The Impact of the Business Facilitation Act 2023 on Startups in Nigeria

August 22, 2024
Startups

Introduction

The Business Facilitation Act 2023 (BFA 2023), recently signed into law by President Muhammadu Buhari, marks a significant legislative step towards improving the ease of doing business in Nigeria. This Act, introduced by the Presidential Enabling Business Environment Council (PEBEC), aims to eliminate bureaucratic hurdles and streamline business processes, particularly benefiting startups.

Key Provisions Benefiting Startups

The Business Facilitation Act 2023 includes several key provisions that benefit startups in Nigeria. Here’s a summary of all the key provisions.

  1. Automation and Simplification:

The Act mandates full automation of the application and registration processes for businesses through the Corporate Affairs Commission (CAC). This simplifies the registration process, reducing time and effort for startups.

  1. Exemption for Foreign Companies:

 The Act expands exemptions for foreign companies from incorporation requirements, making it easier for foreign startups and investors to operate in Nigeria.

  1. Share Capital Increases:

 Startups can now increase their issued share capital by allotment through a board resolution, streamlining the process and reducing administrative burdens.

  1. Pre-emptive Rights:

Existing pre-emptive rights provisions continue to protect shareholders, ensuring they have the first opportunity to purchase new shares before they are offered to non-shareholders. This safeguards the interests of existing shareholders in startups and maintains equity control.

  1. Faster Allotment Registration:

The timeframe for registering allotments with the CAC has been reduced from one month to 15 days, accelerating the process of issuing shares.

  1. Electronic Voting:

Resolutions can now be decided through electronic voting, facilitating decision-making processes, especially for startups with remote stakeholders.

  1. Independent Directors:

Public companies are required to have at least one-third of their directors as independent directors, promoting good governance practices.

  1. Revocation of Authorized Dealers:

The Act stipulates clear grounds for revoking the appointment of authorized dealers by the Central Bank of Nigeria (CBN), ensuring more transparent and fair practices in foreign exchange transactions.

  1. Visa and Immigration Reforms:

Entry visas to Nigeria must be issued or rejected within 48 hours, and visa requirements must be clearly published, easing the process for startups to bring in foreign talent.

  1. Capital Expenditure Notifications:

The threshold for capital expenditure notifications has been increased from 20,000 naira to 5 million naira, reducing regulatory burden for smaller investments.

  1. Investment Flexibility:

Enterprises with foreign participation now have three months to register with the Nigerian Investment Promotion Commission after commencing business, providing startups with flexibility in securing foreign investment.

  1. Export Prohibition:

The Act provides clarity on goods prohibited from export, and the Minister of Finance can vary the list of prohibited goods, aiding startups in international trade.

  1. Financial Reporting Standards:

The Act ensures startups prepare financial reports according to standardized regulations, improving transparency and investor confidence.

  1. Technology Integration in Ports:

The Nigerian Port Authority Act now includes provisions for ICT use and a single window for government operations in ports, facilitating smoother logistics and trade for startups.

  1. Intellectual Property Protection:

The Trademark Act now includes services in the definition of goods, extending trademark protection to service-oriented startups.

  1. Product Standardization:

The Standard Organization of Nigeria Act now includes investigations of imported products, and the organization can publish inventories of products requiring standardization.

  1. Customs and Excise Reforms:

The Customs and Excise Management Act now includes provisions for a single window platform for trade data submission and reduces the timeframe for delivering uncleared goods, enhancing efficiency in trade operations.

  1. Training Fund Contributions:

The Industrial Training Fund Act now requires employers with 25 or more employees to contribute to the fund, supporting workforce development in startups.

  1. Compulsory Licenses for Patents:

The Patent and Designs Act now allows the Minister to regulate the process for applying for compulsory licenses, facilitating access to essential technologies for startups.

  1. Pension Fund Utilization:

The Pension Reform Act now allows pension assets to be used for securities lending and mortgage payments, providing more financial flexibility for startups and their employees.

  1. Export Promotion:

The Nigerian Export Promotion Council Act now includes detailed board membership and qualifications, supporting strategic investments and export promotion for startups.

  1. Customs Service Modernization:

The Nigeria Customs Service Board Act now includes provisions for adopting modern operational means and developing regulations, enhancing the efficiency of customs services for startups. These comprehensive provisions collectively create a more conducive environment for startups in Nigeria by reducing bureaucratic hurdles, enhancing transparency, and providing greater flexibility in business operations.

Conclusion

The Business Facilitation Act 2023 represents a progressive move towards creating a more conducive business environment in Nigeria. By simplifying registration processes, enhancing capital access, protecting intellectual property, and streamlining import-export procedures, the Act significantly lowers entry barriers and operational challenges for startups. These reforms are poised to foster innovation, attract investment, and drive economic growth, positioning Nigeria as a more attractive destination for entrepreneurial ventures.

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