Legal Considerations for Merger and Acquisition in Nigeria
Merger and acquisition are two business processes involving the consolidation of companies. The distinction to these procedures lies in the nature of the consolidation. In a merger, two companies are joined to form one new company whereas, one company (usually the larger one) takes over another company in an acquisition. In Nigeria, it is commonplace to see companies merge or acquire other companies, and these procedures are recognized and regulated by the law. You can seek the help of any of the Patent and Trademark Attorneys in Nigeria.
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Expansion - it allows smaller companies a wider reach to more business opportunities. Increases assets - the companies involved are able to make use of each other's resources, increasing the assets of both sides. Diversifies business - in Nigeria, merger or acquisition is a preferred mode for some international businesses to enter the Nigerian market.
The primary governing law for merger and acquisition is the Investment and Securities Act (ISA) of 2007. Under the ISA, the Securities and Exchange Commission (SEC) is given the power to regulate the process of merger and acquisition. Under section 118 (1) of the ISA, all mergers and acquisitions in Nigeria are subject to the approval of the SEC. The SEC functions as the regulator of capital market operators. It is also the agency assigned to grant pre-merger consents and clearances of merger scheme documents. The agency also has the power to decide whether or not a merger would create a problem in competition or would give rise to a monopoly in a certain business enterprise. Aside from the ISA, the Companies and Allied Matters Act (CAMA), Banks and other Financial Institution Act (BOFIA) and SEC issued rules and regulations also govern the procedure for merger and acquisition.
While the SEC is the primary agency involved, several other concerned agencies also play a part in the process: â—? â—? â—?
Central Bank of Nigeria - involved when it is a merger and acquisition between banks or financial institutions. Federal Inland Revenue Service - approval of the agency is required since it clears the merging companies of its tax obligations Corporate affairs commission - certification of corporate resolutions and the registration of the company is filed in the commission.
In sum, the following are the steps required by the SEC for undergoing a merger: 1.
Parties prepare a merger proposal document
2.
A pre-merger notification is filed with the Office of the Director General of the SEC within 6 weeks
3.
Parties are required to pay the processing fees
4.
Merging companies should file an application to the Federal High Court for the issuance of an order directing the holding of a meeting of the members of the merging companies.
5.
The companies would hold a special meeting where they would agree on a merger scheme by special resolution.
6.
A formal application is submitted to the SEC for approval.
The sec then issues a certificate approving or prohibiting the merger. The notice is published in the Gazette, and the federal court is informed of its decision.
Meanwhile, the procedure for acquisition can be summarized with the following steps: 1. 2. 3. 4.
The acquiring company files a letter of intent to the SEC When no objection is granted, the acquiring company files a report of compliance and terms of approval The SEC approves or grants the application A post-acquisition inspection is conducted 3 months after being approved
With a simplified procedure under the guidance of any Intellectual Property Lawyers in Nigeria, companies both in and outside Nigeria can take advantage of merger or acquisition in order to reap its business benefits.