HOW TO REGISTER A COMPANY LIMITED BY GUARANTEE IN NIGERIA

Introduction

A Company limited by guarantee is a non-profit company registered solely for promoting objectives such as art, culture, science, education, religion, etc. notwithstanding that it is a non-profit company, it is allowed to do business but whatever money the company makes is to be ploughed back into the company towards the attainment of its objectives.

The Corporate Affairs Commission (CAC) is the agency responsible for the registration and regulation of a company limited by guarantee.

Steps for Registration with CAC

1. Application for consent for name reservation
2. Upload of the necessary documents on the Company Registration Portal upon approval of the name by CAC.
3. Application to the Attorney General of the federation for authorization to register the company within 30days. The AG is expected to approve the application where there are no objections or where there is no reasonable cause to refuse the application and where no decision is made within 30 days, the promoters of the company are expected to place an advertisement in 3 daily National Newspaper for 28 days inviting the public to object if any. Where the above requirements have been complied with, the CAC shall within 40 days of the submission of the application register the company.
4. Approval by the commission and grant of incorporation documents upon successful consideration

Features of Company Limited by Guarantee

1. It does not have a share capital but the members are expected to guarantee a certain sum
2. There are no shareholders but the company owned by members who are referred to as guarantors who agree to pay a nominal amount in the event of the company’s being wound up.
3. The company has a legal entity, separate from its owners, and the personal finances of its guarantors are protected.
4. It is a form of registration for a non-profit organisation.
5. Profits earned by the company are re-invested into the company to help promote its objectives.
6. No profit is distributed to the guarantors.
7. The day-to-day activities of the company are financed by the members, plus any funding the company can generate.
8. It can carry out activities in the name of the company such as employing human resources, borrowing credit, buying and sell of property and defending a lawsuit, entering into contracts.
9. It has a Memorandum and articles of association
10. The directors of the company can be paid sitting allowances and directors fees but this is discretional, and the director fees (if any) must be paid out of the company’s fund.
11. The company is required to file annual returns with the CAC just like a private limited liability company

Requirements for Registration

1. Two proposed company names in order of preference
2. The objectives of the company
3. Address, phone number, postal address and email of the company
4. Details of directors, guarantors, witness and secretary such as name, occupation, address, phone number, email, valid means of identification, passport photograph and signature. Please note that there must be at least one named guarantor and one director who is resident in Nigeria. It is acceptable for the same person to act in both capacity
5. Statement of Guarantee of the proposed Company limited by guarantee. In this statement, each member declares that if the company is wound up, and if they are still a member (or within a year of them no longer being a member), then they will contribute to the assets of the company if there are debts and liabilities which were incurred by the company before it stopped being a member and there are costs and expenses that are owed for covering the process of winding up the company.
6. Memorandum of Association and Articles of Association which is provided by CAC and the applicant can adopt or they can have theirs drafted.
7. The consent from the Attorney-General of the Federal Republic of Nigeria
8. Letter of no object from the ministry in which the company objectives is under

Benefits of Registering a Company Limited by Guarantee

1. It has the ability to enter into contracts as a legal entity.
2. The liability of guarantors for debts is limited.
3. It requires less administration as it does not involve the transfer of shares and enables members to join and exit the business easily.
4. It does not require capital to start

Can Foreigners Register a Company Limited by Guarantee?

Foreigners can register a company limited by guarantee but the amount to be guaranteed will be 100 million as a result of foreign participation. This will also affect the cost of registration as in the case of a company limited by shares.

Foreign non-profit companies desirous of being registered in Nigeria are also expected to provide evidence of incorporation in the foreign country and evidence of registration with the National Planning Commission of Nigeria or its successor (in this case, the Federal Ministry of Budget & National Planning).

The cost for this will be assessed and accounted for when it is to be done as it cannot be pre-determined.

The cost of setting up a Company Limited by Guarantee

The first step is the name reservation which cost N5,000 and then the filing fee is N20,000 at a minimum which is subject to change depending on how much is guaranteed. The stamp duty payable to the Federal Inland Revenue Service (FIRS) is not fixed but determined upon assessment and the percentage for assessment is usually 0.75% on every 1 million share capital. Where newspaper publication is required, the cost ranges from N15,000 to N30,000 per publication.

Please note that this does not include professional and other incidental costs associated with this registration as the cost for that varies.

Timeline for Registration

The timeline for registration ranges from 3 to 9 months depending on the approval from the various regulatory bodies.

Conclusion

If you desire to register a non-profit company with set objectives and the ability to enter commercial transactions then you should consider registering a company limited by guarantee. Kindly reach out to us if you need help with this.