Mandatory Incorporation of Foreign Companies in Nigeria: Some Legal Considerations

Description

ABSTRACT

This paper focuses on the legal obligations for incorporation of foreign companies in Nigeria and the requirements for such incorporation. The meaning of a foreign company will also be examined and a distinction will be drawn between a foreign and a local company. It will be posited that the requirement of incorporation is only applicable to foreign companies carrying on business in Nigeria and the expression carrying on business will be elucidated to show that it does not cover a single act of a foreign company in Nigeria. It must be established that the foreign company is performing some business operations or occupation in Nigeria on a continuous or repetitive basis.

Also discussed are the sanctions for non-compliance by a foreign company with the requirement of incorporation as well as the exceptions to the incorporation requirement. The paper concludes with an assessment of the frequency of the exemptions granted in the past by the Federal Government of Nigeria as well as an analysis of the mandatory incorporation requirements for foreign companies in selected jurisdictions. This is in addition to making necessary recommendations for a review of the relevant legal provisions on the subject in Nigeria.

1. INTRODUCTION
This paper addresses the under listed issues in the realm of company law, the meaning of a foreign company, the mandatory requirements for incorporation of foreign companies carrying on business in Nigeria. The crux of the matter is the expression ‘carrying on business’ as every foreign company carrying on business in Nigeria is legally required to be registered in line with the provisions of the Companies and Allied Matters Act. The exemptions to the incorporation requirement and the extent of the application of the said exemptions will be discussed. Also discussed are sanctions for noncompliance with the incorporation requirement and the adequacy of the stipulated sanctions will be analyzed. The paper concludes with a recommendation for the use of legislative intervention in determining the meaning of ‘carrying on business’ in order to avoid uncertainty and give the expression a
more definitive meaning.

In Nigeria, any two or more persons may form and incorporate a company by complying with the requirements of the Companies and Allied Matters Act.₁ A company once incorporated assumes the status of an artificial person, and becomes a legal entity distinct from its members.₂ A foreign company is one that is incorporated outside Nigeria as distinct from a Nigerian or local company incorporated in Nigeria. Foreign company is defined by the Act₃ as a company incorporated elsewhere than in Nigeria. As a general rule foreign companies carrying on business in Nigeria are required to be registered in Nigeria under the Companies and Allied Matters Act in a bid to ensure that the operations of such companies are regulated in line with local requirements. The issue of registration of foreign companies in Nigeria has attracted judicial attention and some of the cases will be discussed in this article with a view to determining the attitude of the Nigerian courts to the subject. Also the article will borrow a leaf from judicial pronouncements in two selected advanced economies, Australia and the United Kingdom and it will be established that there is a striking similarity in the approaches of courts in the various

* LLB, BL, LLM, MBA, ACIS. Partner, Giwa-Osagie & Co., Lagos

1. Cap C20, LFN 2004 (the Act ). See section 1 of the Act.
2. See Salomon v Salomon & Co [1891] AC 22 and Marina Nominees Ltd v Federal Board of Inland Revenue [1986] NWLR 48 [1] 21
3. See section 650 of the Act.