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Differences Between SMEDAN and CAC Registration

by Rejoice Obike

November 18, 2020 7

Micro, Small and Medium Enterprises (“MSME”) represents one of, if not the most important sector of the country’s economy. It currently represents 96% of the businesses in Nigeria and contributes 75% of the National employment. Hence, the growth in this sector is directly correlated with growth in the economy as a whole and the level of employment throughout Nigeria.

The importance of business registration cannot be overemphasised. To enjoy the maximum operational business benefits, protect yourself to some extent and get funding, a business must be a legal entity. While funding may pose a real challenge, the legality of your business matters too.

The partnership between the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) and the Corporate Affairs Commission (CAC) aims to simplify and fast-track business registration processes for micro, small and medium enterprises (MSMEs), a significant step towards the formalization of the nation’s largely informal economy.

SMEDAN positions itself as a One-Stop-Shop for MSME Development. The Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) has assisted about 14,000 Micro Small and Medium Enterprises (MSMEs) operators in Nigeria to formalize their businesses through registration with Corporate Affairs Commission (CAC) and opening of bank accounts.

Under the partnership, SMEDAN would deploy desk officers to CAC’s Head Office and State Offices nationwide to handle registration procedures on behalf of small business operators. The implication is that small business operators would no longer need to engage lawyers to register their companies with CAC, a practice that had increased the cost of registration.

The Corporate Affairs Commission, on the other hand, would be expected to send its staff to serve as resource persons during SMEDAN’s Entrepreneurship Training Programmes [ETPs] to educate prospective and existing entrepreneurs on business registration issues.

What’s SMEDAN and CAC Registration

SMEDAN is a body that was established by the government of Nigeria in 2003. The sole aim at the time was to help with the development of MSMEs within the country. SMEDAN stands for Small and Medium Enterprises Development Agency of Nigeria.  And their core mission is to facilitate the access of micro, small and medium entrepreneurs and investors to all resources required for their development.

SMEDAN’ s mandate also involves stimulating, monitoring and coordinating the development of the MSMEs sub-sector; Initiating and articulating policy ideas for small and medium enterprises growth and development; Promoting and facilitating development programmes, instruments and support services to accelerate the development and modernisation of MSME operations. 

While CAC known as Corporate Affairs Commission was formulated to regulate the formation and management of companies in Nigeria. It is endorsed with the power of creating legality out of small and medium businesses. The corporate affairs commission was established to be responsible for the registration and administration of companies.

Differences between CAC and SMEDAN

What you get

When you register your business under CAC, you will be issued a certificate of incorporation by the appropriate government agency. In Nigeria, CAC’s sole responsibility is to administer the Act, including the regulation and supervision of the formation, incorporation, management, and winding up of companies.

While SMEDAN gives businesses access to business insurance.  Business Insurance, in this concept, is an insurance type established to protect businesses from unforeseen losses that may arise in the course of the business. So one of the benefits of SMEDAN registration for your business is that it grants you access to business insurance. You are assured that your business is in safe hands regardless of future occurrences.

Business Identity

When you register your business as a Limited Liability Company, you are a different entity from your company. CAC affords you legal liability protection. If you incorporate, you will not be held personally responsible for certain accidents and other liabilities. Whether you obtain a loan or default in payment, your bank will not seize your property except the company asset.

While SMEDAN affords your business a unique identification number and a digital certificate.  With a unique identification number, you can easily apply for loans and support funds both within and outside the country. It also grants you access to funding from the government and private sector. 

Investors and Mentorship

With CAC registration, your ability to attract investors and raise money for your business will be easier. Investors are likely to invest in a registered company rather than an unregistered business that has no formal structure in place. If your business is registered, you can raise money by equity financing, which involves selling shares in your business to prospective shareholders, investors or venture capitalists.

While registering with SMEDAN grants you access to mentorship. Professionals in the field handle the mentorship sessions, so you are sure to get nothing but the best piece of information to take your business to the next level.

Access to Funding

When your company is registered with CAC, accessing loans becomes very easy compared to personal loan applications. With your documents, you are going to have to prove that you’re a business. The registration gives you trust and credulity and ensures confidence of your investors in your business.

While with SMEDAN registration, funding comes from either government or private organizations. It takes you past the hassles other non-registered business owners have to go through and makes the process way more accessible. Once your business is registered, you get a conditional grant. This funding is from public funds.