Foreign Participation Flashcards
Mention 7 legal frameworks and their bodies
- Companies and Allied Matters Act (CAMA),cap C20 LFN 2020 — Corporate Affairs Commission (CAC)
- Federal high court act — federal high court
- National agency for technology acquisition and promotion Act — NOTAP
- National investment promotion commission act — NIPC
- Investment and securities act - securities and exchange commission
- Foreign exchange (monitoring and miscellaneous) act — central banks of Nigeria
- Immigration act — Nigerian immigration service
- Customs and excise management act —board of customs
- Stamp duties act — federal inland revenue service
Modes of foreign participation
- Foreign direct investment
- Foreign portfolio investment
- Exempted companies
Explain foreign direct investment
This is where foreign investors decide to do business in Nigeria by incorporating a company in Nigeria either solely or through joint venture with Nigerians
Conditions for FDI
- The foreigner must be in Nigeria or have an address for service
- Acquisition of landed property
- Incorporation of the company with CAC
- CERPAC Application
Procedure for FDI / procedure for establishing a business in Nigeria
- Obtain cable visa subject to regularisation for owners and officers of the company
- Secure a place of address for service of document and other notices for the
incorporation of the company. - Prepare and execute joint venture agreement or other pre incorporation contracts
- Conduct availability search and reservation of name.
- incorporate the company with CAC and obtain certificate of incorporation or letter of exemption
6.Import capital/funds through an Authorized Dealer (i.e. Approved Bank and obtain
Certificate of Capital Importation issued by CBN.
- Register the company with Nigerian Investment Promotion Commission.
- Apply to the Securities and Exchange Commission (SEC) for registration of interest of
foreigner in the shares of the company. - Obtain relevant permits from the relevant Regulatory Agencies and
What is foreign portfolio investment
This is the purchasing of shares in existing public companies by foreign investors S 21 NIPC act
Conditions for FPI
- SEC must be notified
- The shares can only be acquired from quoted public company
Procedure for FPI
- Application for allotment of shares by the foreign investors or a capital market operator to the Nigerian company directly at primary market
- Approval for allotment of share by the board of directors
- Importation of capital through an authorized dealer and obtain certificate of of capital importation issued by CBN then pay for the shares R 408 sec
- Obtain share certificate from the company’s registrar
5 Apply to SEC for registration of security in form SEC 6f accompanied by a prescribed fee
Prohibited business or business in the negative list
- Production of arms and ammunition
- Production of service uniforms
- Production of narcotics s17 NIPC act
Assurance to foreign investors
- Effective dispute resolution mechanisms
- Repatriation of profits to their home county
- Importation of foreign capital through an authorized dealer
4 they are free to do any business except those in the negative list - Investment incentives and reliefs are available for qualified investors
- Interest accruing from such loan will not be taxed.
What are exempted companies list them
exempted companies are company’s that are able to practice business in Nigeria without being duly incorporated s 80(1) CAMA
CATEGORIES: S78CAMA provides that for a company to carry out business in Nigeria it must be duly incorporated
1. Foreign companies invited to Nigeria with the consent of the federal government to execute a specified individual project
2. Foreign companies in Nigeria for the execution of a specific individual loan project on behalf of a donor organization or agency
- Foreign government owned companies engaged solely in export promotion activities
- Engineering consultants and technical experts on the invitation of the president or government agency or individual
Result of Failure to incorporate a company
All contract entered by the company is void and a nullity
a. Commission of an offence and is liable to prosecution and the company is liable to such penalty as the commission shall specify
b. And every officer ,agent who permits the default is liable on conviction to such penalty as the commission shall specify
Application for exemption
A letter of exemption is addressed to the minister of trade, industry and investment with document attached
The minister of trade or secretary to the government of the federation considers the application for approval
Once the application is granted the company is issued a certificate of exemption
Then the company registers with NIPC
And any other relevant registration that may be required
Document to be attached to the application for exemption to the minister of trade industry and investment
- Name and place of the foreign companiy outside Nigeria
- name and place of The proposed business in Nigeria
- particulars of each director, partner or other principal officer of the foreign company
- A certified copy of the charter, statutes or memoart of the company
- Particulars of one or more person resident in Nigeria to accept service of processes and any notice to be served on the company’s behalf
- business or proposed business of the foreign company an duration of Such businesses
- Particulars of any project previously carried out by the company as an exempted foreign company
- Such other particulars as may be required by the secretary of the federal government S 80(2)
STATUS OF AN EXEMPTED COMPANY
a)An Exempted Foreign Company has the status of an Unregistered Company. S. CAMA. The effect is that the company is exempted from payment of all company taxes.
b)An exempted company can only execute the project contained in the exemption order, if it intends to carry out any other project; it must take steps to be incorporated with CAC; section CAMA.
c)An exempted company must deliver/file Annual Reports with the CAC in the prescribed form- S. CAMA
however an unregistered foreign company can sue and be sued in nigeria where liable S84 CAMA FABNO INDUSTRIES LTD V UNITED DISTILLERS PLC
post exemption requirements
- once exemption is granted the company must upon payment of prescribed fees issue a a notice of its exemption to the CAC within 30 days failure to do so will warrant penalty for everyday of the default S80(7) &(8)
- publication of of the exemption in any gazette with the name of the company and details of the exemption by the minister of trade
- the exempted company shall deliver an annual report every year in form cac 24 to the CAC
grounds for revocation of exemption
a. the company has contravened CAMA
b. the company has not fulfilled any condition of the exemption order
c. for any good or sufficient reason S80(5) CAMA
what NIPC application is done for
business permit
pioneer status
expatriate quota
technical assistance agreement
document to be attached for NIPC registration application/application to NIPC
a) non refundable deposit of
15K attached to the application
- 2 Copies of payment receipt
- Joint venture agreement
- CTC OF MEMOART
- Certificate of incorporation
- Certificate of capital importation
- Title deed of land to business premise
- Feasibility study report
- profile of expatriate personnel showing their qualifications ,experience, position to be held in the company and duration of each quota position
- Training program for Nigerian staff
- Names addresses nationality and occupation of the proposed director of the company including non resident director (NRD)
- Information brochure on shareholders
b. application should be forwarded to NIPC headquarters
c. the commission should register the applicant company within 14 days
(the applicant company must have a minimum share capital of 5 million and 10 million for pioneer status )
Requirement for pioneer status
The company must have a required share capital of not less than 10 million Naira
Modes of importation of capital by foreign investors
- Importations of equipment/ raw materials
- Importation of cash
- Importation of cash indirectly through the debt equity conversion program
PROCEDURE FOR IMPORTATION OF CAPITAL THROUGH FOREIGN INVESTORS
PROCEDURE FOR IMPORTATION OF CAPITAL THROUGH FOREIGN INVESTORS
* Buying Nigerian Debt instrument, abroad from any stock exchange at a discount rate
* Certificate of Capital importation will be Issued to the foreigners
* The foreign company or investors will present the certificate of capital importation to CBN through authorized dealers
* CBN Will pay the Face value of the certificate of capital importation in Naira
ADVANTAGES OF IMPORTATION OF CAPITAL
ADVANTAGE
a) enables opening of domiciliary account with banks in Nigeria
b) Opening 0f a special Non resident naira account
c) foreigners Can buy Shares in Nigerian companies out of the Naira account
d) exemption from money laundering investigation
e) aid repatrIation of capital dividends and incomes without
without restriction at autonomous market rate
NECESSARY PERMITS REQUIRED BY FOREIGN INVESTORS
Visa: This will be issued by the Nigeria Immigration Service to grant them access
into Nigeria.
Residence permit which will be granted by the Nigeria Immigration Service to enable
them live in Nigeria
Expatriate Quota: This will be granted to them by the Nigerian Investment Promotion
Commission (NIPC) to enable them work in Nigeria
Business permit: this will also be issued by the NIPC to enable them carryon business
in Nigeria.
INCENTIVES FOR FOREIGN INVESTORS IN NIGERIA
- pioneer Status: This is used to exempt a company from payment of taxes for a period of 3 to 5 years Which may be extended for an additional 2 years.
2.Repatriation of all (100%) capital imported without seizure is guaranteed to foreign investors.
3.Tax relief on double Taxation Treaties: 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
4.Tax Relief on Foreign Loan-S. 11(1) CITA provides for tax exemption/relief on foreign loan
a.If the loan is to be repaid after 10 years, the interest is exempted from tax.
b.If the loan is to be repaid between 5 – 10 years, then the tax the interest accruing should be half of the chargeable tax.
5.Reconstruction Investment allowance: 10 % of the actual expenditure incurred by a company on installation of plants and equipment are allowed and exempted from tax.
6.Local Raw Materials Utilization: Tax concession is granted to industries that attain minimum local raw materials utilization.
7.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
- Export Free Zone Allowance The profits of export oriented businesses are given 100% tax exemption provided the profits are expatriated in Nigeria. No payments of import / export duties or permits are needed in export free Zones. The conditions 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.
9.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.
QUALIFICATION/APPLICATION FOR PIONEER STATUS
To qualify the company must :
a) Incur a share capital expenditure of not less that l0 million Naira
b) Bring the application within one year of commencement
c) the application is made to the NIPC in the prescription form accompanied with necessary documents:
，
* A cover letter addressed to the executive secretary of the commission
* A Copy of the Nigerian investment promotion commission registration certificate
* A copy of the applicant CAC incorporation
* A copy of the applicants memorandum of association
* A copy each of the applicant Statement of share capital form cac 2 and particulars of person who are first directors form Cac 3
- Tax clearance certificate
- Regulatory license to operate in the sector or business activity where required
- Copy of the Business plan or proposed business plan or actual project that the pioneer status is sought
