The issue of whether a foreign company has legal capacity to carry on business in Nigeria and consequently maintain an action in Nigeria courts to enforce its rights under the contract was at the centre of a recent decision of the Supreme Court, which resolved all the issues in favour of the Appellant.[1] The Court based its decision on what it called a literal and plain interpretation of sections 54(1), (2) , (3) and 60 (b) of the Companies and Allied Matters, Act ("CAMA").


The Respondent (Plaintiff at the trial court) was a company registered under the laws of the United States of America as a corporate entity which carries on business of Architecture, Engineering, Planning, Construction and Interiors and having its principal place of business at C/Serrano, 8d, IZq, 28001 Madrid, Spain.

The Appellant employed the Respondent at its "architects and engineers - Consultants and Sole-Contractor to do for the Appellant and the Federal Government of Nigeria, the conceptualization, design, infrastructure and construction of five thousand housing units at Nbera District in Abuja". Part of the business the Appellant engaged the Respondent to carry on in Nigeria as part of the Agreements between the parties was the commitment of the Respondent to build two factories for the production of Simplex Cepol Wall and Slab Panels as well as other elements to be used in the construction of the Housing Units" for the appellant.

The Respondent in furtherance of the agreements it entered with the Appellant, bought all the machinery, equipment and vehicles for the building and operation of the said factories, which it had built and immediately commenced the production of the simplex Cepol Panel used to build the model houses.

The immediate cause of action was the alleged breach of the terms of the agreements the Respondent and the Appellant executed. Allegedly, the Respondent was paid for the supply of 2 new factories at the Nbera site. The Appellant terminated the contract on the ground that the Respondent installed second-hand and fairly-used equipment in the factories while the factories supplied and constructed by the Respondent were unserviceable and unfit for purpose. Upon the termination of the contracts, the Respondent instituted an action against the Appellant seeking mandatory order of injunction, special and general damages.

The Appellant, by way of a preliminary objection challenged the jurisdiction of the trial court to hear the suit on several grounds including the ground that the contract was a nullity having been entered into by the Respondent without it being incorporated in Nigeria under the CAMA. The trial court upheld the preliminary objection and held that the Respondent having not been incorporated in Nigeria did not have legal capacity to enforce the contract.

Aggrieved, the Respondent appealed to the Court of Appeal. In allowing the appeal, the Court of Appeal held that since the legal capacity of the Respondent was in issue the Parties should have been allowed to call evidence to determine the issue; that the onus was on the Appellant as the Defendant, which had challenged the Respondent's legal capacity to prove that the Respondent did not have the legal capacity and that this should have been done by leading evidence, oral or documentary in proof of the same.

Dissatisfied, the Appellant appealed to the Supreme Court. In determining the appeal, the Supreme Court considered the provisions of sections 54(1),(2), (3) (a) & (b), 55 and 60 of the CAMA.


The Supreme Court noted that the language employed therein is clear and unambiguous. Section 54(1) clearly states that every foreign company incorporated outside Nigeria before or after the commencement of the Act must take steps to obtain incorporation in Nigeria. Until the process is complete and certificate of incorporation issued, the company is not entitled to carry on business in Nigeria nor can it exercise any of the powers of a registered company. The court further stated that there is no doubt that the Respondent was carrying on business in Nigeria without being incorporated under the CAMA and was therefore in breach of section 54(1) of the CAMA and that the consequence of the non-compliance is clearly spelt out in subsection (2) . The agreements are null and void. The Court further held that the conduct of a foreign company in defiance of section 54(1) of the Act renders whatever business it carries on not only void but criminal and that the court of justice will not lend its aid to a man who grounds his cause on illegality.

The Supreme Court did however confirm the right of a foreign company to sue and be sued in its name or in the name of its agent. Accordingly, the Court also held that section 60 of the CAMA permits a foreign company to enforce a legal right accruing from a lawful contract or business transaction. In as much as a Nigerian who goes to Harrods to buy goods on credit can be sued by Harrods in Nigerian courts, so also can a British company from whom a Nigerian has brought goods and has not paid be sued in Nigerian courts. The Court noted that Section 60 of the CAMA was enacted to further international trade or commerce. There is basis of reciprocity in international relations and no nationalistic feelings or thoughts should destroy this fundamental rule of international relations.


The Supreme Court in reaching its decision in this case appears to have relied on the fact that the Respondent, an unregistered foreign company did "carry on business"[2] (offer its services) in Nigeria without registration. Without expressly stating so, the Supreme Court did create a dichotomy on the enforceability of transactions that involve the sale of goods in Nigeria by an unregistered foreign company based abroad and those where services are offered in Nigeria. In the former, the foreign entity can enforce the contract since it can validly claim that its transactions have not been caught up by the 'carrying on business' definition. In the latter, where services are involved, it is logically and legally difficult to deny that the unregistered foreign company has not breached the express provision of the CAMA, unless the company can show that the services were rendered abroad for the benefit of the defendant Nigerian entity.

It is also important to note that in those transactions where a foreign company carry on business in Nigeria by way of portfolio/securities investments or jointly forms a new registered Nigerian company with an already existing legal or juristic person for the purpose of a business venture, the foreign company cannot be said to be carrying on business in Nigeria in contravention of section 54 of the CAMA. In other words, holding shares (securities) in the new or existing Nigerian company cannot amount to carrying on business.[3]

In the event an amendment of the CAMA is carried out, it is suggested that a proviso be included in Section 54 of the CAMA to the effect that a subsequent registration in Nigeria by the foreign company would cure the unenforceability of the contract and give the hitherto unregistered company access to the Nigerian courts. A policy consideration for this proviso is that the provisions of the CAMA cannot be used as an instrument of fraud especially by the Defendant who is the registered Nigerian entity or legal person.[4] In addition, subsequent incorporation of the foreign company as a Nigerian company would enable the government exercise its regulatory powers over the foreign company in terms of regulatory permits, certificate of capital importation and other fiscal matters etc.

Author: Mr. Ikemefuna Stephen Nwoye

               Principal Chief Counsel - NWOYE (Barrister & Solicitor)

Disclaimer: The views expressed in this article are personal to the author and do not in any way reflect the views of any organization or persons that the author is or might have been affiliated to.

[1]Citec Int'l Estates Limited v. Int'l Inc. & Associates SC.163/2006. Judgment was delivered on Friday, 9th June 2017.

[2] Several Nigerian cases have attempted to define this phrase. In Ritz Pumperfabrik Gmbh and Co AG v. Techno Continental Engineers and another(1999) 4 NWLR (Pt. 598) 298the Court relying on the Black's Law Dictionary 5th Edition, defined the phrase as to conduct, prosecute or continue a particular vocation or business as a continuous operation or permanent occupation. The repetition of acts may be sufficient. See also the case of Ella v. CIE Ltd (2006) 4 NWLR (Pt.969) 114 at 125.

[3]See Hon. Dr. Olakunle Orojo, Company Law and Practice in Nigeria (Lexis Nexis Fifth Edition) pg. 51.

[4] The Supreme Court decision in Awojugbagbe v. Chinekue Light Industries Limited (1995) 4 NWLR p.426 paras. A-C is very relevant to this case. The Court held that it is morally despicable for a person who has benefited from an agreement to turn around and say that the agreement is null and void. In the instant case, it is inequitable and morally despicable for the appellant after obtaining a loan and after utilizing the same to now turn round and allege that the agreement between it and grantor is null and void. The parties in this case had failed to obtain Governor's consent for a mortgage agreement pursuant to Section 22 of the Land Use Act which prohibits such an agreement.