CLIENT UPDATE ON RECENT CORPORATE SECTOR DEVELOPMENTS IN NIGERIA

I.      INTRODUCTION

This Client Update on Recent Corporate Business Development in Nigeria highlights regulatory activities and new subsidiary legislations issued by sector regulators such as the Securities and Exchange Commission (‘SEC’) and the Corporate Affairs Commission (‘CAC’) mainly for purposes of facilitating the Banking Sector Recapitalisation Exercise 2024 announced by the Central Bank of Nigeria (‘CBN’) and the broader macroeconomic policy of attainment of the Federal Government of Nigeria’s goal of creating a US$1Trillion Economy by 2030.

Significant developments are the SEC Framework on Banking Sector Recapitalisation Programme 2024, the CAC Guidelines for Recapitalisation of Banks and other Financial Institutions. In terms of dispute resolution of Corporate Disputes, the Federal High Court of Nigeria recently delivered two judgments (i) confirming that prior 2020 existing private limited liability companies can register as small companies with single shareholder under the CAMA 2020 (ii) that certain provisions of the Money Laundering Act, 2020 mandating legal practitioners in Nigeria to submit due diligence report on prospective or existing clients to SCUML were declared to be void.

II.   FEATURES OF THE SECTOR DEVELOPMENTS

SEC RECAPITALIZATION GUIDELINES 2024

The Framework issued on 21 June 2024 outlines the guidelines and procedures banks are required to follow to raise capital through right issuance, private placements, or other approved methods during the 2024-2026 Recapitalisation Exercise.

The SEC Recapitalisation Guidelines 2024 amongst others states the Capital Raising Options (rights issue, public offer, private placements, mergers and acquisitions); the Steps/Procedure for Registration, Documentation Requirements and Applicable Fees, Checklist for Minimum Documentation required to support a Capital-Raising, Checklist for Minimum Information to Support a Merger/Acquisition Application, Checklist for Minimum Information Required to Support a formal approval of a Merger, Indicative Timeline for Capital Raising and Indicative Timeline for Mergers & Acquisitions.

CAC RECAPITALISATION GUIDELINES 2024

On 26th July 2024, the Corporate Affairs Commission pursuant to its statutory powers as a companies and corporate entities regulator issued the CAC Guidelines for the Recapitalisation of Banks and other Financial Institutions.

The CAC Guidelines 2024 stipulates the documentation and other requirements (i) new incorporation by a bank or the combining banks post recapitalisation, (ii) Increase in Share capital (Options – private placements, rights issue and/or offer for subscription) (ii) Merger.

Further, there is a caveat that in the upgrade and downgrade of license authorisation, no additional filings are required.

NOTEWORTHY CORPORATE DISPUTES DECISIONS FROM THE FEDERAL HIGH COURT OF NIGERIA

1.     Federal High Court confirms that a Prior 2020 Existing Private Limited Liability Company Can Re-register as a Small Company with a Single Shareholder.

In a decision delivered on 30th July 2024 in SUIT NO: FHC/ABJ/CS/665/2023 (i) Primetech Design and Engineering Nigeria Limited (2) Julius Berger Nigeria Plc V. Corporate Affairs Commission, the Federal High Court ruled that Section 18(2) of the Companies and Allied Matters Act 2020, which permits a single individual to form and incorporate a private company, applies to all private companies, including those incorporated before CAMA 2020. Private companies can now operate with a single shareholder. The Court further held that private companies can validly operate with a single shareholder under CAMA 2020. The CAC’s refusal to approve share transfers making one individual or corporate person the single shareholder was deemed unlawful, and that the CAC should approve such transfers and update the Companies Registration Portal (CRP).

Facts: The second shareholder of the 1st Plaintiff transferred all his shares to the 2nd Plaintiff, making the 2nd Plaintiff the sole shareholder. The 1st Plaintiff's Board of Directors approved this transfer. The 1st Plaintiff thereafter informed the Defendant of the share transfer to update the Company Registration Portal (CRP) but received no response. After a follow-up letter and a formal request from their solicitors, the Defendant queried the application based on sections 18(1) and (2) and 571(c) of CAMA, 2020. The 1st Plaintiff, through their solicitors, countered the Defendant's position as inconsistent with CAMA's objectives, but the Defendant remained unyielding. Consequently, the Plaintiffs initiated legal action.

Significance: The Court has now held that prior 2020 private companies previously required to have at least two shareholders under the repealed CAMA 1990 can now restructure to have a single shareholder and become a small company, if desired, under the provisions of CAMA 2020.

2.     The Court Declares void some Provisions of the Money Laundering Act, 2020 mandating legal practitioners in Nigeria to submit report(s) on prospective or existing clients to SCUML.

The Federal High Court in a judgment delivered on 19th July 2024 in Suit No: FHC/ABJ/CS/25/2023 Abu Arome v. Central Bank of Nigeria & 3 Others gave a purposive interpretation by declaring Sections 6, 7, 8, 9, 11 and 30 of the MLA, 2020 as its relates to Legal Practitioners were unconstitutional, null and void and of no effect whatsoever for their contravention of existing laws including Section 37 of the Constitution, Section 192 of the Evidence Act, Section 20 and 21 of the Legal Practitioners Act. The Court further declared that the inclusion of Legal Practitioners and Notary Publics as DNFBP in the MLA 2020 undermines the confidentiality obligation Legal Practitioners owe their client under the law.

Facts: On the 27th day of September 2022, the Plaintiff (a legal practitioner) approached a FCT, Abuja branch of the 3rd defendant to request for a hard token and cheque book to enable the Plaintiff’s law firm set up online banking services and to access its funds. However, the Plaintiff was informed by a customer service representative in the bank that a restriction was placed on the account for failure of the plaintiff’s firm to present the Special Control Unit Against Money Laundering (SCUML) certificate.

Significance: Subject to any further appeal by the Defendants and a stay of enforcement of the above judgment of the Court, legal practitioners in Nigeria are no longer required to comply with the specific provisions of the MLA, 2020 that were declared null and void.

Qualifications and Disclaimers: This Publication is prepared strictly for informational purposes. It should not be relied upon or serve as a substitute for proper legal advice. Counsel will not be held liable for any action or inaction that is premised strictly on this paper. Thank you to Mr. Anthony Falbo (JD Law Student at Case Western Reserve University, Cleveland, State of Ohio, USA) for his contribution to this publication in the areas of comparative corporate laws and international best practices. Anthony is currently working with the law firm as a Remote Legal Intern under the Virtual Internship Programme.

For Further Information, Please Contact –

1.   Mr. Ikemefuna Stephen Nwoye – Lead Partner  

2.  Mr. Bernard Onyeachonam Omeji – Associate Partner    

3.  Miss Similoluwa Bolarinwa Adekanye – Legal Associate

Law firm’s Telephone Number - +2348071038538 and E-mail address – info@nwoyelegal.com Website – www.nwoyelegal.com