When Your Name Becomes the Risk
Two young professionals in Lagos are approached with an unusual offer. A #foreign investor, eager to “move quickly,” says: “Just let us use your names as directors for now. Once our papers are ready in six months, we’ll transfer everything back. You’ll get something small every month.”
At first, it sounds harmless. Their names would only be on paper. The #foreigners would bring the money, run the business, and later take over officially. But beneath this seemingly easy opportunity lies a trap—one that exposes the Nigerians to serious legal, financial, and reputational risks.
The Proposed Setup
In such arrangements, Nigerians are listed as owners and directors, while real control rests with foreigners. Once permits or residency are secured, ownership is “transferred” back.
This differs from legitimate structures where Nigerians are appointed for their capital, expertise, or local knowledge. In those cases, they are genuine officers of the company, discharging responsibilities under the Companies and Allied Matters Act (#CAMA).
The Legal Risks
This setup often seeks to evade mandatory Business Permit and Expatriate Quota rules. Nigerian law requires foreign nationals who wish to establish and manage companies locally to obtain these approvals.
If discovered, consequences may include:
• Cancellation of registration by the #CAC for misrepresentation.
• Deportation of foreigners physically managing the business without authorisation.
• Sanctions against Nigerians involved, including fines, blacklisting, or criminal liability.
Other dangers include:
• False declarations punishable under CAMA.
• Concealment of beneficial ownership under AML rules.
• Side deals (monthly payments or buyouts) unenforceable in court.
• Nigerians listed as #directors remain liable for debts, fraud, or breaches. Regulators rely on CAC records, so liability attaches even after removal.
The Practical Reality
Not every Nigerian in a foreign-backed company is a “front.” Many play legitimate governance roles and benefit from genuine partnerships. The risk lies in arrangements designed purely for evasion. Nigerians must ask: Am I a genuine partner or just a placeholder?
Safer Alternatives
Foreign investors should:
• Apply properly for #Business Permits and Expatriate Quotas.
• Enter genuine joint ventures with Nigerians.
• Ensure profit-sharing is documented transparently as consultancy fees, dividends, or directors’ pay.
“Fronting” shifts risk to Nigerians while foreigners enjoy the benefit. Genuine partnerships strengthen investment; fronting undermines compliance and puts Nigerians at risk.