Nigeria’s Corporate Affairs Commission (CAC), which is in charge of registering and regulating businesses, has made a significant change that will affect startups with foreign investors.
The agency’s new rule says that the minimum paid-up capital must be N100,000,000 (one hundred million naira).
The change, which was announced in a memo and is part of the Revised Handbook on Expatriate Quota Administration (2022), is meant to make it easier for foreign companies to work with Nigerian startups by setting rules and guidelines.
In the statement, the CAC officially announced that the N100,000,000 minimum paid-up capital requirement for companies with foreign participation would start to be implemented.
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So, this new financial requirement will apply to any incorporation application with foreign stakeholders.
In addition, the CAC stressed the importance of following this rule, saying that when processing incorporation applications for companies with foreign involvement, the minimum paid-up capital threshold would be strictly followed.
The CAC has set up a grace period for companies already running but doesn’t have the required minimum paid-up capital. Current companies have six (6) months from the date of the notice to make changes to their finances that align with the new rules set by the commission.
These companies, which have foreign investors and less than N100,000,000 in paid-up capital, are told they must follow the rules by a specific date.
If these requirements are not met within the time limit, Section 571(e) of the Companies and Allied Matters Act of 2020 will be used to take action to wind up the companies forcibly.
Netizens react to new CAC’s paid-up capital threshold
The announcement has caused reactions in the startup ecosystem, with different stakeholders giving different answers.
Some see this as a way to boost the financial credibility of ecosystems and startups, but netizens are worried about the problems it could cause, especially for new businesses that want to work with or invest in other countries.
According to experts, foreign investments in Nigerian startups may be affected. Foreign companies may not partner or fund ventures due to the new requirement’s high cost.
To meet the minimum paid-up capital requirements, startups with international ties may need to rethink their financial structures and talk to investors.
The CAC changed the rules to balance foreign participation and financial stability in Nigeria’s startup ecosystem. Over the next few months, we will see how this regulation affects Nigerian business investment and startups doing business abroad.
Recently, the commission announced it would remove over 100,000 registered companies.
Unregistered companies must deal with this. Commission Registrar-General and Chief Executive Alhaji Garba Abubakar noted this during a training.