Do you have an existing company that you wish to consolidate into a group of companies? Or perhaps you are just getting started from scratch with CAC registration. In this guide, I will walk you through the cost and document requirements to form and register a group (holding) of companies in Nigeria, the right way.
A group of companies is significantly different from the normal process of registration in terms of cost, duration, and requirements.
As usual, Corporate Zaddy is a platform that aims to simplify CAC registration processes for different kinds of companies, and today, you will be getting reliable and up-to-date knowledge of how holding companies are formed with CAC in Nigeria.
What is a Holding and Group Company?
A group consists of different companies called subsidiaries coming together to form one company under a single name umbrella called a parent for the purpose of sharing resources and profits.
Holding company, on the other hand, is the senior company, or let’s call it the parent company, that consolidates the subsidiaries to form a group of companies.
So, in layman’s terms, company A sells building materials and company B deals in real estate, and company C into engineering construction, can come together (as subsidiaries) to register under an umbrella of company D to operate and share resources.
Companies A, B and C are termed “Subsidiaries” while Company D is called the “Parent or Holding”. They can operate independently of each other and, at the same time, engage in intergroup trading
In addition, the Holding company owns and controls more than 50% shares of the subsidiaries. The purpose of the holding company is to control, acquire assets and manage the affairs of the subsidiary company.
For legal structures like the preparation of financial statements, a consolidated statement is often required, stating all activities of the group and the parent that controls them.
Under Nigerian company law, establishing a group of companies requires a formal application and consent approval from the Registrar General of the Corporate Affairs Commission (CAC).
Legal Framework in Nigeria For Holding Company
The following is the body that regulates the formation and registration of holding companies or groups of companies in Nigeria
- CAMA (Companies and Allied Matters Act)
- CAC (Corporate Affairs Commission)
- Federal Inland Revenue Service (FIRS)
- Joint Tax Board (JTB)
- SCUML
- Government departments and agencies (Where the company operates)
Benefits of Forming a Group of Companies in Nigeria
Registering a group of companies in Nigeria comes with a lot of benefits, not just to the parents but also to the subsidiaries.
The following are common benefits of registering a holding company in Nigeria with CAC
- Tax friendliness, where each subsidiary is taxed independently of the other
- There is limited liability and asset protection
- Subsidiaries can offer each other in cases of losses when the others fail to perform well financially
- There are easier sources of capital since the companies share resources
- A group of companies have a stronger goodwill and public image, potentially opening doors to new business opportunities and partnerships
- The subsidiaries can trade with each other, therefore retaining resources and profits and also fostering growth and development
Difference Between Consortium and Group of Companies
There is a clear difference between a consortium and a group of companies.
A consortium simply is a strategic alliance of different companies coming together to share resources, ideas and tools for the sole aim of working towards achieving a particular goal by gaining a competitive advantage.
At the end of the project, the consortium is dissolved immediately, hence there is no proper structure and plan for growth and sustainability. The company only exists for an intermediate time.
A group of companies, on the other hand, involves different companies (subsidiaries) teaming up to be controlled by a holding (or parent) company in a permanent relationship that lasts longer.
Requirements To Register a Group of Companies with CAC in Nigeria
The following are the must-have information and documents to incorporate a group of companies with CAC in Nigeria
- Proposed company name (ending with Group LTD or Group of Companies LTD)
- A consent letter which will be applied and submitted to the Registrar General of CAC
- CAMA 2020 requires a minimum of 3 companies (subsidiaries) to register a group of companies
- The subsidiary companies will draft a board resolution, stating and declaring their intentions to register a group
- There must be post-incorporation compliance, like annual returns and other corporate governance requirements, by the subsidiaries
- Statement of issued share capital, which must not be less than the total share capital of subsidiaries
- The subsidiary companies must be eligible to form a group (e.g they are not insolvent or liquidating
- There must be a common director among the 3 subsidiaries
Minimum Share Capital Requirements
When forming a group of companies with CAC, the share capital of the group of companies must not be less than the total share capital of the subsidiary companies.
Let’s not forget, you need a minimum of 3 subsidiaries to form a group of companies.
So let’s say company A is a travel and tours company with 30 million shares
Company B is a private security company with 10 million shares
And company C is a finance company with 20 million shares
So now, if these 3 companies want to form a group of companies, the share capital of the group of companies will be calculated based on 30 + 10 + 20 = 60
This means the minimum share capital for the group company must not be less than 60 million shares.
Assuming the subsidiaries are 3 or 4 in number, with a share capital of 1,000,000 (one million naira each), the minimum share capital for the group company will be either 3 million or 4 million shares. However, the share capital can be more, depending on the preference of the shareholders.
Note!!:
If the company has a foreign director or shareholder, this rule does not apply. The company must register with a share capital of 100 million shares (considering its foreign participation)
Directors and Shareholders Requirements
There will be one Director serving as a representative of the subsidiary companies. He will provide the following
- Full name
- Date of birth
- Contact address
- Phone number
- IDs
- Signature
For shareholders, there will be a corporate shareholding and not an individual shareholding structure.
Guide to Register a Holding (Group) Company With CAC Online
The following is a walk-through on how to carry out the registration on the portal
- Conduct a name search on the CAC portal
- Reserve the name (the name must carry Group Limited or Group of Companies LTD)
- Fill in the company information, including address, email and contact
- Draft out the articles of association or adopt the default articles
- Provide details of the witness
- The objects of the memorandum will be the collection of all the subsidiaries and any new ones the holding company wishes to engage in
- Provide information about the directors and shareholders
- Under the statement of issued share capital, use the applicable share capital and do the allotment as the shareholders desire
- Proceed to complete the statement of compliance
- Upload documents
- Make payment to CAC and stamp duty
- Submit and wait for approval.
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Cost to Register a Group of Companies in Nigeria
The cost of registering a holding company in Nigeria is not specific. However, this cost can be broken down into 3 parts
- CAC fees
- Stam duty
- Legal, consulting and service fees from the agents handling the registration
The cost to register a holding company is influenced by the share capital of the group company. There is no specific share capital or amount for registration. It all goes down to the aggregate of the subsidiaries forming the group of companies.
Post-Incorporation Compliance for a Group of Companies
The following are other compliance and registrations you must obtain immediately after a successful CAc registration
- Obtaining a Tax Identification Number
- Registration on Tax Promax
- Processing of Tax Clearance Certificate
- Registration for VAT
- Filing Annual Returns with CAC
- Obtaining EFCC Certificate (where applicable
- Securing Industry Registrations and Licensing
Common Mistakes When Forming a Holding Company
The following are common mistakes faced by agents who engage in this kind of registration
- Not applying for consent
- Uploading blurry and Incomplete documents
- Wrong share capital
- Undercharging the client due to the wrong calculation of fees (low-balling)
- Lack of clarity on the statement of issued share capital, division and allotment
- Lack of professional experience and skill
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FAQs
Q: Can one person own both the holding company and all subsidiaries?
A: Yes. It’s possible. However, a group of companies is owned by corporate shareholders, not individual persons.
Q: Do I need to register all companies at once to form a group?
A: Yes. The parent can not exist without the subsidiaries. The first step is to incorporate the subsidiaries one by one
Q: Can I register multiple subsidiaries under one holding company in Nigeria?
Yes. A holding company can accommodate as many subsidiaries as possible.
Q: What is the minimum share capital for a Holding Company?
A: The minimum share capital of the holding company is 3 million shares. However, this varies sometimes depending on the individual share capital of the subsidiaries involved in the formation.
Q: Can a Foreign Investor Register a Group of Companies in Nigeria?
A: Yes. However, such a company must register as a foreign participant with 100 million shares
Q: How Long Does It Take to Register a Group of Companies with CAC?
A: Duration takes about 2 to 4 weeks on the new AI-powered portal.
Q: Do all subsidiaries need to file separate tax returns?
A: Yes.
Q: Can there be separate bank accounts for each subsidiary?
Yes, each company under the group must operate its own corporate account.
Q: Is it possible to operate businesses under one holding company?
A: Yes.
Q: What is the difference between a holding company and a conglomerate?
A: A holding company owns shares in subsidiaries, while a conglomerate is a larger structure with diverse subsidiaries across industries and engages in different lines of business.
Conclusion:
I hope this article has explained the rudiments involved in forming and registering a holding company in Nigeria, as well as the requirements and costs.
For any questions or suggestions, leave them in the comments
