Regulatory Update: Proposed New Rules On The Issuance And Allotment Of Securities By Private Companies In Nigeria

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On May 7, 2024, the Securities and Exchange and Commission ("SEC") issued the "Exposure of Proposed New Rules for the Issuance and Allotment of Securities...
Nigeria Corporate/Commercial Law
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On May 7, 2024, the Securities and Exchange and Commission (“SEC”) issued the “Exposure of Proposed New Rules for the Issuance and Allotment of Securities by Private Companies” (“Rules”). The Rules are made pursuant to Section 43(1) (b) of the Business Facilitation (Miscellaneous Provisions) Act, 2022 which amended the provisions of Section 67(1) of the Investment and Securities Act and empowers SEC to prescribe regulations for the issuance and allotment of private companies' securities.

In this article, we have provided useful information in connection with the Rules.

1. What do the Rules seek to achieve?

Currently, private companies wishing to raise capital may do so by sourcing for equity or debt investments from investors. Only public companies in Nigeria are permitted to issue securities to the general public, either through private placement or public offering.

The Rules now seek to grant private companies the right to issue and allot securities to the public subject to obtaining the approval of SEC.

2. What is the proposed scope of the Rules?

The Rules are to apply to:

  1. debt securities issued by private companies either by public offering, private placement, or such other methods as may be approved by SEC;
  2. registered exchanges and platforms that admit debt securities issued by private companies for trading, price discovery, or information repository purposes; and
  3. registered capital market operators who are parties in the issuance and allotment of debt securities of private companies.

3. What do private companies need to show to be eligible?

Based on the proposed Rules private companies are to satisfy certain requirements to be eligible including:

  1. be a company duly incorporated under the Companies and Allied Matters Act (CAMA), 2020, or other enabling laws;
  2. have at least 3 (three) years track record of operation;
  3. not be in default of payment of interest or repayment of principal in respect of previous debt issuance(s) for a period of more than 6 (six) months;
  4. cause the bonds to be rated by a rating agency (this however is not mandatory for private placements); and
  5. ensure that all necessary approvals are obtained from relevant regulatory authorities other than SEC, and such approvals are duly filed with SEC.

4. Are there any restrictions on issuance and allotment of securities?

According to the proposed Rules, private companies are only expected to issue debt securities to the public. A private company is not permitted to offer its equity securities to
the public.

5. Are there registration, reporting and disclosure requirements?

In order for private companies to issue and allot securities to the public, they will be required to register with SEC by submitting the requisite documents. They will also be required to comply with reporting and disclosure requirements as set out in the Rules.

6. Are there sanctions/penalties in the Rules?

According to the proposed Rules private companies that issue and allot securities without the approval of SEC are liable to sanctions and penalties including monetary fines, suspension or withdrawal of the registration with SEC.


The exposure draft offers an opportunity for private companies to raise funds beyond the
current available fundraising options. We expect that the finalized Rules will provide
clarity on the requirements of SEC for private companies wishing to raise funds by issuing
securities to the public.

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.

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