TRANSFER OF COMPANY SHARES IN NIGERIA
Units of ownership interests in the company make up the share capital, or shares, of a corporation
TRANSFER OF COMPANY SHARES IN NIGERIA
Units of ownership interests in the company make up the share capital, or shares, of a corporation. These are the tangible objects that can be given or sold to another person. Any shareholder may choose to sell their shares to a third party as long as they do so in accordance with the company's articles of association and the Companies and Allied Matters Act, 2020.
CLASSES OF SHARES
According to the law, a company has the power to issue various classes of shares. However, in practice the two major classes of shares that are often issued are as follows:
Preference shares: This type of shares entitles the holder to a fixed dividend, and the payment of preference shareholders take priority over the ordinary shares dividends. This means that upon declaration of dividends, the holders of preference shares are paid before ordinary shareholders, and preference shareholders are paid a certain amount, according to a fixed percentage.
Ordinary shares: The ordinary shareholders do not receive a fixed sum of money (to be paid as dividends) by the company, and the type of shares rank lower in priority than preference shares, and if the company winds up, preference shareholders are paid first before ordinary shareholders.
Ordinary shares: The ordinary shareholders do not receive a fixed sum of money (to be paid as dividends) by the company, and the type of shares rank lower in priority than preference shares, and if the company winds up, preference shareholders are paid first before ordinary shareholders.
This is when a shareholder sells or transfers their shares to another party, who is either an existing shareholder or a third party either by way of sale or gift, which results in a change in the share structure of the company. According to the new Companies and Allied Matters Act, 2020, a shareholder is prohibited from transferring their shares to a non-member of the company without first offering the same shares to the existing shareholders of the company, except the company's Articles of Association state otherwise.
If a shareholder transfers all its shares to the purchaser, the shareholder divests its entire interest in the company shares and ceases to be a shareholder of the company. However, if only part of the shares is transferred, the shareholder divests its interest in the number of shares that have been sold but remains the holder of the unsold shares.
WHO CAN TRANSFER SHARES
Any person that has shares in a company may transfer those shares to another party, subject to any restrictions on share transfers outlined in the company's bylaws. A shareholder is a person or organisation that owns at least one share in a company. In accordance with the law, a minor may own shares in a company, but it is rare that a minor will engage into a legally binding contract to sell or transfer those shares because minors are not legally capable of doing so.
Through the use of a Power of Attorney, a proxy or agent for a shareholder may engage into a legally binding agreement to sell and transfer the shareholder's shares to another party.
HOW CAN A COMPANY SHARES BE TRANSFERRED
The procedure for the transfer of shares will be divided into two categories:
WHEN THE SHAREHOLDER SELLS THEIR ENTIRE SHAREHOLDING INTEREST
A shareholder must complete a Share Transfer Form or/and Share Sale and Purchase Agreement in favour of the buyer and present it to the company if they choose to sell all of their shares to another person. Additionally, the shareholder will deliver its share certificate to the business.
Once the share transfer form and share certificate have been received, the company will record the transfer and issue one new share certificate to the new shareholder. When a shareholder's name is struck off from the company's register of members, the selling party instantly loses their shareholder status.
WHEN THE SHAREHOLDER SELLS PART OF THEIR SHAREHOLDING INTEREST
A shareholder must sign a share transfer form specifying the number of shares they are transferring and the purchase price when they choose to transfer a portion of their shares in the company rather than all of them.
The shareholder will then deliver the share transfer form together with the shareholder's share certificate to the company. The company will register the purchaser as a shareholder of the company.
Upon registration, the company will issue a new share certificate (reflecting the transfer shares) to the purchaser (the new shareholder) and another share certificate to the shareholder whose shares have been transferred.
POST-INCORPORATION FILING
After completing the transfer, the company is should notify the Corporate Affairs Commission and file form CAC 2A (Return of Allotment) together with the following documents:
A Board Resolution of the company whose shares have been transferred, approving the share transfer
If either the selling party or the purchaser is a company, a Resolution of the Board of Directors from their respective companies authorizing and accepting the share transfer.
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