Incorporating a cooperative opens more doors for it to effect change in society. As is widely known, a cooperative is an organization that is owned and run jointly by its members, who share the profits or benefits. Cooperatives generally help close gaps left open by the shortcomings of humanity. A good example is retail cooperatives. They help create retail stores that give them the opportunity to supply their own needs, gain bargaining power, and share earnings.
Some cooperatives are incorporated while some are unincorporated. This leads us to the question;
What is incorporation?
Incorporation simply means creating a legal identity for an organisation that is distinct from its members. In other words, choosing to incorporate means registering your business with the government.
It is important to note that leaving your cooperative unincorporated is still okay. However, you should know is that you will possibly have to incorporate if you;
- Plan to enter into contracts
- Want members to share risk evenly
- Wish to limit personal liability
The reasons for incorporating a cooperative is more or less like an advantage of incorporating. For instance, once your cooperative (especially for startups) is incorporated, it can have a bank account.
Some advantages of incorporating a cooperative are;
- Limited liability: This is one of the biggest advantages of incorporating a cooperative. Once this happens, a cooperative becomes a corporate personality. Under Nigerian law, a company is deemed to be a separate legal entity from the individual(s) who created/run it once it becomes incorporated. This gives it the power to enter into contracts, buy property, own property, can apply for loans and enter into agreements on behalf of its members.
- Credibility: Having a name with “limited” at the end makes a cooperative look legit. This is very important when applying for loans or going into partnership deals with other businesses. People are more likely to trust an incorporated cooperative in those situations.
- A clear set of rules: Incorporating a cooperative enables the owners to come together to agree on how they are going to work. Especially on decision making, to enable efficiency in that aspect.
- Access to funding: Once incorporated, a cooperative will find it easy to generate start-up funds. This is because becoming incorporated has increased the credibility of the cooperative. It can now easily create member loans or issue shares in order to raise capital.
Now that we have looked at the advantages, let’s see what it takes to incorporate a cooperative in Nigeria;
1. Search for A Name and Reserve It.
This is the most important thing to do. You may already have a name for your cooperative but it may not be available. The law frowns upon using a name similar to one that has been used by
another business before. This is to avoid misunderstanding. You can carry out a name availability search on the Corporate Affairs Commission website. Find out if it has been taken by someone else.
Do not make the mistake of registering for a domain name before finding out if the name is available for your use. That would be a waste of time. Once you confirm your preferred name is available, you can conduct a formal search using the CAC online portal for N500. If your name is available you can reserve it with the CAC for the next 60 days. That gives you enough time to put things in place.
2. Select Your Shareholders and Directors
You need to identify who your shareholders and directors are. For a private limited liability company, you are required by law to have a minimum of two shareholders and a maximum of 50. If you would like to have more, then you would have to register as a public company. You are also required to have a minimum of two directors.
Your shareholders and directors should;
- Be of sound mind and above 18 years
- Should not be an undischarged bankrupt
- If a company should not be at the verge of closing its business
You are also going need the following information on your shareholders and directors;
- House address
- Email address/phone number
- Valid ID card such as international passport, driver’s license, or national ID card
3. Keep Your Documents on Standby
Company incorporation is done online, hence you have to fill the documents on the CAC registration portal: :
- Form CAC 1.1- Application for registration of Company
- Memorandum and Articles of Association (MEMART)
The memorandum of association is the document that sets up your company. While the articles of association explain explicitly how your company is to be governed. It also explains in detail the responsibilities and powers of the directors.
4. Make All Required Payments
The CAC will require you to pay filing fees and stamp duties. The amount you will be required to pay is determined by the share capital of your cooperative. All payments are done online as well.
5. Scan and Upload your documents
After making your payments, download the filled Form CAC 1.1 and MEMART and ensure that they are signed appropriately. After this, scan and upload Form CAC 1.1, MEMART, the valid ID cards of the directors, subscribers, secretary of the company and evidence of payment to the CAC on the CAC portal for processing.
Once all this has been done you will wait for the CAC to confirm your registration or in the event of any queries on your registration, be contacted for clarification. If there are no queries, you will be informed once your registration is complete and an e-certificate of incorporation issued to you.
After being issued the e-certificate, you will have to take all your signed documents to the CAC for submission and you will be issued with your original certificate of incorporation.
How Africa Prudential can help your Cooperative
Incorporation has the leverage an individual business doesn’t have and it has proven to help a lot of cooperatives when planning to expand. At Africa Prudential, we have a team of professionals that can help your cooperative get better and surpass its goals. Our digital product EasyCoop will help your business attain and surpass its goals through the following features;
- Automated dividend payments
- Easy loan management
- Seamless user signups
You can send an email to email@example.com or call 0700 23747783 to apply for a free 10-minute consultation session and we will walk you through how to do what’s best for your cooperative.