It is not exactly uncommon to see company letterheads, advertisements and product labellings identifying the manufacturing company or business with the appendage title of ‘Xyz Group of Companies’ or ‘Wazobia Holding Company’ or seeing big projects in sectors like the Construction Industry said to be carried out by an ‘ABC Consortium’.
The examples mentioned above are simply unique types of Corporate structures different from the typical limited liability/PLC set-up.
This article will be dealing with the topic of Holding Companies, Groups of companies and Consortiums, specifically the topics of :-
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– The definitions of Holding Companies, Groups of Companies and Consortiums in Nigeria.
– The Regulatory Framework governing Holding Companies, Groups of Companies and Consortiums in Nigeria.
– The Registration procedures for each of these company types.
– The outstanding operational structures of these company types where they exist.
What is a Group of Companies, a Holding Company & a Consortium?
A group of companies is a corporate structure made up of 3 or more related companies having common shareholders coming together to form a composite umbrella structure with each of the companies being associates.
This structure differs from a company limited by shares being Incorporated by 2 or more shareholders in the form of companies.
A Holding company on the other hand is a company structure specifically designed by law to engage in the business of holding/acquiring controlling/majority stock interests in various companies/subsidiaries and subsequently maintaining an oversight function over these subsidiary companies.
A Consortium is a Corporate structure that functions as a union of various companies coming together to achieve a common business objective usually in the form of a joint venture/enterprise, specific project, or a special purpose vehicle.
It should be noted that no company in Nigeria is allowed to use the appendages (?) of “Group of Companies”, “Holding Company”, or “Consortium” without the proper Regulatory approval.
What is the Regulatory Framework governing Groups of Companies, Holding Companies and Consortiums in Nigeria?
Holding Companies, Groups of Companies and Consortiums are licensed, regulated and supervised by the Corporate Affairs Commission(CAC) through the Companies and Allied Matters Act 2020.
What is the licensing/registration procedure for a Group of Companies, a Holding company and a Consortium?
A Group of Companies
You need to have the following to register a group of companies:-
– An online application for the consent of the Registrar-General of the Corporate Affairs Commission after carrying out a name availability search & reservation.
– At least 3 or more existing proposed subsidiaries/component companies.
– Certificates of Incorporation of the 3 proposed subsidiary companies.
– Company resolutions of each of the subsidiaries consenting to the umbrella company union.
– Before commencing the process of registering a group of companies, it is important to first satisfy to date all outstanding CAC obligations(in the form of annual returns) of the component/companies that are to make up the group of companies.
– A statement that the share capital of the group shall not be less than the highest capital of any of the subsidiaries in the proposed group.
– Compliance with Section 733 of CAMA 2020 requiring the publishing by companies of statements in the prescribed form as in the 14th schedule, specifically companies such as banks and insurance companies.
– Registration.
A Holding Company
Registering a holding company will require:-
– At least 2 subsidiary companies.
– A statement by the majority of the directors of the holding company that it shall take up more than 50% of the nominal share capital of each of Its subsidiaries within 90 days of incorporation.
– Compliance with Section 733 of CAMA 2020.
Consortiums
To register a consortium you need the following:-
– An application for the consent of the Registrar-General of the Corporate Affairs Commission, after a name availability search and reservation.
– Evidence of at least 3 companies forming the consortium in the form of Certificates of Incorporation.
– Evidence of registration in Nigeria where one of the companies in the proposed consortium is a foreign company.
– A resolution by each of the companies agreeing to the creation of the consortium.
– A Statutory declaration to wind up the Consortium in accordance with the Companies and Allied Matters Act upon the conclusion of its business objects.
– The insertion of a winding- up clause in the article of the Consortium.
– A statement of the object clause in the consortium’s MEMART (Memorandum/Articles of Association).
– Proof of updated annual return filing records of the consortium’s component companies.
– Evidence of compliance with Section 733 of the Companies and Allied Matters Act 2020
Conclusion:- It is hoped from the above write-up that a basic clear. understanding of the Legal/Regulatory Framework governing Holding Companies, Groups of Companies and Consortiums. Further knowledge about these company structures, as well other specialized companies like Investment Holding Companies, will require further consultations with your lawyer.