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SULEIMAN NASIRU ARISEKOLA U08CL1010
ALAKAN ALIU AKOREDE U08CL1158
SULAYMON TADESE ALMOL-YEQEEN U08SH1058
MUSTAPHA RABIU MARU U09SH2014
JIBRIN ALHASSAN KORO U08CL1037
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AN ANALYSIS OF THE PROCEDURE FOR EXECUTING JOINT VENTURE INVESTMENT IN
NIGERIA BETWEEN A NIGERIAN AND NON-NIGERIAN
1.0 INTRODUCTION
The Nigerian economy is primarily based on free market principles, with some areas of state
control. Foreign investment is being actively encouraged by both the private and public
sectors in all facets of the economy. This is evident from the governments foreign
investment policies and the various regulatory frameworks.
With the exception of banking, insurance and broadcasting industries, the various
regulatory laws impose no restrictions on foreign ownership of local companies and
businesses. The Nigerian Government is however committed to the economic
empowerment of its citizenry, thus, varied categories of incentives are incorporated in the
various regulatory laws geared at increasing the number of companies owned by it
populace.
The countrys financial infrastructure is well developed with advanced money markets and
capital markets. The money market is predicated on the issuance of short term securities by
the Central Bank of Nigeria. These securities once issued, are taken up by banks and other
financial institutions for placement with individuals and businesses.
The capital market is made up of a regulator, stock exchange and stock brokers. The
Securities and Exchange Commission regulates the activities in the capital market in
accordance with the Investment Securities Act, 2007. The country boast of a wide array of
financially sound and established commercial, merchant, and investment banks, both
domestic and international, listed shares and debentures, stocks and bonds and options on
those shares and debentures are traded on the Nigerian Stock Exchange (NSE). The NSE is
the only exchange operating in Nigeria with trading floors in the major cities of the country.
The Exchange has undergone major changes in the last few years with the commissioning of
the Central Securities Clearing System (CSCS), by which transactions are completed in T+1
day. The Federal Government in 1995 liberalised the Nigerian capital market to ensure the
participation of foreigners in the Nigerian Market both as operators and investors. This was
facilitated by the abrogation of laws like Exchange Control Act 1962, Nigerian Enterprise
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Promotion Act, 1989. The labour market in Nigeria consists of readily available skilled
professional in many technical fields required for the effective operation of a business.
1.2 OPERATIONS OF FOREIGN COMPANIES IN NIGERIA
A non-Nigerian may invest and participate in the operation of any enterprise in Nigerian
either in joint venture or 100% own by foreigner. However, a foreign company wishing to
set up business operations in Nigeria should take all steps necessary to obtain local
incorporation of the Nigerian branch or subsidiary as a separate entity in Nigeria for that
purpose. Until so incorporated, the foreign company may not carry on business in Nigerian
or exercise any of the powers of a registered company.
The foreign investor may incorporate a Nigerian branch or subsidiary by giving a power of
attorney to a qualified solicitor in Nigeria for this purpose. The incorporation documents in
this instance would disclose that the solicitor is merely acting as an agent of a principal
whose names should also appear in the document. The power of attorney should be
designed to lapse and the appointed solicitor ceases to function upon the conclusion of all
registration formalities.
1.3 PROCEDURE FOR EXECUTING JOINT VENTURE INVESTMENT IN NIGERIA
Except in instances where the proposed company will be 100% owned by non-resident
shareholders, it is must to prepared joint ventures agreement between prospective
shareholders. The joint venture may specify; inter-alia, mode of subscription by parties,
manner of Board Composition, mutually protective quorum for meetings, specify action
which would necessitate share- holders approval by special or other resolutions. And
Memorandum and Articles of Association must incorporating the spirit and intents of the
Join- Venture Agreement.
Thus, discussed below are regulations and regulatory agencies in executing joint venture
investment in Nigeria by Nigerian and Non-Nigerian.
1.3.1 Nigerian Investment Promotion Commission (NIPC) Act1
The NIPC Act established the NIPC as an investment promotion agency of the Federal
Government2. The NIPC is charged with the responsibility of registering foreign investments
1CAP. N117 L.F.N. 2004.
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in Nigeria. It is also part of its responsibility to maintain close cooperation between investors
and ministers, the relevant government departments, institutional lenders and other bodies
concerned with investments. With the abrogation of the Nigerian Enterprises Promotion
Act, 1989, the ceiling on foreign investment in Nigeria has been removed with the exception
of restrictions relating to items on the negative list. Items listed under the negative list are
within the exclusive preserve of the government of Nigeria.
Items contained in the negative list are:
1. The production of arms and ammunition,2. Narcotics and psychotropic substances, and3. The production of military, para-military, police, customs, immigration and prison
service uniforms and accessories.
Important improvements made by the NIPC Act include:
i. The procurement and repayment of foreign loans and interest by Nigeria companies
without first obtaining ministerial approval.
ii. Foreign portfolio investment in Nigerian-quoted companies through the Nigerian Stock
Exchange.
iii. The remittance of dividends, and interests by guaranteeing to foreigners the unrestricted
transferability of dividends or profits attributed to foreign investments in Nigeria and the
repatriation of capital in the event of liquidation without the requirement of approval by the
minister.
Investment Protection Assurance3
The NIPC Act provides that:
(a) No enterprise shall be nationalized or expropriated by any Government of the
Federation, and
(b) No person who owns, whether wholly or in part, the capital of any enterprise shall be
compelled by law to surrender his interest in the capital to any other persons.
2Section 1(1) Ibid.
3Section 25(1) and (2), Ibid.
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There will be no acquisition of an enterprise by the Federal Government unless the
acquisition is in the national interest or for a public purpose under a law that makes
provision for:
(a) payment of fair and adequate compensation, and
(b) a right of access to the courts for the determination of the investors interest of right and
the amount of compensation to which he is entitled.
Procedure for obtaining NIPC Registration
Application is made to the Nigerian Investment Promotion Commission Completed copies of the NIPC Form 1 (Original and 3 copies) Original copy of receipt of purchase of NIPC Form 1 (and 3 copies) A copy ofCompanys Certificate of Incorporation (and 3 copies) Evidence that Company has a minimum share capital of N10million. (3 copies) Companys Allotment of shares and Particulars of Directors (3 copies) Details of the shareholding structure of Company (3 copies) Joint Venture, Shareholders or Partnership Agreement, where applicable (3 copies).1.3.2 Foreign Exchange (Monitoring and Miscellaneous Provisions) Act
4
Section 41 of the Act defines an authorized dealer as any bank licensed under the Bank and
other Financial Institutions Act, and such other specials bank and issued with license to deal
in foreign exchange.
Certificate of Capital Importation
Investors who wish to be able to remit dividends to non-resident shareholders or repatriate
capital on disinvestments must ensure that they obtain a Certificate of Capital Importation
from the Nigerian bank through which the payment is transferred into Nigeria.
Procedure for Obtaining Certificate of Capital Importation (CCI)
Application will be made to Companys bankers
4CAP F34 L.F.N. 2004.
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The foreign shareholders will instruct their bank (the remitting bank) by telex to transfer
the necessary funds either directly to Companys bankers or to their foreign affiliate;
The transfer must be accompanied by a telex stating that the money being remitted to the
bank is for the account of Company and that the money represents the foreign investors
capital contribution to the equity of Company;
Upon confirmation that the funds have been remitted to Nigeria, Company is required to
send a formal letter of application to the receiving bank to issue a CCI in respect of the
equity contribution.
The following documents must be submitted together with the letter of application:
A Board resolution of Company authorizing the foreign investment; A letter from Company stating the purpose for which the money has been remitted; A copy of the certificate of incorporation of Company; A copy of the swift message from the remitting bank.
If satisfied with the documentation the receiving bank will issue a CCI in respect of the
funds. The receiving bank is required to notify the CBN whenever it issues a CCI.
1.3.3 Companies and Allied Matters Act5
By the provisions of the act, an alien or foreign company may join in forming a company
subject to the provisions of any law regulating the right and capacity of aliens to engage in
trade or business in Nigeria. Any foreign company intending to trade in Nigeria must ensure
that all the necessary requirements for incorporation as a separate entity in Nigeria is
complied with.
Without such compliance, the foreign company shall not have a place of business in Nigeriafor any purpose other than the receipts of notice and other documents. There is, however, a
provision for exemption of a foreign company from the requirement of registration. The
Federal Executive Council is empowered by Section 566
of the Act to exempt a foreign
company eligible for exemption under the conditions listed within the section. They are as
follows:
5CAP. C20 L.F.N. 2004.
6Ibid.
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(a) Foreign companies (other than those specified in paragraph (d) (below) invited to Nigeria
by or with the approval of the Federal Government to execute any specified loan project;
(b) Foreign companies, which are in Nigeria for the execution of specified individual loan
project on behalf of a donor country or international organization;
(c) Foreign government-owned companies engaged solely in export promotion activities;
and
(d) Engineering consultants and technical experts engaged on any individual specialist
project under contract with any of the governments in the Federation or any of their
agencies or with any other or person, where such contract has been approved by the
Federal government.
Exemption from the local incorporation requirement may confer tax-free status on the
beneficiary for the duration of the exemption.
Procedure for Company Incorporation in Corporate Affairs Commission (CAC)
An application for incorporation is made to the Registrar-General of the CAC. Prior to the
application being made, submitting a written application to the CAC, and paying a
prescribed fee may reserve the name of the proposed company. Subsequently the
application to the Registrar-General is submitted in the prescribed form along with the
following documents:
A copy of the Memorandum and Articles of Association of the Company (which must besubscribed to by at least two persons, together holding at least 25% of the companys
authorized share capital together with evidence of payment of stamp duty.
A statement of the authorized share capital of the company together with evidence thatthe stamp duty payable in respect of the amount of share capital has been paid.
A statement of the particulars of the initial directors of the company, of which theremust be at least two.
A notice of the situation of the registered office of the company. A declaration, sworn to by a Lawyer that all matters preliminary to the registration of
the company have been complied with.
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Stamp duty and filing fees are payable to the Federal Commissioner for Stamp Duties
and the Registrar - General of Companies respectively. If the application is approved, a
Certificate of Incorporation will be issued and the company can commence business
subject to its having obtained the necessary investment approvals.
1.3.4 National Office for Technology Acquisition and Promotion Act (NOTAP)7
By virtue of the provisions of the Act any agreement under which a foreigner is to provide
foreign technology, management, or assistance, to a Nigerian company must be approved
by the National Office for Technology Acquisition and Promotion (NOTAP). Thus, this is a
form of technical co-operation agreement in which a party will agree to offer technical
services to a company for the payment of a fee. Details and terms of such agreements are
normally worked out between the parties involved. Fees payable for the provision of such
technology or services must also be approved by the NOTAP.
Registration with National Office of Technology Acquisition and Promotion (NOTAP)
Every contract or agreement involving the transfer of foreign technology to a Nigerian
company must be registered with the NOTAP within sixty (60) days of execution or
conclusion of the agreement.
An agreement involves transfer of technology if, in the opinion of NOTAP, it is wholly or
partially connected with any of the following matters:
i. The use of trade marks
ii. The right to use patented inventions,
iii. The supply of technical expertise in the form of the preparation of plan, diagrams,
operating manuals or any other form of technical assistance of any description whatsoever,
iv. The supply of basic or detailed engineering,
v. The supply of plants and machinery, and
vi. The provision of operating staff or managerial assistance and the training of personnel.
Registration with NOTAP is necessary, as non-registration will frustrate transfer of any fees
or payment due under the contract to the account of the aliens outside Nigeria.
7CAP. N61 L.F.N. 2004
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1.3.5 Immigration Act8
This is para-military organization established by the Act. Our concern here is those aspects
of the provisions of the Act that deal with or affect investment in Nigeria. Therefore, for a
foreigner who wishes to enter the country and enjoy the benefits of investments, they must
require the necessary legal permit and any defaulters will be deported. Aliens or foreigners
need the following permits from Immigration Service after obtaining a visa.
i. Business Permit
A business permit is an operational and permanent permit for the local operation of a
business with expatriate investments either as a branch or subsidiary of a foreign company
or otherwise. By the provisions of the Immigration Act, no person other than a Nigerian
citizen shall on his own or in partnership with another practise a profession or establish,
takeover or register a company or business without the written consent of the Minister of
Internal Affairs.
Procedure for obtaining Business Permit
Application is made to the Ministry of Internal Affairs Completed copies of the NIPC Form 1 (Original and 3 copies) Original copy of receipt of purchase of NIPC Form 1 (and three copies) A copy of COMPANYs Certificate of Incorporation (and three copies) Evidence that COMPANY has a minimum share capital of N10million. (3 copies) COMPANYs Allotment of shares and Particulars of Directors (3 copies) Details of the shareholding structure of COMPANY (3 copies) Joint Venture, Shareholders or Partnership Agreement, where applicable (3 copies).ii. Expatriate Quota
Expatriate Quota is the permission granted tot a foreigner to accept employment in Nigeria.
It is the official permit to a company conveying permission to a company to employ
individual expatriates to specifically approved job designations and also specifying the
permissible duration of such employment.
8CAP I1 L.F.N. 2004.
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The initial expatriate quota is sought and obtained usually along with Business Permit. There
are two types of expatriate quota:
a) Permanent Until Reviewed Quota (PUR), usually granted to the post of Chairman of the
companys board of directors or the Managing Director; and
b) Temporary Quota, which is usually granted to the directors and other employees of the
company.
The maximum number of years granted in the first instance is five years renewable for a
further period of two years.
Procedure for obtaining Expatriate Quota
Application is made to the Ministry of Internal Affairs In addition to the requirements listed under Business Permit application, the following
requirements have to be met for Expatriate Quota applications:
Evidence of acquisition of operational machinery and equipment Management and Technical Services Agreement Minimum authorized share capital of N10million Tax Clearance Certificate Company applying for Permanent Until Reviewed (PUR) Quota slots must show evidence
of payment of tax for minimum of =N=1 million.
Names, addresses, qualifications and positions to be occupied by the expatriate Project Implementation Program Training Program for Nigerians and a Management Succession Scheduleiii. Resident Permit
Only aliens with tourist visa may enter Nigeria and stay for a period of three months without
a residence permit. Any person, other than a citizen of Nigeria, desiring to stay in Nigeria
beyond three months must obtain a resident permit. Application is by letter accompanied
by a valid passport of the alien from the company requesting permission to employ the
alien, to the Immigration Department.
iv. Combined Expatriate, Residence Permit and Alien Card (CERPAC)
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Registration permits an expatriate to live and work in Nigeria on a long-term basis. For an
expatriate to obtain Resident permit, he must obtain employment with a company that has
expatriate quota position. Such a person will be expected to come into the country with a
special type of entry visa know as STR (Subject To Regularization) visa after which his
resident permit will be processed. The combined CERPAC scheme was introduced in 2002,
providing for foreigners (except ECOWAS citizens accredited diplomats and children below
the age of 15 years) working or living in Nigeria to carry CERPAC card, the scheme is
expected to simplify the process of acquiring residence permit and alien registration
certificate. It provides a computerized unit at various points of entries, like airports, that is
linked to a central database centre containing information on every foreigner residing in
Nigeria. The residence permit allows a foreigner and his dependants or family to reside in
Nigeria. Unlike the residence permit, the alien registration certificate is essentially a
movement chart. Under the CERPAC scheme, registration is valid for one year, after which
application for revalidation must be made.
Foreigners relocating to a different part of Nigeria must inform the nearest Aliens Office of
the move. Also if a foreigner holding an Aliens Card leaves Nigeria permanently then the
Card has to be handed to the Aliens Office.
1.4 Conclusion
In conclusion foreigners may invest and participate in the operation of any enterprise in
Nigeria. By virtue of the provisions of the CAMA, a foreign investor, wishing to set up joint
business operations in Nigeria is obliged to take all steps necessary to obtain local
incorporation of a Nigerian company, or branch or subsidiary of an existing company, which
would be a separate and distinct entity from its parent company. Until so incorporated, a
foreigner may not carry on business in Nigeria or exercise any of the powers of a registered
company.
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BIBLIOGRAPHY
1. Orojo J.O., Company Law and Practice in Nigeria, 5 edt., LexisNexis, South Africa,2008.
2. Olakanmi & Co., Synoptic Guide Companies and Allied Matter Act, 2 edt.,LawLord Publications, 2009.
3. Akume A.A., Delivered Lectures Note, Class of 2013 Ahmadu Bello UniversityZaria.
4. Nigerian Investment Promotion Commission, www_nipc-nigeria_com. Accessedon 8
thMarch, 2013.