Can One Person Register A Limited Liability Company In Nigeria?

 The answer to this question is YES, one person can now register a limited liability company. But you have to read to the end to understand how it is done. 

Initially, one individual was not qualified to register a Limited Liability Company in Nigeria by the provisions of the Company and Allied Matters Act, 1990 and was later amended in 2004. It required at least 2 persons to register a private company limited by shares. It was difficult for entrepreneurs to set up a company. Single individuals who wished to incorporate their businesses had to look for one or more people who will sign  as one of the promoters and first directors of the company. Most times, these other individuals neither have shares/ stakes in the business nor know how the business is being run. You see people putting the names of their wife, husband, children, siblings just to make up  the number required by law. 

President Mohammadu Buhari on 7th August singed into law the Company and Allied Matters Bill 2020, a repeal of 2004 Company and Allied Matters Act, Cap. C20, Law of the Federal Republic of Nigeria. Among other things, the Act expunged some of the provisions of the former law that prohibited a limited liability company from having single shareholder, thereby making it possible for one individual to register a private company limited by shares. This is in line with the Buhari’s led Federal Government of Nigeria policy on ease of doing business in Nigeria. 

Alt: = "CAC building"
Source: CAC site

Provision of the CAMA 2020 That Have Made It Possible For Limited Liability Company To Have Single Shareholder

  1. Section 18 (2) CAMA 2020 made provision for single member/shareholder for private companies. The minimum number of persons required to set up a private company limited by shares has been reduced to one as against the minimum of two persons required by the repealed Act.
  2. By virtue of Section 40 CAMA 2020, statement of compliance to be signed by the applicant or his agent confirming that the requirements of the law as regards the registration of company has been complied with thereby expunging the need for a legal practitioner or notary public attestation. Before now, only legal practitioners, chartered accountants and chartered secretary were allowed by law to transact business at the Corporate Affairs Commission. With the new law, individuals wishing to incorporate their businesses can apply for registration by themselves without necessarily having to hire an attorney and others. 
  3. Small companies and / or companies with single shareholder are not mandated to hold Annual General Meetings under section 237(1) of CAMA 2020.
  4. Section 330(1) CAMA 2020 provides for exemption from appointment of company secretary for small limited liability companies.
  5. Exemption of small companies or companies having a single shareholder from appointment of auditors at Annual General Meeting to audit their financial records is introduced under section 401(1)(b) CAMA 2020.
  6. Companies are no longer mandated to use Common Seal under section 98 CAMA 2020.

Why Is It Important to Register Your Business As A Limited Liability Company?

As an entrepreneur who has a small business, it’s important you formalize your business by registering it   under limited liability company at the Corporate Affairs Commission, CAC to be able to leverage on the advantages of limited liability company.

Legal Consequences Of Incorporation

  1. Legal Personality. The first consequence is that on incorporation, the company becomes a separate legal person different from the owners of the company. The law recognizes it as a separate person that can do all such things like any other person.
  2. Perpetuity: On incorporation, a business acquires perpetual succession. Perpetual succession means that the business remain  forever while the shareholders and staff members come and go. The company can only die through the legal process of winding up. 
  3. Legal Actions: An incorporated company exist with separate name and by virtue of the separate legal name can sue and be sued in its corporate name. Litigation by and against it is at its own name and legal recovery against it will be executed against its property and not that of the members or the staff. 
  4. Right to Own Property: By the virtue of separate and legal personality of a company comes the rights to acquire, own and dispose of its property as it deems fit. The property belongs to it and not to the shareholders of the company.
  5. Limited Liability: It means that once the company comes into existence, the shareholders will only be liable for its debts to the extent of the unpaid part of their shareholding in the company. Therefore, in the event of winding up of the company, the members cannot be asked to bear the debts of the company except to the extent of their liability for their shareholding.

Benefits of Limited Liability Company 
By virtue of all the above legal consequences provided by Law, you as entrepreneur will gain the following:
  • Trust: When your business is registered, it shows the public that you’re serious with your business and can be traced and trusted. People do not easily trust unincorporated business and find it difficult to invest in such business or patronize the business.
  • Legality: It gives your business legal backing and shows that government is approved of your business.
  • You can be able to  open corporate/ company account for your business which is different from your personal account because your business is a separate legal entity, it then enjoys legal rights. Individuals, companies and government don’t like to deposit money for business transaction in personal account. Certificate of incorporation is one of the requirements by banks to open and operate business company account. Having business account helps you separate your business finance from your personal finance to fight the temptation of spending your business money. And it makes for accountability. 
  • You can access bank loans and government grants or other programs or incentives to support businesses.
  • Your business will be able to acquire and hold business property in your business name which forms part of the business assets, and such property can be used as collateral for credit facility. 
  • Your business can be able to outlive you. When the owner of unregistered business dies, the business dies with him.
  • Limited Liability: You will not be liable to the debts of the business except to the extent of your paid or unpaid shareholding in the business. In other words, the debts of your business cannot be settled with your personal money or property.

Conclusion
It is now possible for single individual can register a limited liability company in Nigeria, so go ahead to set up your business company and also leverage on the benefits thereof.

Disclaimer: I am not a legal practitioner, therefore this article can’t serve as legal advice. The aim of this article is to let you know that as a single individual who wants to set up a business, you can register your business as a private limited liability company in Nigeria without having to join with another individual(s) as the promoters of the company, and you can apply for registration by yourself without compulsorily having to hire the services of an attorney, chartered accountant or chartered secretary as it was in the old, repealed Company and Allied Matters Act, Laws of the Federal Republic of Nigeria. I advise you to further seek legal advice and representation where necessary. 

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