Ezra Akintonde, Commercial & Real Estate Lawyer in Nigeria

Ezra Akintonde, LLB, BL

The required minimum share capital of a company is dependent on either the objects of the company, type of company or statutory provisions regulating that company. The primary law on the registration and regulation of companies in Nigeria is the Companies and Allied Matters Act, 2004 (CAMA) while the Corporate Affairs Commission (CAC) is the body empowered to ensure that the provisions of the CAMA are complied with during pre-incorporation and post incorporation stages.

As interesting as it may sound, the CAMA is not the only law that regulates the minimum share capital of a company as there are other laws, policies and regulations that dictates what the minimum share capital of certain companies should be. The CAC being the regulator at the initiation stage must ensure the compliance of companies before issuing a certificate of incorporation. Hence, section 36(1)(d) provides that:

The commission shall register the memorandum and articles unless in its opinion there is non-compliance with the requirement of any other law as to registration and incorporation of a company.

This article attempts to list regulated business activities and their required minimum share capital. It also discusses the laws and the regulatory agencies that ensure that the provisions of the law are complied with during the post-incorporation stage.

Minimum Share Capital By Category of Company

In this regard, a company’s nature determines its required minimum share capital. In general, the required share capital of companies is set at a very low amount in order to make registration of companies attractive to everyone. Thus it is stated in Section 27 (2) of the CAMA that the minimum share capital of a Private company shall be  N10,000 whereas a public company cannot fall below N500,000.

Private Company: N10,000

Public Company: N500,000

Minimum Share Capital By Classification

By virtue of the CAMA, a company can also either be a company limited by shares, an unlimited company or a company limited by guarantee. A company limited by shares is required to have a share capital as earlier discussed whereas an unlimited company which is also required to have a share capital had hitherto and before the act not fallen under the type of companies required to have a share capital.

A company limited by guarantee, however, is not required to have a share capital. This provision is contained in section 26 (2) which states that a company limited by guarantee shall not be registered with a share capital; and every existing company limited by guarantee and having share capital shall, not later than the appointed day, alter its memorandum so that it becomes a company limited by guarantee and not having a share capital.

It is worthy to note that a company limited by guarantee is also defined in the section as a company formed for promoting commerce, art, science, religion, sports, culture, education, research, charity or other similar objects, whose income and property are to be applied solely towards the promotion of its objects and no portion thereof is to be paid or transferred directly or indirectly to the members of the company except as permitted by the Act.

Private Company Limited by Shares: N10,000

Public Company Limited by Shares: N500,000

Private Companies Limited by Guarantee: N0

Public Companies Limited by Guarantee: N0

Private Unlimited Company: N10,000

Public Unlimited Company: N500,000

 Minimum Share Capital Of Regulated Objects

There are certain businesses activities and ventures that are regulated by specific laws that provide guidelines for the registration, licensing and regulation of the business activities or ventures.  These rules, policies and guidelines place an obligation on promoters of certain types of companies to ensure that the minimum share capital requirement of these types of companies are met. Failure to meet the required share capital will result in the registration being queried by the CAC. The rationale behind setting a higher threshold for certain companies is to provide a means of assurance that in the event of liquidation of the company, the assets of the company will be sufficient to pay a substantial part of any debt owed.  This means that any company which purports to carry out the activities under the regulated list whether public or private would not be registered by the Corporate Affairs Commission unless it complies with the minimum share capital requirement by law.

The regulated objects, the enabling law and the post-incorporation regulatory agencies are discussed below for better understanding of the minimum share requirements of the different categories of companies under this umbrella.

  1. COURIER BUSINESS

By virtue of its power to regulate Courier Business in Nigeria as contained in Section 43 of the Nigerian Postal Service Act, 1992 the Nigerian Postal Service has set its guidelines for registration, licensing and operation of courier companies in Nigeria. The requirements which must be complied with before a courier company can commence operations includes registration of the company with a minimum share capital of N2 Million.

Courier Company: N2 Million

  1. CAPITAL MARKET OPERATORS

The Securities and Exchange Commission (SEC) is empowered by section 8 of the Investment and Securities Act, 2007 to regulate investment and securities business in Nigeria as defined in the Act. Below are the list of investment companies regulated by the SEC and their required minimum share capital.

Issuing House: N200 Million

Brokers/dealers: N300 Million

Trustees: N300 Million

Fund/ Portfolio Managers: N150 Million

Stock Brokers: N200 Million

Stock Dealers: N100 Million

Inter- Dealer Broker (IDB): N50 Million

Corporate Investment Adviser (Registrar) : N150 Million

corporate Investment Adviser: N5 Million

Individual Investment Adviser: N2 Million

Market Maker: N2 Billion

Consultant Partnership: N2 Million

Consultant Individual: N500,000

Consultant Corporate: 5 Million

Under Writer: 200 Million

Venture Capital Manager: 20 Million

Commodities Exchange: 500 Million

Commodities Broker: 40 Million

Capital Trade Point: 20 Million

Rating Agency: 150 Million

Corporate/Su Broker: 5 Million

 

  1. BANKS AND OTHER FINANCIAL INSTITUTIONS

The Central Bank of Nigeria (CBN) is empowered by the Banks And Other Financial Institutions Act, 2004 to regulate the Banking Industry and by virtue of section 2 of the Act, No person shall carry on any business in Nigeria except it is a company duly incorporated in Nigeria and holds a valid banking license issued under the Act.

Through its powers to regulate the banking business, the CBN from time to time make policies relating to the minimum share capital of the type of companies under its purview. Below is a list of the companies and their minimum share capital.

Commercial Bank With Regional Authorization: N10 Billion

Commercial Banks With National Authorization: N25 Billion

Commercial Banks With International Authorization: N50 Billion

Merchant Banks: N15 Billion

Micro Finance Bank (Unit): N20 Million

Micro Finance Bank (State & Fct): N100 Million

Micro Finance Bank (National): N2 Billion

Primary Mortgage Institutions: N2 Billion

Finance Company: N20 Million

Bureau De Change: N35 Million

Non-Interest Banks (Regional): N5 Billion

Non-Interest Banks (National): N10 Billion

  1. REGISTERED INSURANCE BROKERS

The Nigerian Council of Registered Insurance Brokers is the body empowered in Nigeria to regulate the enrolment and operation of Registered Insurance Brokers. Section 15(1) of the Nigerian Council of Registered Insurance Brokers Act, 2003 empowers the Council to  make rules while subsection (1) (a) mandates the council to ensure that a Practicing Insurance Broker business should have a working capital of not less than N5 Million made up of verifiable movable and immovable assets and cash in proportion as the council may decide. Below is a list of insurance-related businesses and their required minimum share capital.

Insurance Brokers: N5 Million

  1. INSURANCE BUSINESS

The National Insurance Commission Act, 1997 empowers the National Insurance Commission by virtue of section 6 to regulate insurance business in Nigeria. The section provides that the principal object of the commission shall be to ensure the effective administration, supervision, regulation and control of insurance business in Nigeria.

The commission through its powers has issued guidelines regulating the insurance business in Nigeria.

Life Insurance: N2 Billion

General Insurance Business: N3 Billion

Re-Insurance Business: N10 Billion

Life Microinsurance Business: N150 Million

General Microinsurance Business: N200 Million

General Takaful/Family Takaful: N200 Million

  1. PRIVATE GUARD BUSINESS

The requirements for registration of Private Guard Security Companies are contained in policies made by the Civil Defence Corps made pursuant to Nigeria Security and Civil Defense Corp Act, 2003. According to section 3 of the Act, the Civil Defense Corps (the Corps) has the power to recommend to the Minister the registration of private guard companies. The Corps is also to supervise and monitor the activities of all private guard command and keep a register for that purpose.

Private Security Company/Consultant: N10 Million

  1. PENSION FUND MANAGERS

The Pension fund business is regulated by the provisions of the Pension Reform Act 2004. The minimum share capital required for Pension Fund business is as follows:

Pension Fund/Asset Custodians: N2 Billion

Closed Pension Fund: N500 Million

Pension Fund Administrators: N1 Billion

  1. NATIONAL HEALTH INSURANCE BUSINESS

Health Insurance Business is regulated under the National Health Insurance Scheme, HMO Accreditation Guidelines. Under this scheme, the following are the required minimum share capital.

Health Maintenance Organisations (HMOs) (National): N400 Million

Health Maintenance Organisations (HMOs) (Zonal): N200Million

Health Maintenance Organisations (HMOs) (State): N100 Million

  1. LOTTERY, CASINO AND BETTING BUSINESS

Setting up a lottery business in Nigeria requires compliance with the regulatory authority which is the National Lottery Regulatory Commission. The commission is empowered by the National Lotteries (Amendment) Regulations, 2007. Also, the Lagos State has its own Lottery Regulatory Commission with a different set of permit requirements. Below are the required minimum share capital for Lottery Businesses.

Non-Sports Lotteries: N5 Million

Sport Lottery Businesses: N30 Million + Approval In Principle (AIP)

  1. AIR TRANSPORT BUSINESS

The air transport business is regulated by the Nigerian Civil Aviation Authority which issues guidelines to the operators in the sector. Section 32 of the Civil Aviation Act gives the Authority the power to regulate and issue licenses to aircraft operators. The Authority from time to time have issued guidelines and directives to airline operators and some of the guidelines relate to the minimum share capital.

Air Transport (International): N2 Billion

Air Transport (Regional): N1 Billion

Air Transport (Local): N500 Million

Air Ambulance/Fumigation/Private Jet: N20 Million

Aerial Aviation Services: N20 Million

Aviation (Ground Handling Services): N500 Million

Aviation (Air Transport Training Institutions): N2 Million

Agents Of Foreign Airlines: N1 Million

 

  1. AGRICULTURE BUSINESS

Generally, the agriculture business is not strictly regulated. However, the National Agriculture Seeds Act, 2004 regulates the business of Agricultural Seeds, Productions, Processing And Marketing. The Act establishes a National Agricultural Seed Council and gives it oversight functions over any business, actions, or activities regarding seed development and the seed industry in general including legislation and research on issues relating to seed testing, registration, release, production, marketing, distribution, certification, quality control, supply and use of seeds in Nigeria, importation and exportation of seeds and quarantine regulations relating thereto.

Thus any business relating to seed business is within the purview of the council and the minimum share capital is as stated below:

Agricultural Seeds, Productions, Processing And Marketing: 10 Million

  1. SHIPPING AND MARITIME BUSINESS

The maritime business is controlled and regulated by the Nigerian Maritime Administration and Safety Agency (NIMASA) which was created by the enabling law, the Nigerian Maritime Administration And Safety Agency Act, 2007.

By virtue of section 22 of the Act, the agency is saddled with the responsibility of pursuing the development of shipping and regulatory matters relating to merchant shipping and seafarers.

Shipping Company/Agent: N25 Million

Cabotage Trade: N25 Million

Freight Forwarding: 5 Million

 

Conclusion

Notwithstanding, a company can choose to increase its share capital above the required minimum either at the time of registration or subsequently. However, the same company cannot reduce its share capital below the minimum either at the time of registration or subsequently unless it alters its object clause to exclude the activities requiring the required minimum share capital.

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