In this post we will be looking at the meaning of shares, minimum share capital for foreign companies in Nigeria and Industry-prescribed minimum share capital.
INTRODUCTION
Certain designated businesses have an industry-prescribed minimum share capital requirement in Nigeria. The corporate affairs commission notifies the general public of these requirements. These are also typically published on the websites of the various regulatory agencies in charge of regulating these industries. The recently enacted Companies and Allied Matters Act (“CAMA”) 2020 has introduced several changes in the way companies are regulated in Nigeria. One of such changes is that the entire share capital of companies must be fully issued. Prior to this, in the repealed CAMA 1990 every company could have a prescribed authorised share capital out of which 25% must be issued to shareholders. The minimum authorised share capital for private and public companies was N10,000 and N500,000 respectively in CAMA 1990. The requirement to issue a minimum of 25% of authorised capital allowed companies to retain unissued shares for future allotments. In the CAMA 2020, the requirement for companies to have an ‘authorized share capital’ has been replaced with a ‘minimum issued share capital’ principle. In the CAMA 2020 companies must have a minimum issued share capital of N100,000 for private companies and N2,000,000 for public companies. Section 124 of CAMA 2020 provides that no company shall have a share capital which is less than its minimum issued share capital and requires that every company with unissued shares, must not later than six (6) months from the commencement of CAMA 2020, issue shares up to an amount not below its minimum issued share capital. The Companies Regulations 2021 has provided further clarity by requiring that all companies with unissued shares must fully issue same not later than 30th June 2021. The result of the new minimum issued share capital rule is that companies cannot have unissued shares after the June 2021 deadline. Companies (and their officers) who fail to comply by the deadline will be liable to a daily default penalty as prescribed by the Corporate Affairs Commission (“CAC”). Given the imminent deadline, companies with unissued shares must ensure compliance on or before the end of June 2021. Several options are available for ensuring compliance some of which include: (i) bonus issue or a rights issue to existing shareholders; (ii) issuance of the unissued shares to new shareholders; and (iii) a reduction of the share capital of the company by cancelling all unissued shares (subject to the CAMA 2020 prescribed minimum share capital). The introduction of ‘minimum issued share capital’ has ended the ability of companies to retain unissued shares for future allotments, including the possibility of free float of shares for listed public companies or retention of shares for employee share schemes amongst other purposes. The new rule has created a situation whereby companies may only increase share capital for specific issuance and allotment to new and/or existing shareholders, with all such newly created shares allotted. The era of unissued shares has ended.
WHAT ARE SHARES?
Shares are small pieces of ownership in a business. For some companies, shares are a financial asset that makes it possible for any leftover profits to be split evenly among all the owners. The shares of a company are owned by the shareholders.
MINIMUM SHARE CAPITAL.
Minimum share capital is the minimum amount of assets a company must have. The purpose of this capital is to make sure that if a company goes bankrupt or has trouble with its finances, it has enough equity to pay its creditors. Therefore, various industries have specific minimum share capital requirements that a company must have before incorporating a business or going public.
MINIMUM ISSUED SHARE CAPITAL.
A company’s minimum issued share capital is the smallest amount of shares that a company can sell to investors. Most of the time, the minimum number of shares issued as capital is the same as the least amount a company offers to investors as shares. The major difference between the minimum share capital and the minimum issued share capital is that the former shall be issued in the company’s Memorandum and Articles of Association, while the latter is issued as the least number of shares to the shareholders.
MINIMUM SHARE CAPITAL FOR FOREIGN COMPANIES IN NIGERIA
Foreign companies that seek to do business in Nigeria must register with the Corporate Affairs Commission and other relevant government agencies depending on the sector the company operates in. The minimum share capital requirement of a foreign-owned company in Nigeria is ten million naira (10,000,000).
MINIMUM SHARE CAPITAL FOR COMPANIES IN NIGERIA
The Corporate Affairs Commission provides for a minimum issued share capital of N100,000 for private companies limited by shares and N2,000,000 for public companies limited by shares.
INDUSTRY-PRESCRIBED MINIMUM SHARE CAPITAL
Certain industries have a prescribed minimum shares capital in Nigeria. The Securities and Exchange Commission (SEC), the Central Bank of Nigeria, the Corporate Affairs Commission and other regulatory authorities have listed minimum share capitals for various market operators, some of which are:
Sector Required Minimum Share Capital
1. Agents of Foreign Airlines 1 million
2. Agricultural Seed, Productions, Processing, Marketing 10 million
3. Air Ambulance/Fumigation/Private Jet 20 million
4. Air Transport (International) 2 billion
5. Air Transport (Local) 500 million
6 Air Transport (Regional) 1 billion
7 Asset Management (Intangible Assets) 300 million
8 Aviation (Air Transport Training Institutions) 2 million
9 Aviation (Ground Handling Services) 500 million
10 Brokers/Dealers 300 million
11 Bureau De Change 35 million
12 Cabotage Trade 25 million
13 Capital Trade Point 20 million
14 Closed Pension Fund 500 million
15 Commercial Bank with International Authorization 50 billion
16 Commercial Bank with National Authorization 25 billion
17 Commercial Bank with Regional Authorization 10 billion
18 Commodities Broker 40 million
19 Composite Insurance 18 billion
20 Consultant (Partnership, Individual and Corporate) 2 million, N500,000 and 5 million respectively
21 Corporate Investment Adviser (Registrar) 150 million
22 Corporate Investment Adviser 5 million
23 Corporate/Sub Broker 5 million
24 Finance Company 20 million
25 Freight Forwarding 5 million
26 Fund/Portfolio Manager 150 million
27 General Insurance 10 billion
28 General Micro-Insurance 200 million
29 Individual Investment Adviser 2 million
30 Insurance Broker 5 million
31 Issuing House 200 million
32 Life Insurance 8 billion
33 Life Micro-Insurance 150 million
34 Lottery 5 million
35 Market Maker 2 billion
36 Merchant Bank 15 billion
37 Microfinance Bank (National) 5 billion
38 Microfinance Bank (State & FCT) 1 billion
39 Microfinance Bank Unit (Tier 1) 200 million
40 Microfinance Bank Unit (Tier 2) 50 million
41 National Micro insurer 600 million
42 Non-Interest Bank (National) 10 billion
43 Non- Interest Bank (Regional) 5 Billon
44 Payment Service Bank 5 billion
45 Pension Fund Administrator 1 billion
46 Pension Fund/ Asset Custodian 2 billion
47 Primary Mortgage Institution 2 billion
48 Private Security Company/ Consultant 10 million
49 Rating Agency 150 million
50 Re- Insurance 20 billion
51 Shipping Company/ Agent 25 million
52 Sports Lottery 30 million
53 State Micro insurer 100 million
54 Stock Broker 200 million
55 Stock Dealer 100 million
56 Takaful Insurance (General and Family Takaful) 200 million
57 Travels/Tours 30 million
58 Trustee 300 million
59 Underwriter 200 million
60 Unit Micro insurer 40 million
61 Venture Capital Manager 20 million