Authorised Share Capital in Nigeria: Meaning, Requirements, and How to Decide

When registering a company in Nigeria, one of the important decisions to make is the amount of share capital with which the company will be registered. The share capital is relevant not only to the company’s ownership structure but also, in some cases, to its ability to obtain regulatory licences and operate in certain sectors.

The term ‘authorised share capital’ is commonly used by business owners and even in some corporate documents to describe the amount of share capital a company is permitted to have. However, the legal position in Nigeria changed significantly with the enactment of the Companies and Allied Matters Act (CAMA), 2020, which replaced the former authorised share capital with a requirement for minimum issued share capital.

Understanding the difference between the former authorised share capital regime and the current issued share capital requirement is important for business owners, shareholders, directors, and persons involved in company registration.

What is Authorised Share Capital?

Authorised share capital previously referred to the maximum amount of share capital that a company was permitted to issue to its shareholders.

For instance, a company could have an authorised share capital of ₦10,000,000 divided into 10,000,000 ordinary shares of ₦1 each, while issuing only ₦2,000,000 worth of shares to its shareholders. The remaining ₦8,000,000 represented shares that had been authorised but not yet issued.

Thus, authorised share capital represented the maximum amount of share capital that a company was authorised to issue without first increasing its authorised share capital.

Is Authorised Share Capital Still Applicable in Nigeria?

No. CAMA 2020 replaced the former authorised share capital regime with the requirement for minimum issued share capital.

Under Section 27(2)(a) of CAMA 2020, the memorandum of a company having share capital must state the amount of the minimum issued share capital with which the company proposes to be registered. This amount shall not be less than ₦100,000 for a private company and ₦2,000,000 for a public company.

Section 124 further provides that a company having share capital cannot be registered with less than the applicable minimum issued share capital.

Therefore, although “authorised share capital” remains commonly used, issued share capital is the more accurate term under the current legal framework.

What is Issued Share Capital?

Issued share capital is the total nominal value of the shares issued by a company to its shareholders.

For example, where a company has 1,000,000 ordinary shares of ₦1 each, its issued share capital is ₦1,000,000.

The shares are then distributed among the company’s shareholders according to their respective ownership interests.

Illustration: If Shareholder A holds 600,000 shares and Shareholder B holds 400,000 shares out of 1,000,000 issued shares, Shareholder A owns 60% while Shareholder B owns 40% of the company.

Thus, the number of shares issued also determines the ownership structure of the company.

What is the Minimum Share Capital in Nigeria?

CAMA 2020 prescribes minimum issued share capital depending on the type of company.

Type of Company	Minimum Issued Share Capital
Private Company	₦100,000
Public Company	₦2,000,000

These are the general statutory minimums under CAMA 2020. However, certain businesses may be subject to higher capital requirements imposed by the relevant regulatory authority. This is because a company carrying on a regulated activity may be subject to a higher minimum capital requirement under applicable regulatory requirements.

Therefore, the nature of the proposed business should be considered before deciding on the amount of share capital.

How Do You Decide the Appropriate Share Capital?

The appropriate share capital depends on the nature of the company’s business, regulatory requirements, and intended ownership structure.

1. Nature of the Business

A company carrying on ordinary commercial activities may not require a high issued share capital beyond the applicable statutory or regulatory minimum. However, a company intending to operate in a regulated or capital-intensive sector may require a higher amount.

2. Regulatory Requirements

Certain industries have minimum capital requirements prescribed by their regulators. Therefore, where the proposed business requires a regulatory licence or approval, the applicable capital requirement should be determined before registering the company.

3. Ownership Structure

The number of shares should also reflect the intended ownership of the company. For example, if two shareholders intend to own a company equally, the company may be structured with 1,000,000 shares, with each shareholder holding 500,000 shares representing 50% each.

The number of shares is, therefore, relevant to how ownership interests will be divided among shareholders.

4. Foreign Participation

Where a company will have foreign shareholders or investors, the applicable legal and regulatory requirements should be considered before determining the company’s share capital. Currently, the minimum share capital for a foreign company is ₦100,000,000.

There should not, however, be an assumption that every company involving foreign participation automatically has the same capital requirement. The applicable requirements depend on the nature of the investment and the company’s proposed activities.

5. Future Business Plans

The company’s anticipated expansion, introduction of new investors, and future financing needs may also be considered when determining its share capital.

However, there is generally no need to choose an unnecessarily high share capital simply because the company may expand in the future. Where additional capital is required, the company may subsequently increase its share capital in accordance with the applicable legal and filing requirements.

When May a Company Require Higher Share Capital?

A company may require a higher share capital where:

• The relevant regulator prescribes a higher minimum capital;
• The company intends to obtain a licence for a regulated activity;
• The company needs to restructure its ownership or introduce additional shareholders;
• The company intends to undertake activities for which a specific capital requirement applies; or
• The company’s business plans make a higher capital structure commercially appropriate.

It is, therefore, important not to assume that satisfying the general CAMA minimum automatically allows a company to carry on every type of business.

For regulated businesses, the relevant sector-specific requirements should be checked before incorporation.

Can Share Capital be Increased After Incorporation?

Yes. A company may increase its issued share capital after incorporation where additional shares are required.

This may become necessary where new shareholders are introduced, additional shares are allotted, the company is expanding its operations, a higher regulatory capital requirement needs to be satisfied, or the company’s existing ownership structure needs to be reorganised.

Under Section 127 of CAMA 2020, a company may increase its issued share capital by allotting new shares, and notice of the increase is required to be given to the Commission within 15 days.

It is also important to consider the effect of issuing additional shares on the percentage ownership of existing shareholders.

Frequently Asked Questions (FAQs)

Conclusion

Authorised share capital is a term that remains commonly used when discussing company registration in Nigeria, particularly because it was part of the former company law framework. However, CAMA 2020 replaced the former authorised share capital regime with a minimum issued share capital requirement.

The general minimum issued share capital is ₦100,000 for a private company and ₦2,000,000 for a public company. However, companies operating in regulated sectors may be subject to higher capital requirements under applicable laws, regulations, licensing conditions, or regulatory requirements.

The appropriate issued share capital should therefore be determined based on the company’s proposed business activities, applicable regulatory requirements, intended ownership structure, foreign participation where relevant, and future commercial plans.

Where a higher capital requirement becomes necessary after incorporation, the company may increase its issued share capital in accordance with CAMA and the applicable CAC requirements.

Get Professional Guidance

Are you looking for professional guidance on choosing the right share capital for your company, registering a new business, or making changes after incorporation?

From company registration and share capital structuring to CAC filings, statutory requirements, and ongoing regulatory compliance, having the right support can save you time, money, and avoidable complications.

With practical experience in corporate advisory, business incorporation, and regulatory matters, TCorporate Legal Advisory helps businesses navigate the process efficiently, so you can concentrate on building and growing your business.

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Disclaimer: This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. For specific legal advice, contact us.

Written by:

Ucheagwu Chiefo, LL.B., B.L.

Legal Associate

TCorporate Legal Advisory