The long-awaited legal instrument for the Micro, Small and Medium, MSME, ecosystem has become a reality with the signing into law of the Nigerian Startup Bill, NSB, by President Mohammadu Buhari.
This was disclosed by the Minister of Communications and Digital Economy, Isa Pantami, via his Twitter handle.
The Presidential assent followed an earlier passage of the NSB by both the Senate and House of Representatives in July this year. The bill was a joint initiative of Nigeria’s tech startup ecosystem and the Presidency, aimed at harnessing the potential of the country’s digital economy through co-created regulations.
The passage of the bill into an Act automatically eradicates the legal uncertainties that have trailed the startup industry in the past.
It also provides for what qualifies a company to register and obtain startup status. Hence, there is a clear-cut definition of what a labelled startup is and what it is not. It also specifies the legal rules that govern this sector.
Flowing from this bill, other authorities can also make policies for the sector.
According to the Senior Special Assistant to the President on Digital Transformation, Mr Oswald Osaretin Guobadia, the implementation and state adoption of the Startup Act 2022 would require that the government continues to engage and collaborate on execution.
He added that its success is dependent on the participation of all stakeholders of the ecosystem which includes lawmakers, policymakers, and practitioners.
Provisions of the Startup law
The Act stipulates, among others, that:
• Before a company can be labelled a startup, it must obtain a certificate known as the startup label. This means that only companies with the startup label will be recognised as startups.
• It mandates that a Startup Support and Engagement Portal should be established to facilitate the issuance of the startup label and also bridge the gap between regulators and startups. It also spells out the requirements for a company to obtain a startup label. Companies issued with a startup label have obligations under the bill and failure to comply with these obligations can revoke their startup label.
• According to the Act, for a company to be named a startup, it must be a registered limited liability company that has been in existence for not more than ten years from the date of incorporation, amongst other requirements.
• Startups can access a special seed fund created under the Act. The Act establishes a Startup Investment Seed Fund, which is designated for startups alone. It will provide finance and tech relief for startups. This means increased access to funding that will grow the startup ecosystem. It will be easier for startups to fund their operations by leveraging the grants and loans that will be available to them.
• Companies labelled as startups will benefit from some tax reliefs and incentives under the Act. These labelled startups are eligible for pioneer status incentives and other tax reliefs. Labelled startups with at least ten employees where 60% of the employees have no prior work experience within three years of graduation or any vocational program have access to percentage-based tax relief.