Revisiting the decisions in Citec, Nayara and Tilone Subsea
ABSTRACT
Technology has made cross-border transactions as easy as a click of a button, with foreign companies routinely supplying goods, services and project work in furtherance of contracts entered into with Nigerian companies without incorporating locally. Section 78 of the Companies and Allied Matters Act 2020 (CAMA) prohibits a foreign company from carrying on business in Nigeria without incorporation and declares any act in contravention void. However, the fact that one contracting party is foreign does not make the transaction unlawful or unenforceable in Nigeria. Rather, enforceability depends on whether an unregistered foreign company’s activities amount to “carrying on business in Nigeria” so as to trigger the registration requirement under CAMA.
This article reviews the decisions of the Nigerian Court in Citec International Estates Ltd v Edicomisa International Inc & Associates[1] (CITEC), Nayara v Ningbo Leeho Import & Export Co Ltd[2] (Nayara) and the more recent decision in Tilone Subsea Ltd v Seatronics Ltd[3](Tilone) in determining the attitude of the Nigerian Courts in enforcing contracts entered into by unregistered foreign companies and what remedies are available when a Nigerian Company is unable to honor the contract.
INTRODUCTION
The Supreme Court’s decision in Citec has often been understood as imposing strict consequences on unregistered foreign companies carrying on business in Nigeria. However, the subsequent decisions in Nayara and, more recently, Tilone demonstrate that the position is more nuanced. The mere existence of a contract with a Nigerian company, or even the supply of goods or services into Nigeria, does not necessarily amount to carrying on business in Nigeria.
The emerging position raises two distinct questions. First, is the foreign company a juristic person under the law of its place of incorporation? Second, does the transaction or activity constitute carrying on business in Nigeria within the meaning of Section 78, CAMA?
The distinction is significant. A foreign company does not cease to exist as a juristic person merely because it has not been incorporated in Nigeria. Section 84(b) of CAMA reinforces this position by providing that nothing in Chapter 3 affects the rights or liability of a foreign company to sue or be sued in its name or in the name of its agent. The real difficulty arises where the transaction sought to be enforced is itself caught by the prohibition against an unregistered foreign company carrying on business in Nigeria.
Accordingly, the absence of Nigerian registration does not render every transaction with an unregistered foreign company void. Rather, it is the starting point for a factual and legal examination of the nature, character and extent of the foreign company’s activities in Nigeria. Hence, the critical question is not simply whether a foreign company has contracted with a Nigerian entity, but whether, by the transaction and the surrounding circumstances, it has crossed the statutory threshold from engaging in a cross-border transaction to carrying on business in Nigeria.
THE STATUTORY POSITION STARTING POINT
Chapter 3, CAMA, forms the regulatory framework governing the activities of foreign companies and when those activities constitute carrying on business in Nigeria.[4]
Section 78(1) provides that a foreign company intending to carry on business in Nigeria must take the necessary steps to be incorporated. Until incorporation, it must not carry on business in Nigeria, exercise the powers of a registered company, or maintain a place of business or address for service in Nigeria except for matters preliminary to incorporation.[5]
Failure to do so renders any act of the company in contravention of subsection (1) void.[6] The statutory language affects the enforceability of the underlying transaction itself.[7]
Section 79 reinforces the prohibition by prescribing penalties for non-compliance.[8] Section 80, however, creates an important qualification. A foreign company falling within specified categories may apply to the Minister for exemption from Section 78. These include foreign companies invited by or with the approval of the Federal Government to execute specified projects, companies undertaking specified loan projects for donor countries or international organisations, certain foreign government-owned companies engaged in export promotion, and engineering consultants or technical experts engaged on approved specialist projects.[9]
CITEC: THE CONSEQUENCE OF CROSSING THE LINE
In Citec, a company incorporated in the United States and operating from Spain, entered into a substantial agreement concerning the design and construction of 5,000 housing units and two factories in Abuja. When the relationship broke down, the company sought to enforce its contractual rights.
The Supreme Court held that the foreign company had carried on business in Nigeria without complying with the statutory requirement for incorporation. The Court treated the transaction as illegal and void under sections 54 and 55 (now sections 78 and 79, CAMA 2020) of the then applicable CAMA 1990.[10]
The importance of Citec is not merely that the foreign company was unregistered. It is that the Court found that the company had engaged in substantive business operations in Nigeria. The case establishes a serious proposition: where a foreign company carries on business in Nigeria in breach of the statutory registration requirement, the resulting contractual rights are incapable of enforcement.
The decision has subsequently attracted academic criticism, particularly for potentially conflating a foreign company’s capacity to sue with the legality of the particular transaction it seeks to enforce.[11] Nevertheless, Citec remains an important Supreme Court authority on the consequences of carrying on business in Nigeria without registration.
This raises the question of what counts as “carrying on business” with respect to Chapter 3 of CAMA. This question was answered by The Court of Appeal in Ritz Pumpenfabrik GmbH & Co. KG v. Techno Continental Engineers (Nig.) Ltd. & Anor (1999) 4 NWLR (Pt. 598) 298 where the Court defined ‘carrying on business’ to mean ‘…conduct, prosecute or continue a particular avocation or business as a continuous operation or permanent occupation. The repetition of acts may be sufficient.’
NAYARA: DO CROSS BORDER TRANSACTIONS WITH A NIGERIAN CUSTOMER CONSTITUTE CARRYING ON BUSINESS IN NIGERIA?
The Court of Appeal confronted that question in Nayara v Ningbo Leeho Import & Export Co Ltd.
Ningbo Leeho, a Chinese company, supplied textile materials on credit to a Nigerian business. Following non-payment, it commenced proceedings in Nigeria to recover the outstanding debt. The appellant argued that Ningbo Leeho was an unregistered foreign company carrying on business in Nigeria contrary to the CAMA and therefore lacked capacity to sue.
The Court of Appeal rejected the argument.
The Court examined the circumstances of the transaction and found no evidence that Ningbo Leeho maintained a place of business or an address for service in Nigeria. Its business consisted of exporting textile materials to Nigerian contacts, who sold the materials and remitted payment to the company. The Court consequently declined to treat the foreign company’s international trading activities as the carrying on of business in Nigeria within the meaning of the statutory provision.
Nayara raises an important distinction, doing business with Nigerians should not be conflated with doing business in Nigeria. A foreign company does not carry on business in Nigeria merely because it sells to Nigerian customers.
International trade requires foreign companies to supply goods and services to businesses in other jurisdictions. If every cross-border sale to a Nigerian customer automatically constituted carrying on business in Nigeria, ordinary international trade would routinely require foreign exporters to establish Nigerian subsidiaries before entering enforceable transactions.
TILONE SUBSEA: PERFORMANCE, PRESENCE AND CONTINUITY MATTER
The Court of Appeal’s decision in Tilone Subsea Ltd v Seatronics Ltd provides a more recent illustration of this distinction.
Seatronics, a Scottish company, provided equipment hire services to Tilone Subsea, a Nigerian company. When Tilone failed to pay, Seatronics commenced proceedings to recover the debt. Tilone argued that Seatronics was an unregistered foreign company carrying on business in Nigeria and that the contract was therefore void under CAMA.[12]
The Court of Appeal rejected the argument.
A critical feature of the case was that Seatronics had no office, staff or operational base in Nigeria, and the services were performed in Scotland. The transaction was also characterised as a one-off commercial arrangement rather than a continuing business operation in Nigeria.[13]
The Court distinguished Citec, where the foreign company had undertaken a substantial, long-term project and established an operational presence in Nigeria from Tilone which was a one-off transaction.
Tilone therefore reinforces an important proposition: the nationality of the customer is not determinative; the court must examine the substance of the foreign company’s activities.
Therefore, the key factors a lawyer must evaluate to determine whether an unregistered foreign company actions constitutes ‘carrying on business’ in Nigeria includes:
- whether the foreign company has an office or fixed business presence in Nigeria;
- whether it maintains personnel or operational facilities in Nigeria;
- whether its employees or agents regularly perform its business in Nigeria;
- where the contractual obligations are performed;
- whether the transaction is isolated or forms part of a continuing commercial operation;
- whether the company undertakes a long-term project in Nigeria; and
- whether its activities demonstrate sufficient continuity and permanence to constitute an organised business operation in Nigeria.
No single factor is conclusive. The ultimate question is one of substance and degree.
COMPARATIVE ANALYSIS: UK VS NIGERIAN LEGAL CAPACITY
The United Kingdom (UK) has long departed from the common law position that governs the enforcement of contracts by foreign companies in Nigeria. It offers a broader approach that allows unregistered foreign companies to sue and enforce contracts so long as the governing law of the contract is in England. Under UK law, an unregistered foreign company (legally termed an overseas company that has not registered a UK establishment at Companies House) possesses full legal capacity to enter contracts, hold assets, and sue or be sued within the jurisdiction.
The UK legal system separates an entity’s internal legal existence and capacity (governed by the law of its home country) from its regulatory disclosure obligations under the Companies Act 2006[14] and Overseas Companies Regulations, 2009.[15] Failure to register does not render transactions undertaken void, rather, it prescribes both criminal and civil liabilities on offending parties.
Under the UK’s Overseas Companies Regulations 2009 (and the overarching Companies Act 2006), a foreign company that sets up a physical “UK establishment” (such as a branch or office) must register with Companies House within one month of opening.[16]
Unlike the strict approach in Nigeria under the Citec rule—where failing to register renders your business contracts completely void—the UK treats a failure to register primarily as a regulatory and criminal offense rather than a contract-voiding mechanism.
WHAT SHOULD PARTIES DO WHEN STRUCTURING CROSS-BORDER CONTRACTS?
The practical lesson from these cases is that CAMA compliance should be considered at the transaction-structuring stage.
Foreign companies should determine whether their proposed activities create a Nigerian business presence. Where services can legitimately be performed outside Nigeria, the contractual documentation should accurately reflect the place of performance. Where personnel, offices, equipment or continuing operations will be maintained in Nigeria, the parties should obtain advice on whether the arrangement requires incorporation or exemption.
Nigerian counterparties should equally conduct appropriate due diligence. A foreign company’s lack of CAC registration should not automatically be treated as rendering a proposed contract void. Conversely, where the transaction involves a sustained Nigerian operation, assuming that the foreign company’s status is irrelevant creates unnecessary enforcement risk.
Cross-border contracts should also clearly identify the parties, place of performance, scope and duration of services, and the location from which the foreign company will perform its obligations.
CONCLUSION
The enforceability of a contract between a Nigerian company and a foreign company cannot be determined by a simple registration test.
Citec establishes that where a foreign company crosses the statutory line and carries on business in Nigeria without incorporation, the consequences can extend beyond regulatory penalties to the invalidity and unenforceability of the resulting transaction.
Nayara and Tilone, however, demonstrate that the line is not crossed merely because a foreign company sells goods or provides services to a Nigerian customer. The courts have distinguished ordinary cross-border transactions from the establishment and operation of a business in Nigeria.
The test is therefore what, in substance, the foreign company is doing in Nigeria, not whether it is registered here.
Where the answer reveals a continuing, substantial or established business operation in Nigeria, section 78 presents a real enforceability risk. Where the transaction is an isolated cross-border arrangement performed substantially outside Nigeria, the absence of Nigerian incorporation does not, without more, render the contract void.
For businesses operating across borders, this distinction is not merely academic. It may determine whether a contractual right can ultimately be enforced when the commercial relationship breaks down.
[1] [2018] 3 NWLR (Pt 1606) 332
[2] [2022] LPELR-56675 (CA) at 37–38, paras A–F
[3] Unreported (CA/PH/313/2024)
[4] The contents of Chapter 3 CAMA remain unchanged despite the amendments to the Act. The provisions contained in Chapter 3 of CAMA 1990 and 2020 were carried over from the Companies Act, 1968.
[5] Section 78 (1) Companies and Allied Matters Act, 2020
[6] Ibid, Section 78(2).
[7] In other jurisdictions such as the United Kingdom and Canada, transactions by unregistered companies are
[8] Ibid, Section 79
[9] Ibid, Section 80(1)(a)–(d).
[10] Citec International Estates Ltd v Edicomisa International Inc & Associates [2018] 3 NWLR (Pt 1606) 332 (SC). The Supreme Court considered the corresponding provisions of the Companies and Allied Matters Act 1990, particularly ss 54–55, now reflected substantially in ss 78–79 CAMA 2020.
[11] See CSA Okoli and IM Ibikunle, ‘Can Unregistered Foreign Companies Sue, Be Sued and Recover under Nigerian Law? A Critique of Citec International Estates Ltd v E International Inc & Associates’ (2026) Journal of African Law 1–20. The authors argue, among other things, that Citec conflated the question of a foreign company’s capacity to sue with the separate question of whether its transaction was illegal under Nigerian law.
[12] Tilone Subsea Ltd v Seatronics Ltd Supra
[13] Section 84 (b) CAMA 2020
[14] https://www.legislation.gov.uk/ukpga/2006/46/contents
[15] https://www.legislation.gov.uk/ukdsi/2009/9780111479476/contents
[16] https://cms.law/en/gbr/legal-updates/overseas-companies-operating-in-the-uk
