Nigeria’s business registration and regulation agency, the Corporate Affairs Commission (CAC) has unveiled a substantial amendment that will impact startups with foreign involvement. The new regulation by the agency is stipulating a minimum paid-up capital requirement of N100,000,000 (one hundred million naira).
The move, which was released via a memo and is under the Revised Handbook on Expatriate Quota Administration (2022), aims to regulate and standardise the involvement of foreign entities within Nigerian startups.
In the announcement, the CAC officially declared the commencement of the implementation of the N100,000,000 minimum paid-up capital prerequisite for companies with foreign participation.
Accordingly, any application for incorporation involving foreign stakeholders will be subject to this revised financial criterion.
Furthermore, the CAC highlighted the significance of compliance with this requirement, stressing that the processing of incorporation applications for companies with foreign involvement will strictly adhere to the prescribed minimum paid-up capital threshold.
For existing companies already operational but falling short of the stipulated minimum paid-up capital, the CAC has provided a grace period. The commission has granted a grace period of six (6) months from the date of the notice for existing companies to align with the revised financial mandate.
These companies, which have foreign participation and currently possess less than N100,000,000 in paid-up capital, are urged to ensure compliance within a specified timeline.
Failure to meet this requirement within the stipulated timeframe will lead to the initiation of proceedings for the compulsory winding-up of such companies under Section 571 (e) of the Companies and Allied Matters Act of 2020.
Read also: CAC to deregister over 100,000 companies for failing to file yearly returns in 10 years
Netizens react to new CAC’s paid-up capital threshold
The announcement has sparked reactions within the startup ecosystem, with varied responses from stakeholders.
While some perceive this as a means to enhance the financial credibility of startups and ecosystems, netizens have expressed concerns about the potential limitations it might pose, especially for budding ventures seeking international collaborations or investments.
Industry experts anticipate a potential impact on the influx of foreign investments into Nigerian startups. The new requirement could potentially deter foreign entities from engaging in partnerships or funding ventures due to the substantial financial threshold.
With the implementation, startups with foreign ties may need to reassess their financial structures as well as have constructive discussions with investors to make necessary adjustments to meet the prescribed minimum paid-up capital.
The CAC’s move signifies a significant shift in the regulatory framework, aiming to balance foreign participation with financial stability within Nigeria’s startup ecosystem. The ensuing months will witness how this regulation shapes the ecosystem for startups with foreign engagements and influences investment dynamics within the Nigerian business realm.
Just recently, the commission said it was going to delist over 100,000 registered companies from its database.
This will come as a consequence for organizations that fail to live up to the requirements of registered companies. This was revealed by the Registrar-General and Chief Executive of the commission, Alhaji Garba Abubakar during a training.
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