TerraLex Cross-Border Guide to Cross-Border Merger & Acquisition Guide

Under Nigerian law, there are no restrictions on foreign investment. However, it is important to note that under the Federal Consumer and Competition Protection Commission (FCCPC) Guidelines on Foreign to Foreign Mergers, any acquisition of shares or other assets outside Nigeria resulting in the change of control of a business, part of a business or assets of a business in Nigeria will come under the regulatory purview of the FCCPC.

The guidelines referred to above simplify the entire process of the acquisition, making it investor-friendly and far easier to do business in Nigeria.

In addition to the above, other regulatory bodies also play a significant role regarding foreign investment under mergers and acquisitions. One such body is the Securities and Exchange Commission (SEC), which has made further amendments to its rules on mergers and acquisitions. The SEC now requires mergers involving public companies and their subsidiaries to first seek and obtain its approval before such transactions can be deemed valid.

All exchange control and currency regulations are solely within the regulatory powers of the Central Bank of Nigeria. However, no such regulations exist except when they pertain to money laundering.

The Nigeria Investment Promotion Commission Act is one of the key legislations enacted by the Nigerian government to provide tax and fiscal incentives to both local and foreign business enterprises. They Include pioneer status, tax holidays, capital allowances and tax exemptions.

The Startup Act is another item of legislation that offers tax incentives to investors.

Employees generally are not entitled to management representation in Nigeria. However, for industries that do have unions, the union helps to protect the rights of employees. In Nigeria, employers have no obligation to inform their employees before taking a business decision, as such decisions are taken at a management level.

Nevertheless, where such business decisions will materially affect employees, sufficient notice must be given before implementation.

The Labour Act provides that before employment can be terminated, adequate notice or salary in lieu of notice must be given by the terminating party. It goes further to outline the length of notice required, depending on the duration of the contract. However, it is important to note that parties may agree to longer notice periods in their contracts of employment.

Where an employment relationship is regulated and governed by a statute, any form of termination must be consistent with the statute.

The Labour Act provides that in the event of a redundancy, the employer is obligated to inform the trade union or workers' representatives of the reasons and extent of the intended redundancy exercise. The principle of ‘last in, first out’ should be adopted.

A redundancy payment package must be negotiated, especially for employees not covered by regulations made by the minister.

For employees excluded from the scope of the act, the redundancy requirements are based solely on terms mutually agreed upon by the employer and employee.

The Capital Gains Tax Act provides that gains accrued from the disposal of shares worth at least N100,000,000 in a Nigerian company within 12 consecutive calendar months would be taxed at a rate of 10%.

Stamp duties.

Instrument of transfer of property at a rate of 1.5%. Registration of charges at 0.375. Share transfer at 0% (free).

Issuance of shares charged at 0.75% on authorised share capital at incorporation or registration of new shares.

The Nigerian jurisdiction does not have an antitrust threshold. However, in considering an acquisition or a proposed acquisition, the FCCPC will determine whether or not such a transaction is likely to prevent or lessen competition by assessing the strength of the competition in the relevant market and the probability that the undertakings will behave competitively or otherwise. Where the commission determines that the undertakings will not behave competitively, the transaction will not be approved.

Documents usually executed (transaction documents) include: - Relevant board and shareholders resolutions Share purchase agreements

• Asset purchase agreements
• Letters of resignation/appointment of directors Deeds of surrender/transfer
• Escrow agreements

No such restrictions exist in Nigeria. As such, transaction documents for companies incorporated in Nigeria can be executed outside our jurisdiction. There is no apparent advantage of signing/closing within the jurisdiction over those that occur outside the jurisdiction.

Our laws do not require a gap between signing and closing. However, parties can negotiate to include a gap period between signing and closing as they deem appropriate.

There is no regulatory requirement for deposit monies or third-party intermediaries. However, parties can, by agreement, appoint such third-party intermediaries (e.g., an escrow agent).

In transactions of this nature, each contracting party is expected to execute and exchange relevant board and shareholders resolutions approving the transaction together with other documents such as their respective certificates of incorporation. In addition to the above, the board of directors equally, by resolution, appoint a person (usually a director) to sign the transaction documents on behalf of the contracting parties (these authorised signatories would also be required to provide signature specimens before the execution of the transaction documents).

The execution formalities for transactions of this nature are largely dependent on the individual signatory. Such documents could either be by simple contract or by deed. However, such instruments of transfer should be done by deed as the limitation period in Nigeria is 12 years for a contract under seal as opposed to six years for simple contracts.

A document that requires execution or authentication by a company may be signed by a director, secretary, or any other authorised officer of the company. Where the document to be executed or authenticated is a deed, the following persons may sign without affixing the common seal of the company, and it shall have the same effect as if it was executed under the common seal:

1. A director of the company and the secretary of the company;
2. at least two directors of the company; or
3. a director of the company in the presence of at least one witness who shall attest to the signature.

This can be done in writing. Where the document to be executed is a deed, it must be executed in the presence of a witness (stating the name, address, occupation, and signature of the witness). Where the witness is blind or illiterate, it must be executed in the presence of a Jurat.

The manner of such execution must be as prescribed in the memorandum and articles of the companies, laws and regulations as made by the Corporate Affairs Commission and by a person so authorised (formal resolution) by the company.

Not applicable.

Not applicable.

Not applicable.

Not applicable.

N/A

Transfer of shares is an arrangement between a shareholder and another person to transfer all or a part of the shareholder’s shares to the other person. This transfer of shares is regulated by the Companies and Allied Matters Act (CAMA), and it is without restrictions unless expressly provided in CAMA (as it relates to the transfer of shares in private companies) and the articles of association of the company. A transfer of shares is effected by a document called an instrument of transfer, including an electronic instrument of transfer.

On the application of a transferor, the company shall enter the name of the transferee in its register of members and register of transfer, which includes an electronic register of transfer. The transferor is deemed the holder of the shares until the name of the transferee is entered in the register of members.

Company officers such as directors are appointed by members of the company at an annual general meeting through an ordinary resolution. Company secretaries are appointed by the directors through a board of directors resolution.

A company may also execute a power of attorney in favour of a person (both officers and non-officers of the company) to do a deed or perform an action on its behalf. It is important to note that if the act would require the appointed attorney to execute a deed in favour of the company, the power of attorney must also be by deed.

Under Nigerian law, faxed or emailed documents are admissible in court. However, they must be presented in the manner prescribed by the Evidence Act.

CAMA provides that an electronic signature is deemed to satisfy the requirement for signing a document where execution or authentication of a company is required. Thus, electronic signatures are admissible as proof of the due execution of documents.

Documents may be executed in counterpart. However, the executed agreement must expressly state that the document may be executed in counterpart.

All undertakings included in transaction agreements are generally enforceable.

Closing mechanisms differ from transaction to transaction based on the agreements of the parties. Parties could decide to adopt an escrow arrangement, where funds deposited are paid out on the happening of an event (usually a certain period after transaction documents have been signed).

The main formality that exists is for the company to file and upload the relevant resolutions, as well as the share transfer forms, to the Corporate Affairs Commission website.

Not applicable.

The timetable for share and asset sales is largely dependent on several factors, including the level of due diligence exercise, the mode of sale, seeking relevant regulatory approvals and the process of obtaining formal approval/ signing of the transaction documents.

Non-compete clauses are enforceable in Nigeria provided they meet the requirement of reasonability, which is determined on a case-by-case basis. There is no laid-down timeframe for their enforceability. However, the duration of such clauses will also be subject to the reasonability test.