TRANSACTIONS DUE DILLIGENCE 003
This is the continuation of a series to show the things to watch out for in day to day transactions, it is meant for non-professional readers, hence the use of layman’s language. Type #TDD in the search portal to get the previous ones. This article will guide readers on transacting with the Nigerian Corporate Affairs Commission.
Here is #TDD 003 and it is for people who wish to transact business with companies and need to operate bank accounts in their own business name. The only way you can open a bank account with a business name is if you present a Certificate from Corporate Affairs Commission (CAC) showing that business name is duly registered/incorporated with them. Then people raising donations for good causes may want to incorporate an organisation referred to as Incorporated Trustees (NGOs, Churchs, Mosques) to receive the funds too. Before my more advanced readers get bored, we will be writing about the implication of share capital too.
REGISTERING/ INCORPORATING BUSINESS WITH THE CORPORATE AFFAIRS COMMISSION (CAC)
Firstly, there is an enterprise, it is still you, but with a different name. If you want to enter a contract with this, you will have to write ‘Mr Lagbaja Tamedo trading in the name and style of Tamedo Enterprises’… It is not a legal entity, although, with appropriate documents, banks will open an account in its name. But if the business is in trouble, the owner (called proprietor) will answer for it directly. To register this business in Nigeria, you need to do a name search, then fill a CAC form, take the form to the court to sign before a commissioner of oaths, then submit the filled form with your valid identification (must be national I.D, voters card, drivers’ license or international passport) and passport photograph to the CAC.
Secondly, the ‘Ltd’ this one has share units. If the business gets in trouble, the shareholders only have to pay the amount of shares they hold. If the trouble is criminal or not part of what was submitted to CAC (ultra vires), the Directors/Company Secretary will answer for the trouble. Shares are supposed to be calculated according to the assets + cash in hand + cash in bank of the business but people usually just write down something. The lowest you can incorporate is 400, 000 share units but the cost for that at CAC is close to the cost of incorporating 1, 000, 000 share unit, so most times, people do the 1, 000, 000 share unit. You are not paying all that unit to CAC, the person incorporating for you will give you a bill that is less than that. For some types of business, the regulator will insist that the share unit must be up to a certain quantity and the Directors must hold professional certification(s) relevant to that type of business. You need to do a name search, fill CAC forms, and submit other necessary documents to the CAC. You need a minimum of two Directors and a Company Secretary. One of you may be company secretary. But whenever you need to sign a document as company secretary and director, one person cannot sign the two on that same document. Only PLC needs professionals as Company Secretary. You also need to allot 25% of the shares so if you incorporate the 1, 000, 000 share capital, at least 250, 000 must be given to the shareholders at the inception. Like we said earlier, this is not the amount you pay to CAC, the amount is lower than all these big figures.
Thirdly the Incorporated Trustees, this one does not pay tax to the government (except p.a.y.e which is taken from employee’s salary) and cannot make any profit from its customers. It lives on donations or grants. You need 5 to 7 people to be trustees. The person incorporating this for you will place an advert in the newspaper, then wait for 28 days, before filing your required papers with the CAC. This is for NGO, Churches, Mosques.
After registering or incorporating any of these businesses as you desire and as it suits your purposes, the organisation has to obtain a Tax Identification Number from the Federal Inland Revenue Service for payment of all applicable Taxes.
Thank you for reading.