28 Feb Establishing a Representative Office In Nigeria
Nigeria is one of the largest and fastest growing economy in Africa with a population of about 200million people. It is, therefore, an attractive destination for foreign companies looking to expand their business in Africa. In exploring the Nigeria business market, depending on market feasibility, an investor can either rely on direct or indirect options for investment and entry into the market.
One of the direct options is by setting up a Representative Office (RO).
What Is A Representative Office?
A Representative Office is an office opened in a foreign market as a first step towards establishing a relationship with potential customers. This type of office allows a company to show its commitment to the new market while permitting more intense on-the-ground research.
Must A Representative Office Be Registered with The Corporate Affairs Commission?
Under Nigeria laws, a foreign company desirous of doing business in Nigeria is generally required to register with the Corporate Affairs Commission (“CAC”) as a separate and distinct legal entity.
It is important to note that failure to procure a separate registration in Nigeria means that the foreign company cannot carry on business in Nigeria, neither can it have an address for the service of documents or processes in Nigeria for any purpose other than for the receipt of notices or documents preliminary to the said incorporation.
What Other Registration/Permits Does A Representative Office Need to Obtain?
Before a Representative Office can commence operation in Nigeria, the following registration/permits may be required:
- Registration with Nigerian Investment Promotion Commission (NIPC);
- Approval from the Central Bank of Nigeria before registration with CAC if the foreign company is a Bank;
- A business permit from Ministry of Interior Affairs where applicable;
- Obtainment of Nigerian Expatriate quotas if it seeks to employ individual immigrants to specifically approved job designations;
- Obtainment of Residence permit for immigrants it seeks to employ;
- Obtainment of requisite license where the company intends to engage in a specialized sector that requires a government agency’s approval or permit;
What Type of Activities Can a Representative Office Carry Out?
The type of activities that a Representative Office can engage in are highly restricted. A Representative Office may only:
- serve as a promotional office,
- obtain information and conduct market analysis,
- market research and intelligence,
- storage and display of goods or merchandise
What are the Limitations of a Representative Office?
It is noteworthy to state that a Representative Office in Nigeria is limited to the duties stated above and cannot
- Engage in business, negotiate or conclude contracts. It is solely a promotional office of the foreign company.
- The Representative Office cannot be sued or sue in itself, thus the liabilities of the Representative Office extend to the Parent company.
Therefore, a Representative Office must ensure that it does not engage in any business or generate any income otherwise it risks not only being sanctioned by the appropriate regulators but also may be deregistered.
How Does a Representative Office Fund Its Operations?
It is important to note that the expenses run by the Representative Office must be an inflow from the parent company. This is because the Representative Office as stated above cannot engage in any business, it is therefore not expected to generate any form of income or profit from its operations. Thus, the day to day expenses of the Representative Office will need to be funded directly by the Parent Company.
A Representative Office is considered a good option for foreign companies seeking to establish a presence in Nigeria. It is usually a first step towards establishing a relationship with potential customers and it allows the company to show its commitment to the new market.
The information provided in this article is for general informational purposes only and does not constitute legal advice. If you require specific legal advice on any of the matters covered in this article please contact email@example.com