SULEIMAN NASIRU ARISEKOLA U08CL1010 ALAKAN ALIU AKOREDE U08CL1158 SULAYMON TADESE ALMOL-YEQEEN U08SH1058 MUSTAPHA RABIU MARU

U09SH2014 JIBRIN ALHASSAN KORO U08CL1037

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

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
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CAP. N117 L.F.N. 2004.

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, and 3. 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.

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Section 1(1) Ibid. Section 25(1) and (2), Ibid.

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 interes t 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 of Companys 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) Act4 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

CAP F34 L.F.N. 2004.

 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 Nigeria for 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:

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CAP. C20 L.F.N. 2004. Ibid.

(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 be subscribed 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 that the 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 there must 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.

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.
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CAP. N61 L.F.N. 2004

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 ii. 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). 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.

CAP I1 L.F.N. 2004.

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. iii. Names, addresses, qualifications and positions to be occupied by the expatriate Project Implementation Program Training Program for Nigerians and a Management Succession Schedule 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 University Zaria. 4. Nigerian Investment Promotion Commission, www_nipc-nigeria_com. Accessed on 8th March, 2013.

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