Going by our present legal reality in Nigeria, at the point of incorporation, a founder must take up all the shares.

The law further goes on to permit a single-man company.

And by that, if a solo founder wishes to form an LLC, he must take up 100% of the shares from the beginning.

Even where he has a Co-founder (s) they must issue all the shares.

Now if equity was split equally, it means they would take 50% each.

And based on all other factors, it was unequally split, it means one person would have a higher number of shares.

This is against the former legal requirement which allowed you to take up not less than 25% of your shareholders while you keep the rest on reserve if you so wish.

Now as a startup legal expert, I think that the transition to 100% ownership is a faulty one and not compliant with international best practices as far as startup legal is concerned.

But you see the law is what the lawmakers say it is and as far as the Companies and Allied Matters Act is concerned, this is what is currently obtainable in Nigeria.

The banks are not in any way helping matters either.

Before this law even came, they had been mandating newly incorporated companies to take up the reserved shares or account for its use which is absurd.

On several occasions, I have had to school some of the bankers when my clients had issues completing their account opening process because of their reserved share capital and the mandate of the banks to take up the shares.

So you see, while I align with the law, The problem is in the usefulness of the enabling laws guiding the formation and operation of businesses in Nigeria.

So regulatory compliance is one thing that every business owner and founder must pay attention to.

The funny thing is that even if you don't like the law, you must still obey it.

this is why I believe that with the right education, a progressive and enabling legal environment, plus the right mindset, we can achieve the ideal equity ownership structure for African Startups.

Besides, regardless of how much a person owns, once equity funding is a major part of the fundraising activities of a startup, the effect of dilution can bring a person's ownership to even 0.001

These are critical issues you need to keep in mind as you are building your company.

Now you see why you must have a startup legal expert in your corner!

To your #LegalSense

#BarinaadaLegal