility study

INCENTIVES / RELIEFS TO FOREIGN INVESTORS IN NIGERIA

A-NIPC ACT INCENTIVES

12. Acquisition of a foreign company by Nigeria is attended with the payment of adequate compensation. Generally, no foreign enterprise shall be nationalized by the Federal Government UNLESSit is in the public or National interest.

NOTE-The compensation must be paid if a foreign company is expropriated and the foreigner can access the Courts as to the quantum of compensation to be paid. The compensation is to be paid promptly and in foreign exchange. S. 25(3) of the NIPC Act.

PIONEER STATUS CERTIFICATE

This is issued to exempt a company manufacturing pioneer productsfrom payment of taxes for 3-5 years withADDITIONAL 2 YEARSif neededby the Nigerian investment promotion commission.

The seven years tax holiday is reserved for pioneer industries located in economically disadvantaged local government area of the Federation.

This is to enable the industry to make a reasonable level of profit within its formative years

NOTE- EXAMPLES OF PIONEER COMPANIES FOR EXAM

CONDITIONS FOR GRANT OF PIONEER STATUS

a. The company’s business is listed as a pioneer company.

b. The business is carried on a scale suitable to the economic development of Nigeria

c. Its capital is up to five million Naira for a wholly or JVA foreign owned company, or not less than N150,000 for indigenous company

d. it is carried out as a low-key company

e. There are favourable prospects for further developments in Nigeria of such industry. -S. 1 OF

THE INDUSTRIAL DEVELOPMENT (INCOME TAX RELIEF) ACT 2004

THE FOREIGN EXCHANGE (MONITORING AND MISCELLANEOUS PROVISIONS) ACT.

Repatriation of all (100 %) capital imported without seizure is guaranteed to foreign investors.

S. 14(4) of the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act.

COMPANIES INCOME TAX ACT

c. Tax relief on double Taxation Treaties

This works if a Nigerian foreign company’s country has a double Taxation Treaty with Nigeria, the foreign Nigerian company is exempted from taxation provided its parent company abroad has paid its tax. S. 33 of the Companies Income Tax Act

b.Tax Relief on Foreign Loan-

S. 11(1) CITA provides for tax exemption/relief on foreign loan

1. The loan must not be less than N150,000

2. The loan must be granted by a foreign company to any person carrying on trade, business, profession in Nigeria.

3. If the loan is to be repaid after 10 years, the interest is exempted from tax.

4. If the loan is to be repaid between 5 – 10 years, then the tax the interest accruing should be half of the chargeable taxmust be made within A MAXIMUM OF TWO years from the date of exportation

b. Reconstruction Investment allowance

10 % of the actual expenditure incurred by a company on installation of plants and equipment are allowed and exempted from tax.

S. 32 of the Companies Income Tax Act.

d. Tax exemption

Here a company or person is completely free or partially excluded from payment of taxes as follows:

i. The exportation of goods and raw materials is exempted from payment of tax provided the proceeds are repatriated to Nigeria and used in the purchase of raw materials, plants etc.

S. 23 of the Companies Income Tax Act.

ii. The profits of a 100 % export oriented manufacturing companies are exempted from payment of tax.

iii. The interests on domiciliary accounts are not taxable

iv. The profits of companies involved in educational promotion and stationary are tax free.

v. Interests on foreign loan for agricultural business, fabrication of local plant etc are not taxable.

e.Investment tax credit

· Companies and other organizations that are engaged in Research & Development (R & D) activities for commercialization are allowed 20% investment tax credit on their expenditure.

S. 26 (3) CITA

· For fabrication of spare parts and equipment for local consumption and export – 25% ITC – S. 38(I) CITA

· 15% ITC for company that purchases/uses locally manufactured plant, machinery etc for its business. S. 26 of the Companies Income Tax Act.

f.Petroleum Investment Allowances

50% of the income and profits are non-taxable for companies doing petroleum exploration.

g.Tax exemption for company’s utilization of gas

There IS 3 YEARS TAX FREE PERIOD which is RENEWABLE FOR 2 MORE YEARS-S. 39 of the Companies Income Tax Act and S. 4 of the Petroleum Profits Tax Act.

h.LOCAL RAW MATERIALS UTILIZATION

· Tax concession is granted to industries that attain minimum local raw materials utilization.

· A tax credit of 20% is granted for 5 years to industries that attain minimum levels of local raw materials sourcing and utilization in their respective sectors.-Agro – allied 70%, Engineering 60%, Chemicals 60%, Petrochemicals 70%.

i.Rural Investment Allowance

This incentive is granted if a company establishes or provide electricity, water and road in rural areas of about 20 km away from such facilities.

The allowances depend on the facility so provided as follows: No facilities-100% ;Electricity- 50% of the capital expended is free from tax ;Water- 30 % ;Road- 15%.-

S. 34 of the Companies Income Tax Act.

LOCAL CONTENT ACT

LABOUR INTENSIVE MODE OF PRODUCTION

· Tax concession is granted to industries with high labour/capital ratio.

· These are industries with plants, equipment and machinery which essentially are operated with minimal automation.

· The rate of tax concession here is graduated, in that a company employing 1000 persons or more enjoy 15 percent tax concession, an industry employing 200 persons will enjoy 7 percent, 100 persons enjoy 6 percent etc.-

section Local Content Act 2011

CAMA

Bonus for filing of Annual Returns on time

1% bonus is allowed for companies complying with early payment of tax by FIRS. S. 57 of CAMA.

EXPORT/IMPORT RELATED INCENTIVES.

Export Free Zone Allowance (Onne and Calabar).

The profits of export oriented businesses are given 100% tax exemption.

No payments of import / export duties or permits are needed in export free Zones.

THE CONDITIONS TO BE FULFILLED FOR ITS GRANT ARE:

a. It is a new business

b. The business uses new plants and machinery

c. The export proceeds is solely up to 75 % of its turn over

d. The business is registered with the National Export Promotion Commission. S. 35 of the Companies Income Tax Act.

Duty draw back/ suspension scheme

Here importers of raw materials and other materials used in the manufacture of goods for export are entitled to claim the import duties earlier paid and the import duties will be refunded provided the manufactured goods are solely for export-

Export (Incentives and Miscellaneous Provisions) Act cap E19 LFN 25,

Customs Duties (Dumped and Subsidized Goods) Act cap C48 LFN2004.

Duty draw back application

ACTIVITY

1. What is the scope of the Invitation envisaged in S. 56(1)(a)(b) CAMA.

* Where in a Dinner, the President of Nigeria invited all persons present to come into Nigeria and invest. Is this a valid invitation by the Federal Government?

==è No; this invitation is an informal one made generally to no specific company and for no specific project.

NOTE FOR EXAMS-

· If you are going to talk to an alien about foreign participation the starting point is S. 17 NIPC Act ;S. 20(4) CAMA; S. 54 CAMA; S. 56 CAMA if the company is exempted from registration.

· Expatriate Quota is granted through the Ministry of Interior but it is applied for through NIPC.

· The Solicitor or Director is to appear in person before the NIPC to defend the application to employ foreign personnel in the company.

· Your client has briefed you to apply for expatriate quota. what do u need to show

ANS-As a solicitor, you should convince the NIPC on the following points(THIS CAN COME AS A LETTER)

1) The company has advertised in two National Dailies in Nigeria for qualified Nigerians to apply for the positions, no application has been received.

2) The expertise/skill required is not readily available in Nigeria.

DRAFT APPLICATION FOR EXEMPTION

RT BRAZIL LIMITED

NO 5 DECAPRIO ROAD,RIO DE JAINEIRO,BRAZIL

rtbrazil@yahoo.com.+234-666-556-9990

OUR REF:………….

DATE:

The President

Federal Republic of Nigeria

Through:

The Secretary

Government of the federation of Nigeria

The presidency,

FCT, Abuja

Dear Sir,

APPLICATION FOR EXEMPTION FROM REGISTRATION AS A

NIGERIAN COMPANY PURSUANT TO SECTION 56(2) COMPANIES AND ALLIED MATTERS ACT, 2004

We the above named foreign company having been invited to Nigeria by the Federal Government of Nigeria to execute a solar energy project hereby apply for exemption from incorporation as a Nigerian company.

Please find attached the necessary documents as stipulated by section 56 (2) of the Companies and Allied Matters Act for your kind consideration.

Thank you

Yours faithfully,

Musa kumo

Company Secretary.

FOR:RT BRAZIL ENERGY INC

ENCL

1. Particulars of RT BRAZIL as the Parent company outside Nigeria.

2. Proposed name and place of business of our company in Nigeria

3. Particulars of the name and address of each Director, Partner or Principal officers of RT BRAZIL

4. Particulars of persons resident in Nigeria authorized to accept services of any process/ Notice on the foreign company

5. Duration and proposed business of RT BRAZIL in Nigeria

6. A certified copy of the charter/Memorandum and Articles of Association of XLING Refinery, or a certified translation of them if not written in English.

7. Particulars of any project previously carried out by RT BRAZIL as an exempted foreign company.

B-APPLICATION LETTER FOR RELIEFS/APPROVALS TO NIPC(USE CASE STUDY 1)

GROUP4HUB CHAMBERS

1, law school drive, Victoria island, lagos.

Group4hub@yahoo.com,0989-9009-098

Our ref…. your ref…..

DATE:

The Director General

Nigerian investment and promotion commission

Maitaima,FOREIGN INVESTMENT AND PARTICIPATION IN BUSINESS IN NIGERIA