Learn how to arrange a holding/group firm in Nigeria

THE TRUSTED ADVISORS LEGAL DIGEST

INTRODUCTION

A holding firm is a mother or father firm that holds greater than 50% shares in one other firm (daughter) that acts as a subsidiary with a specified goal. The aim of the holding firm is to regulate property and handle the affairs of the subsidiary firm. It’s a enterprise entity that has no operations and doesn’t conduct any actions. Holding Corporations are designed to accumulate fairness in different firms. Nonetheless, this isn’t the identical as shopping for inventory in one other firm. Fairness possession refers to possession in an organization even when that firm doesn’t challenge inventory.

It’s noteworthy that using the appendage “Holding” or “Group” whereas registering an organization is prohibited except the requisite consent/approval of the Registrar Common of the Company Affairs Fee is sought and obtained.

Holding firms are sometimes leveraged by Nigerian companies to keep up their possession or management over their firms. They do that by organising a Holding Firm to accumulate a controlling/majority fairness of their firm. That is usually employed by them to bypass the unfavourable tax construction inside our tax legal guidelines.

Group Corporations however are enterprise constructions which can be created to perform particular functions. In line with the Corporations and Allied Issues Act, 2020 (CAMA), it contains three or extra related firms with widespread shareholders or possession. These firms change into the shareholders of the distinct “Group” firm.

Causes for Organising a Holding Firm

1. Minimizing tax obligations by tactically finding particular enterprise operations in international locations with extra beneficial tax environments, thereby optimizing general tax effectivity.
2. Holding Corporations get pleasure from safety from authorized or monetary legal responsibility within the occasion of its subsidiary firm going bankrupt.
3. Holding firms can be utilized to guard property, reap tax advantages and have management or affect over different firms.

Necessities for organising a holding firm

Organising a holding firm would require:

• A minimum of 2 subsidiary firms
• An announcement by majority of the administrators of the holding firm that it shall take up greater than 50% of the nominal share capital of every of its subsidiaries inside 90 days of incorporation.
• Compliance with Part 733 of CAMA 2020

Process for organising a Holding Firm

The process for organising a holding firm in Nigeria is much like the process for registering any new firm in Nigeria, besides that the place using the phrase “Holding” is required, then an software for the consent of the Registrar Common of CAC would of necessity be required.

The process for acquiring such consent is:

1. A proper software for consent to make use of the phrase “Holding” within the identify of the corporate shall be made.
2. There have to be proof of not lower than two subsidiary firms, that are restricted to solely restricted legal responsibility firms.
3. There have to be an announcement by the vast majority of the Administrators of the proposed holding firm that the corporate shall purchase greater than half within the nominal worth of the share capital of every of the subsidiaries inside 90 days of incorporation.
4. The applicant is to offer proof of up to date annual returns of the prevailing subsidiary firm.
5. Proof of compliance with Part 733 of the Corporations and Allied Issues Act the place relevant, restricted to classes of firms.
6. Upon acquiring the Consent, the Applicant can go forward to register the holding firm.

Process for organising a Group of Firm

1. A proper software for consent to make use of the phrase “Group” shall be made to the Registrar Common of CAC
2. There have to be proof of a minimal of three (3) or extra related firms to kind the Group Firm, which would be the distinct entity.
3. Proof of comparable names of affiliate firms with widespread shareholders and possession.
4. There have to be a decision of the affiliate firms indicating consent to the “Group” relationship.
5. The up to date annual returns of all affiliate firms have to be offered.
6. Proof of Firm secretary of affiliate firms.
7. Assertion by the proposed Group Firm that the share capital shall not be lower than the very best share capital amongst the affiliate firms.
8. Proof of compliance with S.733 CAMA the place relevant. That is relevant to banks, insurance coverage firms, deposit provident firms, profit societies.
9. Upon acquiring the Consent, the Applicant can go forward to register the Group of firms with the identical process for the registration of a brand new firm.

CONCLUSION

Organising Holding Corporations although fraught with variety of benefits, it’s essential to level out that it’s not with out its attendant disadvantages which have to be rigorously thought-about previous to incorporation. Disadvantages such because the addition of a component of complexity which is actually absent in a single-entity construction will not be unusual with holding firms.

Be aware additionally that Enterprise names, Restricted Partnerships and Restricted Legal responsibility Partnerships can’t kind a gaggle or holding firms. That is the unique protect of Restricted Legal responsibility Corporations.

Chinaza is an affiliate within the Company and Business Follow group on the Trusted Advisors