A business plan helps the Entrepreneur visualise all parts of the business and
also helps to persuade other people or banks to invest in his business idea.
THE LEGAL PROCESS AND PROCEDURE FOR STARTING AN ENTERPRISE:
This section will guide potential entrepreneurs regarding the steps to adopt as
well as the documentations required for registering and operating their
proposed business enterprises in Nigeria. The legal document that guides the
process is the Companies and Allied Matters Act (CAMA) 1990 as amended in
2004.
The institution that regulates, carries out and monitors the process is the
Corporate Affairs Commission (CAC0.
Main Features of CAMA
CAMA has three parts: A, B and C.
Part A deals with incorporated companies: procedure of incorporating
companies, the functions of CAC, types of companies, composition of
companies of meetings, merger and acquisition of companies and winding up
of companies.
Part B deals with business name; while part C covers incorporated trustees,
procedure for incorporation of trustees, functions and composition.
Functions of Corporate Affairs Commission:
1. TO administer the Act including the regulation and supervision of the
formation, incorporation, management and winding up of companies.
2. TO establish and maintain companies registry and offices in all states of the
federation.
3. Arrange and conduct an investigation into the affairs of any company(ies)
where the interests of shareholders and the public demand.
4. Undertake such other activities as are necessary or expedient for giving full
effect to the provisions of the Act.
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The commission also registers Business Names and Incorporated Trustees as
well as provides wide range of ancillary services.
LEGAL FORMS OF BUSINESSES:
In Nigeria, legal forms of business are Sole proprietorship, Partnership and
Companies.
Sole proprietorship: One-man Business. The owner provides the capital, takes
decision and assures all risk.
Partnership is an association of 2 to 20 persons called partners carrying on a
business with a view to making profits. They have a ‘deed’ of partnership
specifying the rights, duties and privileges of such partners.
A company is an artificial being existing only in contemplation of law. It has the
right to acquire, own and sell property, sue and be sued.
A company can be private or public.
A private company is composed of 2 – 50 owners, while a public company has
a minimum of 7 and no upper limit of owners.
NAMING A BUSINESS:
It is important that each business has a distinct name different from others.
Some factors are to be considered in naming a business. Such are:
1. Nature of the business to be undertaken (Type).
2. Type of goods/services to be produced or offered to the public.
3. Environment of the business.
4. The name has to be attractive/appealing.
5. The name should be easy to relate with.
6. The name should comply with requirements of CAC.
REJECTION OF BUSINESS NAME:
Business name can be rejected by CAC if:
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1. It is found to be identical with or similar to any registered trademark or to a
name by which any firm, company or individual has already been registered
as a corporate entity under CAMA.
2. It is found to be deceptive or objectionable in that it contains a reference
direct or otherwise to any personage, private or institution, or its likely to
mislead the public as to the nationality, race or religion of the person(s) by
which the business is wholly owned.
3. It contains the word “national, government, municipal, state, federal or any
other word which imports or suggests that the business enjoys the
patronage of government.
4. It contains the word “Cooperative” or its equivalent in other language or
any abbreviation for that or it contain the word “ Chamber of commerce,
building society, guarantee, investment, bank, insurance or any other word
of similar connotation.
REQUIREMENTS FOR REGISTRATION OF BUSINESS NAME:
Registration of business name requires among other things, the submission of
a statement in writing, on the prescribed forms, signed by the appropriate
persons and containing the following particulars:
- The business name, or if the business is carried on under two or more
names, each of those business names.
- The full address of the principal place of business and every other
subsidiary place of business.
- In respect of registration of a firm, the present forenames and surnames,
nationality, ages, sex, occupation and the corporate name and
registered office of such corporation which is a partner.
- Date of commencement of the business.
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- Passport photographs duly certified in the prescribed manner in case of
sole proprietorship or firms consisting of individuals.
- Professional certificates in cases of sole proprietorship or firms intending
to carry on any professional business.
- Submission of tax clearance certificates for at least three years.
CAC may request for additional information and supporting documents in
cases of a firm or an individual carrying on business on behalf of another
individual, firm or corporation whether as nominee, trustee and in case of a
firm or individual carrying on business as general agent for another entity
overseas and not having a place of business in Nigeria.
DOCUMENTS REQURIED FOR INCORPORATION OF A COMPANY:
- Articles and memorandum of Association.
- A List of persons who have consented to become directors with their
written consents to act as such (not required for private companies).
- Notice of situation/ location of registered office.
- A statement of authorised share capital.
- A statutory declaration that all the requirements for registration have
been complied with.
PROCEDURE FOR INCORPORATION;
- Consulting a legal practitioner to prepare all the necessary incorporation
documents as itemized.
- Filling the documents with CAC.
- Payment of all the necessary fees.
- If the Registrar is satisfied that all is in order he will issue “certificate of
Incorporation”. A private company can commence operation with this
certificate, but a public company may have to receive an additional “
trading certificate” before it can commence business.
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NOTE – Some business will require license or permit from regulatory agencies
before they can be legally allowed to operate.
Agencies Responsible for Issuance of License and Permits in Nigeria:
ORGANISATIONS CERTIFICATE/LICENSE/ PERMIT
1. National Agency for Food and Foods and Drugs
Drugs Administration and Control
(NAFDA)
2. Nigerian Police Fire Arms
3. Nigeria Export Promotion Council Certification relating to exports.
(NEPC)
4. Nigeria Investment Promotion Tax concessions/ Pioneer status.
Council (NIPC)
5. Nigeria Immigration Service Expatriate Quota
6. Nigerian Institute for Standards (Quality control)
(Nis)/ Standard organisation of
Nigeria (SON).
7. NACCIMA/Ministry of Commerce Certificate of Origin.
8. National Office for Technology Intellectual property.
Acquisition and Protection
(NOTAP)
9. Ministry of Environment Location Permit.
10.Federal Inland Revenue Services Tax/VAT Certificates.
(FIRS) and Board of Internal
Revenue (BIR)
11.State /Federal High Court. Stamp Duty.
12.National copy Right Commission Patents, Trademarks, Designs,
(NCRC) Copyright etc.
Consult your lawyer for more.
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BUSINESS FAILURE:
The aim of every Entrepreneur is to set up a business that will outlive him, but
many times we see businesses that cease operations i.e. the business has
failed.
Business failure occurs when a firm’s total revenue is unable to cover its total
expenditure and when the business is unable to meet its current obligations as
at when due.
Symptoms of Business Failure:
- Deteriorating working capital.
Working capital = Current Assets – Current Liabilities.
- Declining sales or customer patronage.
- Declining profit.
- High debt ratio.
Causes of Business Failure:
- Incompetence and lack of Managerial Experience.
- Neglect and Lack of Supervision.
- Inadequate Start-up capital.
- Sentiments and misplaced priority.
- Poor Time Management.
- Poor Location.
- Inadequate Preparation and planning before starting a business.
- Uncontrolled expansion.
- Poor financial control.
- Poor customer relations.
- Unfavourable economic conditions, etc.
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Intending Entrepreneurs should work towards avoiding the above listed and
learn from the mistakes of others.
Thank you for listening.
