Most startups exist for months before the company does. During that time the founders build the product, pay for hosting with their own cards, take deposits from early customers and make promises to suppliers, all in their own names. When the company is finally incorporated, none of those arrangements moves across automatically, so they remain with the founders until someone takes the steps to transfer them.
I find this handover is much easier to do soon after incorporation, while everyone still remembers who signed what and the contractors who worked on the early product are still easy to reach. It helps to treat it as a short project with a list and a finish date, and to keep a record of what has been moved and what is still outstanding.
List everything done before incorporation
Start by collecting the contracts and promises made while the project was being built. That includes customer deposits, supplier invoices paid personally, hosting and software subscriptions, and any informal promises made on WhatsApp or by email that a customer or supplier has relied on. For each item, note who actually entered into it, because that decides how it can be moved.
The next question is how each contract was made. Section 96 of CAMA deals with contracts made on behalf of a company before it existed, and it allows the company to ratify such a contract after incorporation through a proper board or shareholder decision. Until the company ratifies it, the person who signed remains personally bound. A contract the founder signed in their own name, without any reference to a future company, is treated differently, and the company can only take it over by assignment or novation, usually with the other party's consent.
If the company takes over a payment obligation, the founder remains liable to the original creditor unless that creditor agrees to release them. Where a release is part of the arrangement, it should be obtained in writing and kept with the handover documents.
Decide how the early spending is treated
Each founder's spending on the business should be reconciled, using receipts and bank statements to separate genuine business costs from personal spending and removing anything that has already been reimbursed.
For the balance the company accepts, the founders need to decide whether it is a reimbursement, a loan that remains outstanding, or payment for shares. If it is a loan, the repayment terms should be agreed in writing, and I go through those in when a founder lends money to the company. If it pays for shares, the allotment has to be completed and recorded, which I explain in making sense of the company's cap table.
The company's opening accounts should then be prepared from these agreed figures. Customer deposits should appear as money the company has received but for which it still owes either the service or a refund, and any amount still in dispute should be marked so that nobody treats it as settled.
Transfer the assets the company should own
Code, designs, content and branding created before incorporation belong to whoever created them, or to whoever engaged them on the terms agreed at the time. The founders and any contractors should therefore sign written assignments to the company, and if a contractor built part of the product without signing anything, it is better to deal with that now than when an investor asks about it. I explain the chain of documents in more detail in making sure the company has the rights to its software.
Domains and brand materials should be moved into accounts the company controls. Software and platform subscriptions need to be checked for transfer restrictions, since some cannot be transferred and the company will simply have to open its own account. I explain why a domain and a registered company name protect different things in choosing and protecting the business name.
If a transfer cannot be completed straight away, the founder can grant the company a temporary licence to use the asset in the meantime. The licence should say what it covers and how long it lasts, and it should name the person responsible for completing the transfer, with a date set to check that it has been done.
Bring customers and suppliers across
Each customer contract should be read for its assignment and novation clauses. An assignment generally moves the benefit of a contract, such as the right to be paid, while moving the obligations and releasing the founder from them usually requires a novation signed by all three parties.
Customers also need to know where future invoices and payments should go. Because fraudsters often target the moment when bank details change, it is sensible to confirm any new account details through a contact the customer already knows. Deposits and prepaid services should be reconciled at the same time, so that customers understand the company now owes them the service or the refund.
Promises made during early pilots need attention too. If a founder told an early customer they would have free access permanently, that promise has to be either renegotiated or honoured before the company starts charging them, and whatever is agreed should be written down so that sales and finance apply the same terms.
Move the operating accounts
Hosting and payment accounts each have their own rules. Some can be transferred to a company after identity checks, while others require the company to open a new account and migrate to it, so it is worth finding out which applies and making sure the company holds the administrator and recovery access.
The migration should be planned so that the product stays available and every payment can be traced. Historical records should be kept, and the founders' personal access should be removed once the company has taken over, as I explain in before your business depends on another platform.
Review the personal data already collected
Personal data collected before incorporation was collected by the founders personally. Under the Nigeria Data Protection Act, the company needs a lawful basis to keep using it, and the people concerned should be told who now holds their information and why. If the company wants to use the data for a new purpose, such as marketing, that use has to be considered separately.
The privacy notice should be updated with the company's name and contact details. Data the company does not need should be deleted, and retention periods should be set for what it keeps.
Keep a record of the completed handover
Keep each completed transfer with its approval and the date it took effect, and for anything still outstanding, note the remaining step and the person responsible for it.
Once the work is finished, compare the completed transfers with the opening accounts and the contracts. The board should then be able to see which loans and customer obligations the company has taken on, and which items are still being completed.
This article is general information and not legal advice. For guidance on your specific circumstances, speak with us directly.