Finance companies are founded to aid people to make transactions but first, these companies have to get licensed before they can operate in the market.
The licensing procedure helps weed out or discourage crooks as there are procedures of verification before a finance company is licensed.
A finance company in Nigeria is registered and licensed as standalone entities and unless the Central Bank of Nigeria approves of the company it cannot be registered with the Corporate Affairs Commission (CAC).
Finance companies are licensed as middlemen who mediate between financial institutions and businesses.
There are various bodies involved in regulating the activities of a finance company in Nigeria, the Central bank of Nigeria oversees and licenses based on the services the finance company set out to offer.
The Nigerian Communication Commission regulates and monitors how these finance companies use USSD codes and other telecommunications avenues.
The management of clients’ funds and data is regulated by the Security and Exchange Commission (SEC) and the National Information Technology Development Agency (NITDA) respectively.
These regulatory bodies make sure that finance companies work within their stipulated job description and handle transactions as they should as defaulting could lead to loss of license or heavy fines.
Steps in registering a finance company in Nigeria
There are requirements needed before a finance company is licensed. They are as follows;
- A letter addressed to the Governor of the Central Bank of Nigeria
- An application fee of one hundred thousand naira in bank draft. This fee is nonrefundable
- A capital of one hundred million in bank draft. This capital is paid back after the license has been granted
- A business plan, well detailed showing the objectives, aims, organizational structures and other feasibility studies of the finance company
- A memorandum draft and an Article of Association draft
- The names and resumé of the intended board of directors members duly signed by the individuals
- A letter signed by intending subscribers
- A list showing the proposed shareholders of the finance company
Licence is renewable, usually renewed every first three months in a year. Failure to renew as at when due results to sanctions.
Licenses sometimes are given with additional criteria, where these criteria have not met the license can be revoked.
There are other conditions to be met by these finance companies before the commencement of activities, they include the following;
- Submission of a copy of the document where every equity owned by each stakeholder is written
- A copy of certificates given to these shareholders
- A copy of Return of Allotments registered with the CAC
- An audited opening statement of the finance company by accountants in Nigeria
- A letter of undertaking duly signed by the finance companies stating their willingness to obey the rules and regulations guiding their practice
- Submission of the intended location of the finance company
- Registration with the association of finance companies in Nigeria
- Copy of document showing that the members of the Board of directors approved by the Central Bank of Nigeria for the finance company has been duly installed and also a document showing the offer of employment of the management staff and acceptance letter of these management staffs.
- A formal letter stating when the finance company intends to start its business operations.
