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Legal status of foreign companies in Nigeria

By Ikedi Uwandu on 28/10/2019

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•Ikedi Uwandu
•Ikedi Uwandu

A foreign company in Nigeria is required to register before commencing a business operation in Nigeria. A foreign company may open for business as a secondary establishment, such as an office, agency, branch or subsidiary in Nigeria. However, such a company must fulfill certain legal requirements necessary to obtain local incorporation of the Nigerian branch or subsidiary as a separate legal entity. Foreign company registration in Nigeria is the only means a foreign entity can acquire as a separate legal entity in Nigeria and legitimately carry on business.

In the same vein, every foreign individual seeking to engage in any form of business in Nigeria must also incorporate a company and meet other requirements to set up a business in Nigeria as stipulated by requisite laws. A foreign company or foreign national may not carry on business in Nigeria or exercise any of the powers of a registered company until so incorporated. By virtue of section 56 of Companies and Allied Matters Act (CAMA), a foreign company may apply for exemption from incorporating a local subsidiary if such a foreign company falls within the categories stipulated in the Act. Such categories include, among others, foreign companies invited to Nigeria to carry out a specialised duty by the government. Every other foreign company that does not fall within the category mentioned above must incorporate a company before commencing business transactions in Nigeria. It is pertinent to point out the difference between registering a foreign company in Nigeria and the right of a foreign company to sue in Nigeria.

Registration of a foreign company is different from the power of a foreign company to sue. A foreign company not registered in Nigeria can sue in Nigeria once the laws of the country where the company is registered is recognised in Nigeria. A close look at section 54 of CAMA shows that it talks about registration and not otherwise. 

Nigerian courts interpreted section 54 of the CAMA vis-à-vis section 60 (b) of the CAMA in the case of Ritz and Co. KG v Techno Ltd, (1999) 4 NWLR (Pt. 598) 298 the Court of Appeal, per Justice Muntaka-Comassie JCA (as he then was) who delivered lead judgment thus:

“In the result, I hold that it cannot be right as held by the trial court that a foreign company cannot carry on business in Nigeria and, therefore, cannot sue and be sued in view of the Companies and Allied Matters Act, 1990 until it is properly incorporated. I think there is a fundamental misapprehension of the particular section relied upon by both the trial court and the learned counsel for the respondent. The relevant law to my understanding is that a foreign company which has not been registered in Nigeria under the Act supra cannot carry on business in Nigeria unless and until it has taken steps to incorporate same. Failure to do so, some punishments have been stipulated in the same chapter, that is, chapter 3. I must state clearly that same has capacity to sue and be sued. Section 54 is concerned with ‘carry on business.’”

Also in the case of Bank of Baroda v Iyalabam Co. Ltd, (2009) 13 NWLR (Pt. 785) 551, the court held that Nigerian courts recognise as juristic persons, corporations established by foreign law by virtue of the fact of their creation and continuance under and by virtue of that law. Such recognition is encouraged by comity of nations and such foreign company is permitted under the proper instruments of the foreign country. In Saeby Jernstoberi MFAS v Olaogun Enterprises Ltd, (1999) 14 NWLR (Pt. 637) 128, the Supreme Court of Nigeria, per Ayoola, JSC, explained the rationale of a foreign company's right to sue or be sued in Nigerian courts.

 “The principle of law that a foreign corporation, duly created by laws of a foreign state recognized by Nigeria may sue or be sued in its corporate name in our courts is part of the Common Law. The suggestion that a foreign company duly incorporated outside Nigeria should first be registered in Nigeria under the provisions of the Companies Act 1968 (which was the applicable statute) dealing with registration of foreign company as defined by that Act is too preposterous and patently inimical to international trade to merit any prolonged or serious consideration. It suffices to say that the appellant company with its registered address in Copenhagen is properly sued in its corporate name.” See all the most recent case of Companhia Brasifeira De Infraestrutura (INFAZ) v Companhia Brasifeira De Entrepostos (COBEC) Nig. Ltd (2018) LPELR 43848(SC) per Aka’ahs, JSC, held inter alia: “The principle of law that a foreign corporation duly created according to the laws of a foreign state recognized by Nigeria may sue or be sued in its corporate name in Nigeria is part of the common law.” 

Furthermore, the legal implication of Bilateral Investments Treaties (BITs) vis-a-vis the municipal law calls for a closer analysis, given that treaties entered into by Nigeria are not self-executing. According to section 12(1) of the 1999 Constitution (as amended), no treaties entered into by Nigeria acquire the force of law except if ratified by the National Assembly. Similarly, section 12 (2) of the 1999 Constitution empowers the National Assembly to make law for the federation or any part thereof, for the purpose of implementing a treaty. It is settled that once a BIT is ratified by the National Assembly, a foreign investor acquires the right to sue not only under international law but also under Nigerian law, particularly in Nigerian courts.

However, where an investment treaty entered into by Nigeria is not ratified by the National Assembly, the right of foreign investors becomes doubtful. It could be argued that such unratified investment treaties enjoy enforcement under international law, given that article 2 of the Vienna Convention on the Law of Treaties (VCLT) stipulates, inter alia, that a treaty entered into between two states is governed by international law. Equally, article 27 of the VCLT provides that states may not rely on their internal laws (in this case section 12 of the 1999 Constitution) as a justification to evade international treaty commitments. The implication of these provisions is that a prospective foreign investor may seek an available forum outside Nigeria to sue the latter in the event of investment disputes. However, such foreign investors do not have the locus standi to sue in Nigeria courts on the basis of unratified BIT, since such unratified treaties do not form part of the corpus of Nigerian law. The preceding scenario by no means deprives Nigerian courts of the jurisdiction over the infraction of other municipal laws committed by foreign investors.

Finally, by virtue of section 54 of the CAMA, every foreigner seeking to do business in Nigeria must incorporate his company, except his company falls within the purview of section 56 of the CAMA, which deals with the exemption of some foreign companies from incorporation. Nevertheless, non-registration of a foreign company does not prevent it from suing a Nigerian or Nigerian company before Nigerian courts or prevent a Nigerian or Nigerian company from suing it before Nigerian courts.

*Ike Uwandu is a law graduate of Enugu State University of Science and Technology. He can be reached via Uwanduikedi@gmail.com

Source News Express

Posted 28/10/2019 7:37:08 PM

 

 

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