Single Director Company in Nigeria: Advantages and Disadvantages

I bet you never heard of Single Director Company in Nigeria. Yes!

Not every business starts with a team of co-founders or a boardroom full of decision-makers. Many entrepreneurs begin alone with the drive to build something meaningful. By the amendment of CAMA, it is now possible to register and run a private company with just one director.

Before the promulgation of CAMA 2020, it was a requirement for every company to have at least two directors at the point of incorporation. However, the new CAMA in Section 18(2) provides that only one person can form and incorporate a company. This new development is great for entrepreneurs who run their business alone. In this case, they become the only director in the company.

But, just like anything, having a single director in a company comes with its advantages and disadvantages, which is what this article delves into.

Advantages of a Single Director Company

1. It is easier to set up and manage
   A single director does not have to wait for other people when they need to fill forms, sign documents, open corporate accounts, or handle everything else needed to run and manage the company. There is swift decision-making, as a single director has the liberty to make all decisions affecting the company by themselves.
2. Ease of access to loans
   In a single director company, there is ease of access to funding. This is because it can be difficult to put documentation together for loans when a company has more than one director. In some instances, there may be disagreements, long procedures before approval, and in other cases, a director with a bad credit history might cause the company to lose access to credit.
3. Non-sharing of profit
   Usually, a single director in a company is also the only shareholder in the company. Where this is the case, the profit realized at the end of a year is enjoyed by the single director and shareholders in the company.

Disadvantages of a Single Director Company

1. Difficulty in scaling and expansion
   Most grants and investors would prefer to work with a company that has more than one director. They would want to be sure that their investments do not go into a company with just one person as the owner who takes decisions as they please. Accountability is a catalyst for expansion. Since a company with a single director has this limitation, it would be very difficult to expand and scale up.
2. Limitation in scope and type of business
   There are some regulatory agencies that specifically require certain applications to be done with a company that has two directors, for example, export permits from NEPC. There also exist certain documents that are required to be signed by two directors in a company. Additionally, a foreign-owned company cannot be a single director company. A single director poses a limitation to the scope of business of a company.

Is a Single Director Company the Same as a Sole Proprietorship?

No. A single director company is a limited liability company, meaning it has its own legal personality distinct from its owner. Unlike a sole proprietorship, where the business and the owner are the same person.

If I Opt for Single Directorship, Can I Add More Directors Later?

Yes. The company may appoint more directors at any time after incorporation, subject to compliance with the provisions of CAMA on the appointment of directors.

Conclusion

The decision of having a single director company or a multiple director company will depend on various factors ranging from the type of company, the scope of business, source of capital, etc.

Do You Need an Expert to Assist in Setting Up a Single Director Company?

Setting up a single director company requires expert guidance. With our years of experience in business setup and compliance, we make the process seamless so you can focus on managing 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 herein without obtaining specific professional advice. For specific legal advice, contact us.

WRITTEN BY:
OGHENEYOMA E. IBUJE LL.B, B.L, ACIS
LEGAL ASSOCIATE
TCorporate Legal Advisory