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Startups wishing to operate with ease and avoid sanctions from regulators must pay attention to compliance and ensure that they understand regulations in countries in which they operate.
Nigeria Corporate/Commercial Law
Startups wishing to operate with ease and avoid sanctions from regulators must pay attention to compliance and ensure that they understand regulations in countries in which they operate.
A few startups in various jurisdictions have suffered reputational damages as a result of failure to understand regulations and properly comply.
In view of this, and to support startups, we have set out below a preliminary compliance checklist for startups operating in Nigeria.
Regulation
Companies and Allied Matters Act (CAMA)
i) incorporate their company before commencing business in Nigeria; and
ii) file their annual returns within 18 months of incorporation of the company in Nigeria and
subsequently on an annual basis.
National Pension Commission (PENCOM).
Employee Compensation Act, 2020
Pension Reform Act (PRA), 2014
i) contribute 1% of their employee monthly payroll to NSITF; and
ii) upon the employment of 3 or more employees deduct and remit monthly pension contribution (employee - 8% and employer -10%).
i) the 1% contribution to the NSITF within 2 years of commencement of its operations, and subsequently every year; and
ii) pension contribution with an approved Pension Funds Administrator (PFA) not later than 7 days of payment of salary every month.
Penalties for failure to remit pension contribution by a startup varies from cautions, monetary penalty to imprisonment, depending on the duration of non-compliance.
Finance Act, 2019 & 2020; Companies Income Tax (CIT) ; Value Added Tax (VAT).
i) Companies Income Tax; and
ii) Value Added Tax
i) file CIT within 18 months of incorporation, and subsequently on or before June 30 of every year; and
ii)remit VAT monthly to the FIRS on or before the 21st day of every month.
i) file CIT attracts a penalty of N25,000 for the first month and N5,000 for each subsequent month; and
ii) remit VAT attracts a payment of fine of 5,000 for every month of default.
Nigerian Data Protection Regulation (NDPR) 2019
i) submit to an annual audit; and
ii) file the report of such audit, amongst other requirements.
(Please note that NITDA at its discretion could extend the deadline for submission of the report.)
Trademarks Act, Cap T13, Laws of the Federation of Nigeria
The Nigerian Code of Corporate Governance 2018
It is important to note that certain licenses and permits are required to successfully commence operations in specific industries. A few of these are set out below.
The consequences of non-compliance with stipulated regulations in Nigeria may be rather steep, as it may hinder the smooth operations and growth of a startup.
It is important that startups understand the regulatory terrain it wishes to operate in, take necessary measures to ensure compliance and engage the services of a lawyer to advise on the regulatory requirements of the license the startup requires to operate in the country it wishes to set up.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
