Corporate structures in Nigeria range from a single company to large groups made up of a holding company, several subsidiaries and special purpose vehicles, as well as consortia formed for particular projects. The structure a business chooses affects who controls it, how risk is shared, how it raises money, how it is taxed and regulated, and how easily it can be sold or passed on.
This guide explains the main corporate structures used in Nigeria under the Companies and Allied Matters Act 2020 (CAMA 2020), what each one is for, the legal rules that apply, and how to choose the right structure for your business.
Types of corporate structures in Nigeria at a glance
| Structure | What it is | Typical use |
|---|---|---|
| Single company | One company carrying on the whole business | Most small and new businesses |
| Holding company | A company that owns shares in, and controls, other companies | Groups with several businesses or licensed activities |
| Subsidiary | A company controlled by another company | Separating businesses, licences, assets or markets |
| Group of companies | A holding company with its subsidiaries and sister companies | Larger businesses and family groups |
| Consortium | Companies working together on a project, with or without a new company | Large contracts, tenders and infrastructure projects |
| Special purpose vehicle (SPV) | A company set up for one project, asset or transaction | Project finance, real estate and acquisitions |
| Shell or dormant company | A company with little or no active business | Holding assets, reserving a name or preparing a transaction |
| Branch of a foreign company | A foreign company operating directly in Nigeria | Only with an exemption from local incorporation |
The starting point: separate legal personality
Every company registered with the Corporate Affairs Commission (CAC) is a separate legal person, distinct from its shareholders and from other companies in the same group. It owns its own assets, enters its own contracts and is responsible for its own debts. This is what makes group structures useful: risks and liabilities can be kept within the company that incurs them.
The protection is not absolute. Nigerian courts can look behind the company, or lift the corporate veil, where a company is used to commit fraud, evade obligations or act as a mere sham. Directors can also be personally liable for breaches of their duties under CAMA 2020. A structure only protects a business if each company is run properly as a separate entity.
Holding companies
A holding company is a company that controls another company, usually by holding more than half of its shares or voting rights, or by controlling the composition of its board. Some holding companies only own shares in other companies, while others also carry on business themselves.
A holding company structure is useful where a business wants to:
- separate different businesses, so that problems in one do not affect the others
- keep licensed or regulated activities in their own companies
- hold valuable property or intellectual property apart from trading risk
- bring in investors at the right level, either in the whole group or in one business
- plan for succession in a family business
- prepare part of the business for sale
In regulated sectors, a specific holding company structure may be required. For example, banks that want to own insurance, asset management or other financial businesses generally do so through a CBN-approved financial holding company, and fintech groups with several payments licences often use a payment service holding company.
Subsidiaries
A subsidiary is a company that is controlled by another company, its holding company. A wholly owned subsidiary has all its shares held by the holding company, while a partly owned subsidiary has other shareholders as well, such as a local partner or an investor.
Key rules for subsidiaries include:
- Separate company: a subsidiary is a separate legal person with its own directors, accounts and filings with the CAC
- No cross-holding: as a general rule, a subsidiary cannot be a member of, or hold shares in, its own holding company
- Group accounts: a holding company is generally required to prepare group or consolidated financial statements covering its subsidiaries
- Foreign parents: a foreign company that wants to do business in Nigeria usually does so through a Nigerian subsidiary; see our guide on how to register a foreign-owned company in Nigeria
Groups of companies and sister companies
A group of companies is made up of a parent company and the companies it controls, directly or through intermediate holding companies. Companies owned by the same parent are often called sister or affiliate companies.
Groups need clear governance to work well. That usually means a group structure chart, written intercompany agreements for services, staff, loans, technology and intellectual property, consistent policies across the group, and boards that understand which decisions belong to each company. Transactions between group companies must be priced at arm's length, because Nigeria's transfer pricing rules apply to transactions between connected companies. Each company in the group is taxed separately, so tax planning should be part of the design of the group.
Consortia and joint ventures
A consortium is an arrangement in which two or more companies work together on a project, such as a large construction contract, an infrastructure concession, a government tender or an energy project, while remaining independent. A consortium can be structured in two main ways:
- Contractual consortium: the members sign a consortium or joint bidding agreement that sets out their roles, contributions, profit sharing and liability, without forming a new company. Members are often jointly and severally liable to the client.
- Incorporated consortium: the members form a new company, often an SPV, to hold the contract and carry out the project, with their relationship governed by a shareholders' or joint venture agreement.
The right choice depends on the client's requirements, the length of the project, tax, liability and how profits and assets will be shared. See our joint ventures service.
Special purpose vehicles
A special purpose vehicle is a company set up for one specific purpose, such as owning a building, carrying out a project, holding a licence, raising project finance or acquiring another company. Lenders often require projects to be held in an SPV so that the project's assets and cash flows are ring-fenced from the sponsors' other businesses. SPVs are common in real estate development, power and infrastructure projects, and private equity acquisitions.
Shell companies and dormant companies
A shell company is a company with few or no active operations or significant assets. The term is often used negatively, but shell companies have legitimate uses, such as reserving a business name, holding shares or intellectual property, or preparing for a future transaction or licence application.
They also carry risk. Shell companies can be misused to hide the real owners of assets or to move illicit funds, which is why regulators pay close attention to them. CAMA 2020 requires companies to disclose their persons with significant control, meaning the individuals who ultimately own or control them, and banks apply enhanced customer due diligence to companies with complex or opaque ownership. A company that is not trading must still file annual returns, and the CAC can strike off companies that fail to do so. See our post-incorporation and annual returns service.
Branches of foreign companies
Under CAMA 2020, a foreign company that intends to carry on business in Nigeria must generally incorporate a Nigerian company, rather than operate as a branch. Exemptions are available in limited situations, such as foreign companies invited by the Federal Government to carry out specific projects or executing projects funded by a foreign government or international organisation. Most foreign investors therefore set up a Nigerian subsidiary.
Other business structures
Corporate groups can also include other types of entity under CAMA 2020:
- Private and public companies limited by shares, the most common vehicles for businesses
- Companies limited by guarantee and incorporated trustees, used for foundations and non-profit arms of a group
- Limited liability partnerships and limited partnerships, used by professional firms and some investment structures
See our business registration service for registering each type of entity.
How to choose the right corporate structure in Nigeria
The right structure depends on the business and its plans. Questions to consider include:
- How many different businesses, licences or markets does the group have, or plan to have?
- Where are the main risks, and which assets need protecting from them?
- Who are the owners, investors and lenders, and at which level do they want to invest or lend?
- Do any regulators require a particular structure or approve changes in ownership?
- How will profits move around the group, and what are the tax consequences?
- How will the business be passed on, sold or listed in future?
- Does the business need a structure outside Nigeria, such as a foreign holding company?
Common mistakes
- Running several businesses through one company, so that one problem puts everything at risk
- Creating subsidiaries without intercompany agreements, so that money and assets move between them informally
- Ignoring regulatory approvals when moving licensed companies into a group
- Using shell companies without proper records, which causes problems with banks, regulators and buyers
- Letting dormant group companies fall behind on annual returns
How we can help
Our corporate and commercial lawyers in Lagos and Abuja design and set up corporate structures for founders, family businesses and international groups. We advise on the right structure, incorporate holding companies, subsidiaries and SPVs, document consortia and joint ventures, prepare intercompany agreements and keep the group compliant. See our corporate structuring and international expansion service, and where an existing group needs to be reorganised, our corporate restructuring service. To discuss your structure, contact us.
Frequently asked questions
What is the difference between a holding company and a subsidiary in Nigeria?
A holding company controls another company, usually by owning more than half of its shares or controlling its board. The company it controls is its subsidiary. Each remains a separate legal person with its own assets, liabilities and filings.
Is a holding company liable for the debts of its subsidiary?
Generally, no. Each company is responsible for its own debts. However, a holding company can become liable if it guarantees the subsidiary's obligations, or if a court lifts the corporate veil because the structure has been used for fraud or as a sham.
Is a shell company illegal in Nigeria?
No. Shell companies are lawful and have legitimate uses, but they must disclose their persons with significant control, file annual returns and must not be used to hide ownership or move illicit funds.
Can a foreign company operate a branch in Nigeria?
Generally, no. A foreign company must incorporate a Nigerian company to carry on business here, unless it obtains an exemption for specific situations such as approved government or donor-funded projects.
What is a consortium in Nigeria?
A consortium is a group of companies that work together on a project, such as a tender or infrastructure contract. It can be purely contractual, governed by a consortium agreement, or incorporated as a new company owned by the members.
Does each company in a group pay tax separately?
Yes. Each company in a Nigerian group is taxed separately, and transactions between group companies must be priced at arm's length under the transfer pricing rules.
Can a subsidiary own shares in its holding company?
As a general rule, no. CAMA 2020 restricts a subsidiary from holding shares in its own holding company, subject to limited exceptions.
When should a business set up a holding company?
Usually when it has several businesses or licensed activities, valuable assets to protect, investors to bring in at different levels, or succession plans to put in place.
