The Companies and Allied Matters Act 2020 (CAMA) is the operative law regulating corporate and business-related activities in Nigeria. Under this law, any company desirous of carrying on business in Nigeria must be registered with the Corporate Affairs Commission, the statutory body saddled with the responsibility for business registration and post-incorporation compliance in Nigeria.

Under Nigerian law, foreign companies are required to register locally before doing business in the country. On the other hand, foreign companies may be permitted to set up a representative office or liaison office for the purpose of market entry without full incorporation as a Nigerian entity.

What is a Representative Office?

The representative office is an office established in a foreign country to perform some promotional and administrative tasks for a company. The operations are usually not transactional and provide more of a facilitation for the carrying out of market research, maintaining visibility for brands, and undertaking client liaison activities.

Many foreign companies, however, are opening representative offices for test purposes whenever they need to get a feel of the market or desire to expand without committing to full operational activities like manufacturing or direct sales.

Key Features of Representative Office

1. No Legal Personality: A representative office does not constitute a separate legal entity distinct from its parent company. For this reason, it cannot sue nor be sued in its own name.
2. Parent Company Liability: All liabilities or obligations assumed by the representative office are attributable to the foreign parent company.
3. Limited Scope of Activities: The representative office is allowed to conduct market research, promotional activities, brand representation, product display, and logistics support only. It cannot enter into business transactions, negotiate, or conclude contracts.
4. Tax Exemption: The representative office will not be charged corporate tax in Nigeria, since it does not raise revenue and carry out business activities. But it may also be charged based on some business objectives in its incorporation documents.
5. Operational Funding and Expenses: All the operational expenses should be fully funded by the parent company.
6. Registration as a Private Company – A representative office is, nonetheless, registered as a private limited liability company, although with varying objects of the company, area of operation. It needs to have in its name, “Representative Office.”

Merits of a Representative Office Establishment in Nigeria

1. Low-Cost Market Entry: Companies through representative office presence could enter the market at very minimum cost operation-wise than that could be achieved compared to a subsidiary.
2. Ability to Open a Local Bank Account – This facilitates financial transactions, payroll, and administrative payments.
3. Hiring of Local Employees – A representative office can employ staff to handle administrative, promotional, and support functions.
4. Facilitates Product Distribution & Client Relations – While it cannot engage in direct sales, the office can manage sales logistics and customer support under the parent company’s name.

Minimum Share Capital Requirement

The minimum share capital allowed to set up a representative office in Nigeria is ₦100 million. This is according to the law on companies with foreign participation.

Requirements for Registration as a Representative Office

The following are the requirements for registration of a representative office in Nigeria:

1. Company Name – Two alternative names are to be submitted for approval.
2. Business Nature & Objectives: A description of the business activities the representative office will undertake.
3. Company Officials’ Details (Directors, Secretary, Shareholders, and Witnesses):

• Full Name
• Valid Means of Identification (e.g., Passport or National ID)
• Signature
• Passport Photograph
• Phone Number
• Email Address
• Date of Birth
• Address (State, City, Street, LGA)

5. Company Address- House number, city, state, and local government area.
6. Shareholding Structure – List of Shareholders & % held,Anyone holding more than 5% will be considered a PSC
7. Other Statutory Requirement from CAC: Other documents that might be required by the CAC during the incorporation process

Regulatory Compliance & Licensing for a Representative Office

Even though a representative office does not carry out commercial activities, it is nonetheless subject to several regulatory and licensing requirements, such as:

1. Registration with the NIPC: This is a requirement for all companies with foreign participation.
2. Work and Residence Permits: Where foreign staff is to be employed, the company will have to obtain residence and work permits.
3. Expatriate Quota Approval: For hiring foreign employees.
4. Registration with Special Control Unit Against Money Laundering-Compliance with anti-money laundering law.
5. Compliance by Central Bank of Nigeria for Foreign Banks: Every foreign bank opening representative offices in Nigeria shall comply with the directives of the CBN, as issued on May 3, 2023.

Setting up a representative office is a very good way to enter the market in Nigeria, as it tries to minimize regulatory and financial burdens. It will enable the companies to conduct market research, establish a presence, and build relationships with customers before finally committing to doing business in Nigeria.

Please do contact us if you need help with registering a representative office in Nigeria, as we will certainly be glad to help you with the process.