PROCEDURE AND GUIDELINE FOR PRIVATE PLACEMENT IN NIGERIA
Private Placement means any offer or invitation to subscribe or issue of securities to a select group of persons by a company
PROCEDURE AND GUIDELINE FOR PRIVATE PLACEMENT IN NIGERIA
Private Placement means any offer or invitation to subscribe or issue of securities to a select group of persons by a company (other than by way of public offer) through private placement offer-cum-application.
PROCEDURE FOR PRIVATE PLACEMENT IN NIGERIA
In Nigeria, the following main procedures can be used to offer a company's shares to the public: direct offer to the public, offer for sale, placing, right issue, and private placement. Rule 339 of the Securities and Exchange Rules, defines Private placement to mean the issue of securities by a public company to select persons. Rule 340 subsequently provides for the conditions a public company must fulfill for the approval of the offer by the SEC. it states that;
No public company shall offer securities by way of private placement without the prior approval of the Commission.
Private placement by public companies shall be subject to the following conditions
The company shall show evidence of the dire need for fresh funds or technical expertise and shall satisfy the Commission that private placement remains the only viable option to achieving its objective.
The securities shall not be offered to more than 50 subscribers.
The resolution of the company authorizing the placement shall be Special as defined in the Companies and Allied Matters Act and shall state the number of shares to be offered and the price.
The notice of the general meeting authorizing the placement shall be published in two national daily newspapers and evidence of the publications shall be filed with the Commission.
The aggregate number of shares to be offered through private placement by a public quoted company shall be 30% of its existing issued and paid-up capital prior to the offer: Provided that where the company is ailing, it may offer a higher number of shares, subject to the approval of the Commission.
The price of the securities of the company, if quoted, shall be on technical suspension during the period of placement.
The offer shall be for a period as proposed by the issuer and approved by the Commission but not exceeding ten (10) working days: Provided that the Commission may extend the period under special circumstances.
All subsequent capital raising shall be approved only upon satisfactory account of utilization of previous issue proceeds.
Private Placements shall not be advertised, mentioned and/or discussed in the print and electronic media. Approval of a private placement may be suspended or withdrawn for violation of this rule. Any Capital Market Operator engaged in an advisory role on the private placement may also be sanctioned.
GUIDELINES FOR PRIVATE PLACEMENT IN NIGERIA.
Section B3 of the Securities and Exchange Commission Rules and Regulations made in accordance with the Investments and Securities Act contains guidelines for private placements in Nigeria (ISA). It's important to take note of the clause limiting subscribers to a private placement to 50 individual or corporate investors.
Some other provisions of the rules includes restrictionon solicitation or advertising, limitation of the offer to only informed investors who can correctly interpret the unregistered security they are being offered or have the capacity to bear the risk. The rules also mandate the issuer to come up with a Private Placement memorandum detailing adequate information about the issuer, its business and the securities being offered which shall be filed with the Securities and Exchange Commission (SEC).
NB: This article is not a legal advice, and under no circumstance should you take it as such. All information provided are for general purpose only. For information, please contact chamanlawfirm@gmail.com
WRITTEN BY CHAMAN LAW FIRM TEAM
EMAIL: chamanlawfirm@gmail.com
TEL: 08065553671, 08024230080