Nigeria: Share Certificates And Dematerialisation In Nigeria

Last Updated: 4 March 2014
Article by Vincent Iweze and Chinonyelum Uwazie

Shares relate to the proprietary interest that shareholders have in a company and are the basis for the existence of a relationship between a company and its shareholders. The significance of this interest is that it is the object through which the holders become members of a company, such that the issuance of a share certificate under the common seal to shareholders constitutes prima facie evidence of the title of the members to those shares (s.1 of the Companies and Allied Matters Act). This paperbased system, however, is fast becoming obsolete, as technological advances have resulted in a global preference for electronic mechanisms of recognising the ownership of shares.

In most cases, the contract with the company is constituted by an application being made by the intending shareholder to the company for an allotment of a certain number of shares, and by an allotment being made and notified to him – effectively invoking the provisions of section 125 of the Act. Where the company wholly or partially accepts the application, an allotment will be made to the applicant and, within 42 days after the allotment, the applicant will be notified of the allotment and the number of shares allotted to him (s.125(c)). Upon registration of the name in the company's register, the allottee becomes a member of the company. Furthermore, section 146(1) of the Act requires every company to issue certificate of shares allotted or transferred to the allottee or transferee as the case may be.

Share certificates confer proprietary rights on the holder, and like any other property belonging to an individual, can be sold or transferred by the shareholder. A share certificate, like a membership register, is prima facie evidence (s.147) only and not a title document, as where there is conflict between it and the register of members, the latter is stronger prima facie evidence than the former as to evidence of title and membership of the company.

The introduction of the Central Securities Clearing System (CSCS) by the Securities and Exchange Commission (SEC) in conjunction with the Nigerian Stock Exchange has, however, made the issuance of physical paper certificates redundant, especially for companies whose shares are traded on the Stock Exchange, as the CSCS incorporates a Central Securities Depository for the share certificates of listed securities and a sub-registry for all listed securities.

Upon opening a CSCS account, a shareholder's data is captured and transferred into an electronic register with the equivalent number of securities credited in electronic form to the CSCS depository. An electronic statement reflecting the shareholder's shareholding and its current value replaces the physical paper share certificates earlier issued. This process, otherwise known as dematerialisation, facilitates paperless trading whereby transactions are executed electronically.

It is quite regrettable that the Act does not provide for dematerialisation – a shortcoming that needs urgent redress. While the form of the certificate is governed by the Articles of the company, the Act requires that the certificate be issued under the common seal of the company (s.146(3). In effect, the Act only recognises physical paper certificates. In practice, however, most companies, especially publicly-listed companies, do not issue share certificates; rather, they direct allottees to open CSCS accounts so that their shareholding will be reflected therein. In effect, the actions of these companies are a contravention of the provisions of the Act, notwithstanding the fact that the shareholder or investor can demand physical share certificates (s.146(5) accords the shareholder the right to seek redress in court where the company fails to issue physical share certificates).

For companies trading on the floor of the Stock Exchange, the 2011 Consolidated Rules and Regulations of SEC require that their shares are held in dematerialised form (rule 168(a)). The question therefore is "Can the rules and regulations made by SEC (being subsidiary legislation) supersede the provisions of the Act?" While applauding the notable strides of SEC in providing these rules, it is imperative, as is the case in India, that the Act be reviewed to accommodate dematerialisation.

So far as these provisions are still operative under the Act and pending harmonisation with SEC rules, the nonissuance of share certificates constitutes an offence under the Act. Just as the new Evidence Act 2011 provides for the admissibility of electronic signature and documents, it is high time that the importance of technology as a tool for business and advancement is recognised in Nigerian corporate legislation. Courage Isibor

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.