Nigeria’s Corporate Affairs Commission (CAC), has issued a new directive to Nigerian startups with foreign participation, to have a minimum paid-up capital of N100 million.
The commission via a public notice, announced that existing companies with foreign participation that have less than N100,000 paid-up capital are advised to comply within six months from the date of the notice, failure to do so will force the compulsory winding-up of companies.
The notice reads,
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“The Commission wishes to notify the General Public that it has in line with the Revised Handbook on Expatriate Quota Administration (2022), commenced the implementation of the requirement of N100,000,000 (One Hundred Million Naira) MINIMUM PAID-UP CAPITAL for Companies with foreign participation.
“Accordingly, any application for incorporation of a company having foreign participation shall not be processed unless it complies with the above requirement. Existing Companies with foreign participation that have less than N100,000,000 paid-up capital are hereby advised to ensure compliance with the above requirement not later than six (6) months from the date of this notice, failing which the Commission shall commence proceedings for the compulsory winding-up of the Companies under Section 571 (e) of the Companies and Allied Matters Act 2020.”
This new directive by the CAC is likely implemented to ensure financial robustness and stability, potentially reflecting regulatory efforts to fortify the economic resilience of startups with international investment involvement. Prior to this time, the minimum share capital requirement was 10 million naira.
While this new requirement may be intended to protect the interest of stakeholders, enhance corporate governance, and contribute to the overall economic stability of the country, it has however sparked mixed reactions from Netizens.
Check out some reactions from Netizens on X,
@Ashley Smith wrote,
“This requirement is hugely prohibitive. A startup with foreign co-founders are better off registering abroad, opening a bank account abroad, and paying local talent as contractors. Meanwhile, NG will lose out on the tax rev. What’s the purpose here??”
@Malachy Odo wrote,
“Foreign companies are shutting down and fleeing from the company but CAC is asking the few companies with foreign participation to up their share capital by N100M!!! Tone deaf”.
@Good_citizins wrote,
“It’s concerning to see Nigeria’s Corporate Affairs Commission set a high minimum paid-up capital of N100m for foreign-involved companies. In a time when Nigeria desperately needs foreign investments, this policy can deter potential investors. More flexible strategies are needed.”
@Arome Abu wrote,
“I hear that by January 2024, already existing companies with foreign participation may be given a deadline to increase their share capital from 10 million naira to 100 million Naira or risk penalties. The only solution in the event of inability to increase share capital might be to remove the foreigner(s) as Directors and appoint Nigerians”.
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.