The recent enactment of the Nigeria Startup Act (“Startup Act“) has introduced a new regulatory framework for startups in Nigeria. The Startup Act is expected to drive growth in Nigeria’s tech industry, and its proper implementation will contribute to the development of an enabling environment for startups to thrive.
Here are four provisions in the Startup Act that entrepreneurs, startups, and investors should be aware of:
- Startup Labelling: The Startup Act introduces a labelling requirement such that only companies that have obtained a startup label would be eligible for incentives under the Act. Key requirements for obtaining the label include registration as a domestic limited liability company, existence for not more than 10 years from the date of incorporation, and at least 33% ownership by a Nigerian founder or co-founder.
- Establishment of a Fund for Startups: The Startup Act introduces a special seed fund called the ‘Startup Investment Seed Fund’. The fund will be managed by the Nigeria Sovereign Investment Authority and would be deployed to provide financing to labelled startups and technology accelerators, incubators, and hubs.
- Incentives: Labelled startups are entitled to various tax and financial incentives under the Startup Act. For example, a labelled startup may be entitled to exemption from the payment of income tax or any other tax chargeable on its income or revenue for a period of three years and an additional two years under the terms of the pioneer status tax exemption scheme.
- Regulatory Collaboration: The Startup Act contains provisions aimed at easing the burden and time spent by startups in the regulatory compliance process. Particularly, there shall be a Startup Support and Engagement Portal that would facilitate a centralised access point for engagements with regulators such as the Corporate Affairs Commission and the National Office for Technology Acquisition and Promotion.