The Corporate Affairs Commission (CAC) has intensified efforts to delist inactive companies from its official register, putting many Nigerian businesses at risk of losing their legal status. This move, known as “striking off,” can have severe consequences for entrepreneurs who fail to comply with regulatory requirements. To avoid being delisted, businesses must take proactive steps to maintain their legal existence.
Understanding the Consequences of Non-Compliance
When a company is struck off the CAC register, it loses its legal status and can no longer operate as a registered business. This can lead to significant problems when applying for loans, seeking investment, or bidding for contracts. Many entrepreneurs remain unaware of the consequences until it’s too late, often discovering their company has been struck off during critical moments.
Step 1: Choose a Unique Business Name
To start a business in Nigeria, selecting a unique company name is crucial. Entrepreneurs must verify the availability of their chosen name on the CAC online portal and ensure it doesn’t infringe on existing company names or violate Section 30 of the Companies and Allied Matters Act (CAMA) 2020. Once approved, the name can be reserved for 60 days for a fee of ₦500.
Step 2: Prepare Key Governing Documents
Businesses must draft a Memorandum of Association (outlining business objectives and share capital) and Articles of Association (detailing internal governance rules). These documents can be prepared using templates from the CAC portal and must comply with Sections 27 and 28 of CAMA 2020. The Memorandum of Association should specify the company’s authorized share capital, while the Articles of Association outline the rules governing the company’s internal management.
Step 3: Declare Share Capital
The company’s authorized share capital must be specified, with a minimum of ₦100,000 for private companies. This is a statutory requirement under Section 27(2) of CAMA 2020, and higher share capital may lead to increased filing fees and stamp duty.
Step 4: Appoint Directors and Shareholders
Businesses must provide details of at least two directors (or one for small companies) and at least one shareholder. Directors must be at least 18 years old and of sound mind, as stipulated in Sections 20 and 271 of CAMA 2020. Required information includes names, addresses, occupations, and valid identification.
Step 5: Submit Registration Documents
All required documents, including CAC Form CAC1.1, the Memorandum and Articles of Association, and details of directors and shareholders, must be submitted via the CAC online portal. This is followed by the payment of statutory filing fees and stamp duty, which vary based on the company’s share capital.
Step 6: Comply Post-Registration
After receiving the Certificate of Incorporation, businesses must register for a Tax Identification Number (TIN) with the Federal Inland Revenue Service (FIRS) and obtain necessary permits. Most critically, they must file annual returns within 42 days of their company’s anniversary, including submitting yearly forms, declaring Persons with Significant Control (PSC), and paying all fees on schedule.
By following these six steps, Nigerian businesses can maintain their legal status and avoid the risk of being delisted by the CAC. It’s essential for entrepreneurs to stay informed about regulatory requirements and take proactive steps to ensure compliance.
