Introduction
Going public is a significant milestone for any private company, offering access to capital, increased visibility, and enhanced credibility. In Nigeria, the Nigerian Exchange Group (NGX) formerly The Nigerian Stock Exchange (NSE) provides a platform for companies to raise capital and trade their shares. However, navigating this complex process demands meticulous planning, from securing board and shareholder approval to complying with regulatory requirements stipulated by the Corporate Affairs Commission (CAC), Securities and Exchange Commission (SEC), and the Nigerian Exchange Group NGX.
This guide outlines the requirements, costs, and steps involved in taking a private company public and listing on the NGX.
Regulatory Framework for a Private Company to go Public on the on the NGX
- The CAMA provides the legislative framework for company registration, share restructuring, and corporate governance in Nigeria. This involves special resolution, minimum share capital requirements, mandatory disclosure and reporting requirements and appointments of external auditors for financial verification.
- Compliance with SEC Regulations, file a prospectus and meet disclosure requirements.
- NGE Listing Rules: Companies must comply with specific listing rules regarding corporate governance, financial performance, and public float.
Differences between Private and Public Companies
The primary difference between private and public companies lies in their ownership structure and share transferability. A private company is typically owned by a small group of individuals, with restrictions on share transfers to the public. In contrast, a public company offers its shares for sale on a stock exchange, allowing the public to become shareholders.
Key Differences:
- shareholders: Public companies can have an unlimited number of shareholders, whereas private companies are limited to a maximum of 50 shareholders, as stipulated in CAMA
- Disclosure and Reporting: Public companies are subject to more stringent disclosure and reporting requirements, in compliance with CAMA, whereas private companies have less onerous reporting obligations.
These distinctions highlight the different regulatory requirements and ownership structures that apply to private and public companies in Nigeria
The benefits of Going Public in Nigeria
Transitioning from a private to a public company and listing on the Nigerian Exchange Group (NGX) offers numerous advantages, including:
- Capital Raising:
- Liquidity for Shareholders
- Enhanced Credibility
- Increased transparency and accountability
- Access to a wider investor base
- Improved corporate governance
- Enhanced visibility and brand recognition
By going public, Nigerian companies can unlock new opportunities for growth, expansion, and success.
Categories of Listing available on the NGX
NGX offers a range of listing options through its three boards, each designed to support companies at different stages of growth and development. By choosing the right board, you can access the capital and resources needed to drive your business forward
- Growth board listing
- Main board listing
- Premium board listing
The Step-by-Step Guide in converting a Private Company to a Public Company
Step 1: Board and Shareholder Approval
The journey to becoming a public company begins with obtaining approval from the company's board and shareholders. A special resolution must be passed by the shareholders to authorize the re-registration of the company as a public company.
Step 2: Compliance with the Corporate Affairs Commission (CAC)
Following shareholder approval, the company must file an application with the CAC for re-registration as a public company. The application must include:
- Amended Memorandum and Articles of Association (MEMART) reflecting the change
- Special resolution from the shareholders
- Any other required documents
Step 3: Restructuring the Company's Share Capital
To meet the requirements of a public company, the company may need to restructure its share capital. This involves increasing the issued share capital to a minimum of ₦2 million, which may require issuing additional shares or restructuring existing shares.
Step 4: Appointment of Advisors and Auditors
To ensure a smooth transition, the company must appoint professionals to guide it through the legal, financial, and regulatory aspects of going public. This includes:
- Financial Advisors: to assist with valuation and IPO structuring
- Legal Advisors: to ensure compliance with CAMA, SEC, and NGX requirements
- Auditors: to audit the company's financial statements
Step 5: Filing an Initial Public Offering (IPO)
The company must file an IPO with the Securities and Exchange Commission (SEC), providing a prospectus that includes a detailed description of the company, its business model, and financial condition.
Step 6: Applying for NSE Listing
After initiating the IPO process, the company can apply for listing on the NSE. This involves submitting the company's financial statements, business model, and governance structure to the NSE for review. The company must comply with NSE's listing rules, including the minimum public float requirement. The NGX will review the company's application and ensure that it meets all listing requirements. Once the NGX has approved the company's application, it will be listed on the exchange. The company's shares will be listed on the NGX, and trading will commence.
Costs Involved in Listing on the NGX
The costs involved in listing on the NGX can be significant and include:
- Listing Fees: The NGX charges a listing fee, which varies depending on the type of listing and the company's market capitalization.
- Professional Fees: The company must pay fees to its professional advisers, including lawyers, accountants, and stockbrokers.
- Marketing and Investor Relations: The company may incur costs related to marketing and investor relations, including the preparation of a prospectus and other listing documents.
- Regulatory Fees: The company must pay fees to the Securities and Exchange Commission (SEC) and other regulatory bodies.
Conclusion
Listing on the NGX can provide a private company with access to capital, increased visibility, and enhanced credibility. However, the process involves significant costs and requirements. By understanding the requirements, costs, and process involved, companies can navigate the listing process more effectively and achieve a successful listing.
Originally published January 25, 2025
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.
