Introduction

Since the advent of the Covid19 pandemic, there has been an improvement in technology, resulting in a clamour for a regulatory framework to govern digital innovation and entrepreneurship, which would provide an enabling environment for technology-enabled start-ups. Two African countries, Tunisia and Senegal enacted Start-up Acts in 2018 and 2020 respectively.

In Nigeria, the Start-Up Bill was first introduced in 2021, and on the 19th day of October 2022, it was assented to and became a law. This newsletter examines the new Act and highlights among other things, the legal and institutional framework for the development of technology-related start-ups in Nigeria.

Application of the Law

The Act specifically applies to two categories of business. The first category covers Companies incorporated under the Companies and Allied Matters Act (2020) which have been granted start-up labels by the Secretariat of the National Council for Digital Innovation and Entrepreneurship. The second category covers organizations and establishments whose activities affect the operations of a labelled start-up in Nigeria. 

Important Definitions

The Act defines a start-up as a company that has been in existence for no more than 10 years and carries out the following activities: – creation, innovation, production, development, or adoption of a unique digital technology innovative product, service, or process. 

The law also introduces the phrase – “labelled start-up”, which is a start-up that has been granted a certificate upon the fulfilment of the labelling requirements under the Act.

Start-Up Label

For a start-up to be eligible for labelling under the Act, it must be registered as a limited liability company under the Companies and Allied Matters Act 2020 and must have been in existence for no more than 10 years. It must have as its object clause, the innovation, development, production, and commercialization of a digital technology innovative product. The start-up must either be the holder or repository of a product or process of digital technology or, be the owner or author of a registered software. In addition, at least one-third of the shareholders of the start-up must be Nigerian citizens.

A sole proprietorship or partnership is also eligible to be so labelled, upon the fulfilment of the conditions stated above and would be entitled to a 6-month Pre-label status period within which time the sole proprietor or partnership is required to upgrade its registration to incorporation as a Limited Liability Company.

A Start-Up Label Certificate is valid for 10 years from the date of issuance, but it may be withdrawn if the start-up fails to comply with the obligations stated above.

The Council and The Secretariat

The Act establishes the National Council for Digital Innovation and Entrepreneurship (‘’the Council’’) to monitor and enforce the regulatory framework of the Act to encourage the development of technology start-ups in Nigeria. Read More