GUIDELINES AND REQUIREMENTS FOR FINANCE COMPANY LICENSE IN NIGERIA
A Finance Company Business means the business of providing financial services for consumers and to industrial, commercial, or agricultural enterprises.
OUR STORY
Quality, not quantity
We have made quality our habit. It’s not something that we just strive for – we live by this principle every day.
GUIDELINES AND REQUIREMENT FOR FINANCE COMPANY LICENSE IN NIGERIA
In 2014, the Central Bank of Nigeria issued updated regulations to control the establishment, operations, and other activities of finance companies in accordance with the authority granted to it by Section 28 of the Central Bank of Nigeria Act and Sections 56-61 of the Bank and Other Financial Institutions Act.
A Finance Company Business means the business of providing financial services for consumers and to industrial, commercial, or agricultural enterprises. Such services include:
Consumer loans;
Equipment leasing;
Hire-purchase;
Debts factoring and securitization;
Project financing or consultancy;
Debt administration;
Project financing;
Export financing;
Warehouse receipt financing
Financial consultancy; and
Issuing of vouchers, coupons, credit cards, and token stamps and such other businesses as the CBN may, from time to time, designate.
REQUIREMENTS FOR THE GRANT OF LICENCE
i. A non-refundable application fee of N100,000 (One hundred thousand nairaonly) in bank draft, payable to the Central Bank of Nigeria.
ii. Deposit of the minimum capital of N100 million (One hundred million naira only) in bankdraft made payable to the Central Bank of Nigeria. The capital thus
deposited together with the accrued interest will be released to the promoters on the grant of the final licence.
iii. Satisfactory, verifiable and acceptable evidence of payment by the propose shareholders of the minimum capital of N100 million.
iv. Detailed business plan or feasibility study, including:
a. The objectives and aims of the proposed Finance Company.
b. The need for the services of the Finance Company.
c. The special services that the Finance Company intends to provide.
d. A five-year financial projection for the operation of the Finance Company, indicating its expected growth and profitability.
e. The branch expansion programme [if any] within the first five (5) years.
f. The proposed training programme for staff and management succession.
g. Details of the assumptions upon which the financial projection has been made.
h. The organizational structure of the Finance Company, setting out in detail, the functions and responsibilities of the top management team.
i. The conclusions based on the assumptions made in the feasibility report.
v. A copy of the draft Memorandum and Articles of Association. The objectives of the Company as disclosed in its Memorandum and Articles of Association
should agree with the services listed under the scope of permissible operations for Finance Companies.
vi. A letter of intent to subscribe to the Finance Company, signed by eachsubscriber.
vii. A copy of the list of proposed shareholders in tabular form, showing their business and residential addresses [not post office addresses] and the names and addresses of their bankers.
viii. Names and curriculum vitae (CV) of each of the proposed members of the Board of directors including other directorships held. The CVs must be personally signed and dated. The promoters would also be required to submitthe names and curriculum vitae of the proposed management team.
ix. Thereafter, the Governor of the CBN may grant a licence to a Finance Company. The Bank may at any time vary or revoke any condition of a licence or impose additional conditions.
x. Where a licence is granted subject to additional conditions, the Finance Company shall comply with those conditions to the satisfaction of the CBN within such period as the CBN may deem appropriate in the circumstances. Any Finance Company that fails to comply with such conditions shall be guiltyof an offence under BOFIA, 1991 [as amended].
xi. No proposed Finance Company shall incorporate/register its name with the Corporate Affairs Commission until a written approval has been communicated
to the promoters by the CBN, a copy of which shall be presented to the Corporate Affairs Commission.
xii. Licences shall be renewed within the first quarter of each year at a nonrefundable fee to be stipulated by the Bank from time to time, subject to the operations of the Finance Company being satisfactory to the Bank. Failure to renew a licence would attract severe sanctions, including revocation
REQUIREMENTS FOR DIRECTORS
1. The maximum number of directors on the Board of a finance company shall be seven while the minimum shall be three. To qualify for the position of a director in a finance company, it is hereby required that the person(s) must not be current employees or directors of banks or other nfinancial institutions, except the finance company is promoted by the banks or other financial institutions and are representing the interest of such institutions. In circumstances, however,nwhere current directors or employees of banks or Other financial institutions are proposed for the position of Director, the consent of their employers must be given in writing to the CBN.
2. The appointment of new directors must be preceded by CBN’s approval.
MANAGEMENT REQUIREMENTS
The following minimum qualifications and experience are mandatory for officers who may occupy the key/top management positions in the finance company.
1. Managing Director/Chief Executive – a recognized university degree or professional qualification with at least 7 years of post-qualification experience in relevant fields.
2. Departmental Head – a recognized university degree or professional qualification with at least 5 years of post-qualification experience in relevant fields.
3. Support staff – shall be qualified and be of proven ability.
4. A person with any other qualifications or experience that may be considered adequate by the CBN can hold any of the positions [i], [ii] and [iii] within the organization.
CONDITIONS PRECEDENT TO THE COMMENCEMENT OF OPERATIONS
The promoters of a Finance Company shall submit the following documents to the Central Bank of Nigeria before such Finance Company is permitted to commence operations:
a. A copy of the shareholders’ register in which the equity interest of each shareholder is properly reflected [together with the original for sighting].
b. A copy of the share certificate issued to each shareholder.
c. A certified true copy of Form C02 [Return of Allotments] filed with the Corporate Affairs Commission.
d. A certified true copy of Form C07 [Particulars of Directors], and written confirmation that the Board of Directors approved by the Central Bank of
Nigeria has been installed.
e. A certified true copy of the Memorandum and Articles of Association filed with the Corporate Affairs Commission.
f. The opening statement of affairs audited by an approved firm of accountants practising in Nigeria.
g. A certified true copy of the certificate of incorporation of the company [together with the original for sighting purposes only].
h. A copy each of the letters of offer and acceptance of employment by management staff and a written confirmation that the Management team approved by the Central Bank of Nigeria has been put in place.
i. A letter of undertaking to comply with all the rules and regulations guiding the operations of Finance Companies.
j. Evidence of registration with the Finance Company’s association umbrella body.
Central Bank of Nigeria
i. Revised Guidelines for Finance Companies in Nigeria
ii. The Finance Company shall inform the Central Bank of Nigeria of the location and address of its Head Office.
iii. The Finance Company shall be informed in writing by the Central Bank of Nigeria that it may commence business after physical inspection of its
premises.
iv. The Finance Company shall inform the Central Bank of Nigeria in writing of the date of commencement of business.
In conclusion, any company intending to be licenced as a financial company must be ready to comply with all the requirements and guidelines as stated by the Central Bank of Nigeria.
NB: This article is not a legal advice, and under no circumstance should you take it as such. All information provided are for general purpose only. For information, please contact chamanlawfirm@gmail.com
WRITTEN BY CHAMAN LAW FIRM TEAM
EMAIL: chamanlawfirm@gmail.com
TEL: 08065553671, 08024230080