An Analysis of the Legal Status of Unregistered Companies and Their Commercial Obligations in Nigeria

Millions of businesses in Nigeria operate as unregistered sole proprietorships, partnerships, and informal enterprises outside the Companies and Allied Matters Act 2020 registration regime, raising fundamental questions about their legal capacity to sue and be sued, enforce contracts, and access formal finance. This study analyses the legal status and commercial obligations of unregistered businesses in Nigeria under CAMA 2020, the Business Facilitation Act 2023, the Income Tax Act, and common law principles. A doctrinal approach was combined with field interviews of 50 informal business operators in Onitsha, Anambra State, and Aba, Abia State, regarding their legal challenges. Results indicate that unregistered businesses lack the capacity to enter contracts enforceable in their own name, creating vulnerability to non-payment and breach without effective legal remedy. The Business Facilitation Act 2023 improves registration access but does not resolve the contractual incapacity of existing informal enterprises. Tax obligations attach regardless of formal registration status, yet enforcement against informal businesses is selective and inconsistent. The study concludes that a simplified legal status mechanism for informal businesses, short of full CAMA registration, is needed to extend legal protection without imposing full compliance costs. Recommendations include an Informal Business Legal Status Act providing minimum contractual standing and a graduated formalisation incentive programme through the Corporate Affairs Commission.

Keywords: unregistered companies, informal business, CAMA 2020, contractual capacity, Business Facilitation Act