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Mergers & Acquisitions: A Review of Nigeria’s New Consolidated SEC Rules & Regulations 2011

By Professor Bankole Sodipo* & Ms. Nkiru Okonkwo**
Posted: 30th December 2011 13:51


In September 2011, the Securities and Exchange Commission SEC, published  the New Consolidated SEC Rules 2011, (the Rules).  The Rules made amendments to SEC rules and consolidated some of its unpublished guidelines pursuant to the powers derived under section 313 of the Investments and Securities Act, ISA 2007.  In particular, section 313(1)(e) of the ISA gave SEC the powers to make rules on mergers and acquisitions.  The New Consolidated Rules are made of 14 parts A to N and 11 schedules. The consolidated rules were made in recognition of the fact that the adoption of formal rule making in this consolidated manner is more efficient than SEC’s erstwhile case by case adjudication as this resolves multiplicity of issues.  It should be noted in addition to these SEC Rules, some regulated sectors such as finance, insurance, telecommunications and electricity, have other regulations that must be complied.(1)  This short review outlines the Rules as they relate to M&A transactions.

Notification to the Companies Registry

Pursuant to the Rules(2), a notification by way of letters of consent must now be filed with the Nigerian Companies Registry known as the Corporate Affairs Commission CAC, for review.  A clearance must also be signed by a Notary Public.  This means that for M&A transactions, CAC must be notified before the transactions take place. It is, however, doubtful if the consent of CAC must be obtained.

Transactional Value

The Rules define an acquisition(3) to mean the purchase of at least 30% of the shares, interests or assets of the target company.  This means that transactions involving less may not follow the strict requirements of the Rules.  The Rules specifically provide that SEC regulates the Acquisition of both Public and Private companies.(4)  The Rules prescribe procedures for acquiring the controlling interest in a company include the ownership of 30% and above.(5)

Pre-Transaction Notification to SEC

The entity acquiring is required to file a letter of intent about the transaction with SEC.  This is irrespective whether the acquirer is a corporate body or an individual.  This letter of intent must be filed through a registered capital market operator and it must be accompanied by the under listed documents:-(6)

Copies of an information memorandum that must include the background information of the offer, the offer itself, the acquirer and the aquiree and the effect of the prospective acquisition.(7)  Other documents that must be attached include: an extract of the board resolutions of the acquirer and acquiree agreeing to the acquisition signed by the Company Secretary and a Director;  a recent certified copy of the Memorandum and Articles of Association of the acquirer and acquire; a certificate of incorporation of both the acquirer and acquiree signed by the Company Secretary; an extract of the shareholders resolution of the acquirer and the acquiree signed by a Director and the Company Secretary; a summary of all the claims and litigation of the company to be acquired; a copy of “No Objection letter” form from the relevant regulatory body; copies of the letters appointing the financial advisers to the transaction;  a certified copy of companies registry - CAC forms showing the particulars of the Directors of both the acquirer to the acquire company; Notarized consent letters  of Directors of both the acquirer and acquire; the financial services agreement between the acquirer and the acquiree and their respective financial advisers; the share purchase agreement and other relevant agreements executed between the acquirer and the acquire; an application fee in the sum of N 50,000.00; a processing fee based on the value to be acquired on the graduation fee; the annual report and accounts of both companies for 5 years or 3 years for private companies and those in operation for less than 5 years; evidence of source of funds to finance the acquisition must be clearly disclosed and backed with documents;  and a report of the valuation of the  assets/shares.

Post Transaction Publication of Acquisition

Pursuant to the Rules, the acquisition must be published in 2 national dailies after consummation.  The contents of such publication must include: (8) 

The number of fully paid up ordinary shares in the target company; the total number and percentage of shares in the target company; the price of each share; the identity of the acquirer; the existing shareholding of the acquirer in Target company; the object of the acquisition; and the future plans for  the target company. Publication is aimed at transparency of the transaction.

Notification to SEC Post Transaction

Pursuant to the Rules, an Information Memorandum must be submitted to SEC on post acquisition with the following documents and information:(9)

An executed share/purchase agreement on the transaction; evidence of the settlement purchase consideration; and the evidence of the settlement of severance benefits of employees who may lose their jobs as a result of the acquisition.

Although the old rules did not specifically require an Information Memorandum to be submitted post transaction, it was an informal requirement.

Post Transaction Inspection

There is a new Rule requiring/permitting SEC to conduct a post transaction inspection not less than 3 months after the approval of the application by the Commission.(10)  This is a new Rule enables SEC to police the activities of the company after the transaction.

SEC Notification for Take-Overs

In a takeover bid, the Rules require the following documents to be filed with SEC:(11)

An application letter; copies of information memorandum; Letter of “no objection” from regulatory body; Copy of the board and shareholders resolution of the offeror certified by company secretary; a certified of the copy Memorandum and Articles of Association of the offeror by the Corporate Affairs Commission; Copies of the offerors letter appointing the financial adviser to the transaction.

An information memorandum is to be filed stating background information to the takeover; the history of the companies involved; the financial ability of the target company; and the shareholding of the offeror company.(12)  Although the previous rules made no provision for the inclusion of an information memorandum, this was required by practice.

If a go-ahead or an authority to proceed with the transaction is given by SEC, the following documents must be filed with SEC:(13)

Draft copies of the takeover bid; Consent letters of Directors and other parties to the transaction; CAC forms containing particulars of directors to the offeror;  copies of the Draft Financial Services agreement between the financial adviser and the offeror and any other agreement entered into in course of the transaction; an annual report and accounts of the offeror for the preceeding 5 years period or period the company has been in existence; a N 50,000.00 application fee and relevant SEC fees based on the value of shares to be taken; a draft newspaper publication of the proposed takeover bid; evidence of offeror’s source of funds. SEC may also require the submission of other documents.

Further, the offeror must file the following documents within 7 days:(14)

A schedule of Target Company Shareholders who have accepted the offer containing the volume and value of the respective shares, Evidence of settlement of consideration.  The previous rule has no provision for a filling with the Commission within specified time.

Finally, SEC is empowered to conduct a post take-over inspection not less than 3 months after registration of the bid by the Commission.(15)  This is significant as the previous rules had no provision for post takeover inspection by SEC.

Tax on M&A Transactions

Merging companies are required by the Companies Income Tax Act, CITA(16) to obtain the direction of the Board.  Section 29(12) of sub section 9 and clearance with respect to any tax that that may be due or payable under the Capital Gains Tax Act.  This goes to show that there is a necessity for the approval of the Federal Inland Revenue Service, FIRS to be sought in the completion of the merger transaction.  In commencing the merger process the FIRS Board requires copies of the merger scheme and scheme of arrangement on the consolidation for its study to ensure that taxes that may result are properly assessed and collected.  The Board has the power in section 29(9)(I)to require either directly to the company under consideration of the Board to guarantee or give security to its satisfaction for full payment of all tax due or to become due by the company selling or transferring assets or business.                           

Mergers may result in the formation of a new company, or the merging companies may continue in the consolidated business in a new name or in an old name, or one of the companies may cease business whilst the other continues the business.  On the emergence of a new company, annual returns and audited accounts  are expected to be filed in line within 18 months of incorporation or not later than 6 months after end of its first accounting period(defined in section 29 (3) CITA)  section 55(3)(b) CITA.  A mere name change does not make a business a new entity and are treated as an ongoing concern.   

If merging parties are connected Board may direct that commencement rule be set aside and new company files its returns as an ongoing concern and assessment is on preceding year basis. Where new business is reconstituted, taking over that business or trade of foreign parent company, section 29(3) will not apply.  The newly formed company may not be allowed to inherit unabsorbed losses of the absorbed company except the new company is in the same business as the absorbed companies and it proves that the losses have not been allowed against assessable profits of that company for such year, being deemed to be loss by reconstituted company in trade during the year under assessment in which business commenced.         

Stamp duty payment will arise on the share capital of the new company subject to section 104 Stamp Duties act.  Fees remitted to statutory bodies like the SEC, NSE, etc including solicitors accounts or issuing houses are capital in nature and not allowable as deductible expenses under section 27(a) CITS. Professional fees rendered pursuant to the transaction are subject to VAT and WHT.  The new company may be required to guarantee or give security for full payment that may be due on the company that has ceased.                            

Where one of the merging companies survives in its old or new name to inherit assets, liabilities, reserves etc, returns to be filed in line with section 55 (3)(a)CITA, the commencement rule will not apply as the company is an ongoing concern.  The surviving company is not allowed to claim investment allowance on assets transferred to it and will not claim initial allowance on assets, but it may claim the annual allowance on Tax Written Down Values (TWDV) on assets transferred. Unabsorbed losses and capital allowances may not be inherited unless proves that the new business is a reconstituted company. All fees payable on merger bids or consolidation are liable to VAT and WHT.  When business ceases section 29 (4) CITA applies to any of the merging companies unless merging companies are connected and in accord with section 29(9) CITA cessation rule may not apply.  A company reconstituted to takeover trade previously run by foreign parent company, Section 29 (10) CITA applies.  Tax not payable on gains from acquisition of shares in a company merged, taken over or absorbed by another and as a result loses its identity - Section 32(a)CGTA CAP 121 LFN 2004.  But where shareholders are paid either wholly or partly in cash for a surrender of their shares in a ceased business, the gains are subject to CGT.  FIRS has no power to stop or prevent mergers once the merger is in line with CAMA.


Bankole Sodipo, Barrister and a Solicitor and the Principal Partner with the Law firm of Chief G.O. Sodipo & Co. Lagos. He was a member of the 1988 Copyright Drafting Law Committee that prepared the Nigerian Copyright Act 1988. He has contributed to teaching the Masters programme at Queen Mary & Westfield College, University of London and is a visiting guest lecturer at the Nigeria Law School.. He is a regular contributor to leading international journals. His major publications includes a book on Nigeria’s Foreign Investment Law and Intellectual Property Rights and a book on Piracy and Counterfeiting: GATT-TRIPS and Developing Countries. He has also worked with leading firm of solicitors and at Barristers’ chambers in London. He organizes and speaks at conferences in Nigeria and internationally; these include the Frankfurt Book Fair, the Copyright Society of America; the American Intellectual Property Law Association and the University of Maastrict. He is a visiting guest lecturer at the University College, London; an Adjunct Research Fellow at the Intellectual Property Institute, Queen Mary & Westfield College and a Consultant to the World Intellectual Property Organization. He handles contentious and non-­contentious matters. He is the President of the Intellectual Property Law Association of Nigeria which is the local organization that liases between the government and the private sector in lobbying for reforms in the administration, adjudication and enforcement of Intellectual Property Rights. He was a member of the committee that drafted Nigeria’s Intellectual Property Policy. He is currently a Corporate law Professor at Babcock University, Nigeria.  Bankole can be contacted on +234 80231 98641 or by email at

Nkiruka Okokwo is an Associate in the Law Firm of Chief G.O. Sodipo & Co. She holds a first degree in law from Obafemi Awolowo University Ile Ife, Osun State, Nigeria and also Masters of Law from the same University. She has attended several conferences and seminars.

Nkiruka can be contacted on her mobile at +2348033771179 and +2348080521855 or by e-mail at and

*Ph.D (London), Babcock University and partner, G.O. Sodipo & Co; ** Associate, G.O. Sodipo & Co

(1) The Banks and other Financial Institutions Act, 1991 regulates the banking industry; the Nigerian Communications Act 2003 regulates the telecommunications industry; the Insurance Act 2003 regulates the insurance industry; and the Electric Power Sector Reform Act 2005 regulates the electric power sector.

(2) Rule 426

(3) new Rule 431

(4) subsection 2 of Rule 431

(5) Rule 432

(6) supra

(7) Rule 434

(8) Rule 433

(9) Rule 435

(10) Rule 437

(11) Rule 443

(12) Rule 443 A and B.

(13) Rule 444 (5)

(14) Rule 444 (6)

(15) Rule 444 (7)

(16) CITA CAP(21, LFN, 2004).


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