TerraLex Cross-Border Guide to Pre-Merger Notification Guide

Yes.

Notification for small merger is voluntary except where the Commission requires notification within 6 months of the merger implementation. However, parties to a small merger may voluntarily notify the Commission of the merger at any time.

The advantage of a voluntary merger notification for small merger is that it makes for business convenience. There will be no need for the bureaucracy of obtaining approval from the regulatory bodies except the undertaking desires to do so.

Any large mergers require notification and approval by the Commission.

Under the FCCPA, there are only two thresholds; small merger and large merger but the financial thresholds are yet to be fixed. The FCCPA unlike the Investment and Securities Act did not specify financial thresholds but empowered the Commission to do so by regulation.

Joint ventures are considered as mergers under section 92(1)(b)(iii) of the FCCPA. What determines whether notification is mandatory or optional is the merger threshold.

Ordinarily, mergers outside Nigeria are not regulated. However, mergers outside Nigeria resulting in the change of control of a business, or part of a business or any asset of a business in Nigeria are regulated under the FCCPA. Consequently, foreign companies with Nigerian subsidiaries looking to merge which merger would change the shareholding of their subsidiary in Nigeria would be required to provide a pre-merger notification and await approval before going ahead with the merger. This pre-merger notification is compulsory for large mergers and subject to the discretion of Commission for small mergers.

There is no merger notification document mentioned in the FCCPA. However, Sections 92(4) and 102 empower the Commission to make regulations to that effect. However, under the defunct SEC Rules, the following information were required:

• Completed Merger Notification Form.
• A joint letter of intent from the merging entities.
• Extract of Board Resolution of the merging entities in support of the merger duly certified by a Director and the Company Secretary.
• A copy of the letter appointing the financial adviser(s)
• Certificate of Incorporation certified by the Company Secretary, certified true copies of Form CAC 7, and Memorandum and Articles of Association of the merging entities.
• A letter of No Objection from the companies’ Regulator(s) (where applicable).
• The Audited Accounts of the merging entities for the preceding five years or the number of years the companies have been in operation if not up to five years.
• Evidence of payment of filing fee of N50,000 per merging entity.
• Information memorandum

We do not anticipate the information to be required in the new regulation would be far from the above.

It is difficult to ascertain how long it would take to set up the new Commission to make regulation on the information required for merger. However, we do not anticipate the Commission would be set up any time earlier than 29th May 2019, when the new Government would be sworn in.

N/A. The Commission may from time to time make regulations on the required information.

The Commission, when set up will make rules on the merger notification fee. However, under Rule 426(g) of the SEC Rules provides for a merger notification fee of N50,000 per merging company.

It is difficult to ascertain if the new regulation would maintain the fee under the SEC Rule.

For large mergers, by virtue of Section 96(1) of the FCCPA, parties to large merger shall notify the commission in the prescribed form (i.e. as contained in the regulation to be made by the Commission).

Section 96(4) of the FCCPA provides that Large merger cannot be implemented until it is approved by the Commission otherwise it shall be void. Consequently, one can say that notification should be made to the Commission as soon as parties have signed intention to proceed with the merger which can be evidenced by the resolutions of parties.

Under the FCCPA, the Commission has 20 days, extendable by a single period not exceeding 40 business days, for the consideration and decision on a small merger notified to it upon demand. Mergers which are not approved or prohibited within these statutory periods are deemed to be approved, though the Commission reserves the residual power to revoke the deemed approval.

In the case of large merger, parties are expected to wait for a period of 60 business days and the Commission may by notice extend the waiting period to 120 days to enable it consider whether to approve the merger, approve it subject to conditions or prohibit its implementation.

In practice however, it is not advisable to deem a large merger as being approved on the basis that time elapsed. Parties to such merger must therefore obtain the Commission approval before implementing the same.

Under the FCCPA, the statutory time period for small mergers is 40 days while a large merger takes up to 120 days. However, in practice, effective liaison (by professional advisers of the merging parties) with the appropriate regulatory officers in charge of the approval may speed up the approval process.

The FCCPA makes it mandatory for parties to a merger to fulfill all the prescribed notification requirements before approval is given for implementation of the transaction.

The risk of parties implementing a merger before approval or the risk of the waiting period being exhausted is that the merger runs the risk of being invalidated and the parties exposed to huge financial penalties. Also, by virtue of Section 96(5) and (7), a large merger transaction shall be void and will amount to an offence.

Pursuant to Section 99 (1) of the FCCPA, the Commission may revoke its approval for merger if such approval was given based on incorrect information, deceit or breach of an obligation attached to the decision.

Section 99(2) further states that if the Commission revokes a decision to approve a merger under subsection (1) of this section, it may prohibit the merger even though a time limit prescribed in this part may have elapsed.

In addition, Section 94(1) of the FCCPA states that where the Commission determines that the business practice of a company substantially prevents or lessens competition, the Commission may in the public interest order the break- up of the company into separate entities in such a way that its operations do not cause a substantial restraint of competition in its line of business or in the market.

Under the FCCPA, there are no ways of protecting a transaction from post-closing challenge. Consequently, there is need to comply strictly with the Act and the regulations, constantly liaise with officers of the regulatory bodies so as to avoid post-closing challenge.

The Federal Competition and Consumer Protection Commission is the primary body which regulates mergers and acquisitions in Nigeria. Pursuant to Section 17(k) of FCCPA, the Commission is vested with the powers to review and approve every merger between or among companies.

However, mergers involving organisations in regulated industries are also subject to the provisions of the various sector legislations or regulations.

In addition, SEC still regulates public companies; other agencies which are involved in a merger transaction include the Corporate Affairs Commission which will register the new entity and the Nigerian Stock Exchange which regulates all listed companies in Nigeria.

It is difficult to tell the level of confidentiality a merger notification may enjoy. However for public companies which apart from the Commission are also regulated by SEC, the decision of SEC, i.e. the approval or otherwise of the merger is to be published in the official gazette.

By virtue of Section 96 of the FCCPA, a merger may face challenges if it does not fulfill the notification requirements in the prescribed manner and form or if it is against anti-trust regulations or public interest.

The best approach is to follow the instructions as contained in Part XII of the FCCPA strictly so as to avoid unnecessary delay or refusal to grant approval. In practice, cooperation (by professional advisers of the merging parties) with the Commission and appropriate regulatory officers in charge of the approval may ensure a seamless process.

Apart from the FCCPA which governs mergers and acquisitions generally, SEC still exercises regulatory control over mergers involving public companies. There are other laws applicable to mergers and acquisitions which are sector or industry specific. For instance, the Central Bank of Nigeria (CBN) Act, Nigerian Deposit Insurance Corporation (NDIC) Act and the Banks and Other Financial Institutions Act regulate mergers and acquisitions in the banking sector, the Insurance Act of 2003 regulates mergers and acquisitions in the insurance sector, and the Petroleum Act regulates mergers and acquisitions in the Oil and Gas Sector.

In addition, companies listed on the Nigerian Stock Exchange will also be regulated by the listing rules.

Mergers or acquisitions involving foreign companies may be subject to the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act and the Nigerian Investment Promotion Commission Act.