Tag: business

Developing an Efficient IP Portfolio Strategy for Startups and SMEs: Beyond Legal Compliance.

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Introduction

Intellectual Property (IP) is a significant asset for startups and small to medium-sized enterprises (SMEs), not only for legal protection but also as a tool for commercial growth and competitive advantage. This is why SMEs should focus on an effective IP portfolio strategy, structured towards managing and leveraging intellectual property (IP) assets for commercial and strategic advantage. It goes beyond mere registration to actively protect, monetize, and integrate IP into business growth plans.

While many businesses focus on fulfilling registration requirements, an effective IP portfolio strategy should align with broader business goals, including market expansion, fundraising, and brand positioning. This article explores how startups and SMEs can leverage their IP assets beyond mere legal compliance to drive commercial success.

Understanding the Business Value of IP

A well-developed IP portfolio strengthens a company’s market position, attracts investors, and increases valuation. Patents, trademarks, copyrights, and trade secrets provide legal protection while also making commercial avenues available to the business in form of licensing, franchise, merchandising and assignment of IP i.e transferring ownership of IP assets to another entity for a lump sum or structured payments. For example, trademarks enhance brand recognition, and strengthens market positioning, patents secure technological innovations, and trade secrets protect proprietary business processes. Businesses that effectively manage their IP tend to experience greater investment interest and financial growth. Startups and SMEs that strategically develop their IP portfolios can establish a competitive edge within their industries and create long-term business sustainability.

Aligning IP Strategy with Business Objectives.

An IP strategy should be integrated into a company’s business development plan. Startups and SMEs need to identify the core aspects of their business that require IP protection and select the appropriate rights accordingly. For instance, a technology startup specializing in artificial intelligence may prioritize patent protection and software copyright, whereas a fashion brand may focus more on trademark and industrial design registration. Investors often view a strong IP portfolio as an indicator of business stability and innovation potential. By ensuring that IP management aligns with broader commercial objectives, startups can enhance their financial and operational prospects.

Prioritizing Key IP Assets

Given the financial limitations of many startups, prioritizing the most valuable IP assets is essential. Conducting an IP audit allows businesses to assess which assets provide a competitive advantage. Companies should categorize their IP as: core IP, which is directly linked to primary products or services; supporting IP, which contributes to brand visibility and credibility; and monetizable IP, which can generate revenue through licensing, franchise and distribution agreements. The Nigerian Startup Act 2022[i] emphasizes the importance of IP identification and protection, offering regulatory support to help startups register and commercialize their intellectual assets. The Act also includes incentives such as tax relief and funding to encourage startups to actively safeguard their IP.

Leveraging IP for Competitive Advantage.

Some of West Africa’s leading companies have demonstrated how intellectual property can be leveraged to create lasting competitive advantages. One notable example is Dangote Group, which has secured trademarks across multiple markets, reinforcing brand trust and preventing unauthorized use of its name in sectors such as cement, salt, and consumer goods. This strategic use of IP protection has allowed Dangote to dominate industries while maintaining a strong corporate identity.

In the technology sector, Flutterwave, a Nigerian fintech unicorn, has actively protected its proprietary payment technology through patents and trademarks, ensuring its brand remains distinctive in the growing African digital payments ecosystem. By securing its innovations and licensing its solutions to partners, Flutterwave has scaled its operations across multiple African countries while preventing competitors from exploiting its technology.

Another example is MTN Group, one of Africa’s largest telecommunications firms, which has strategically used trademarks and copyrights to protect its digital services and content. By securing exclusive rights over its mobile financial service platform, MTN MoMo, the company has established a trusted digital payments brand, preventing market dilution and unauthorized replication of its service offerings.

These examples illustrate how effective IP management goes beyond legal registration. By licensing proprietary technologies, forging strategic partnerships, and protecting brand identity, companies can reinforce their market presence and increase profitability. For startups and SMEs, following the lead of established firms in leveraging IP can significantly enhance business sustainability and long-term success.

Cost-Effective IP Management Strategies.

Since many startups operate within budget constraints, managing IP efficiently is crucial. Businesses can reduce costs by using provisional patent applications, which secure an early filing date before committing to the full cost of a patent. Regional trademark and patent registrations may be prioritized based on market relevance, rather than pursuing global coverage. Several renowned technology startups have successfully adopted hybrid models to balance proprietary rights with open-source accessibility.

For example, Dropbox has taken a hybrid approach with projects like Lepton, a streaming image compression format. They maintained proprietary rights over the compression technique, which provided significant business value, while open-sourcing the project to engage the community and encourage broader adoption. This strategy allowed Dropbox to benefit from community-supported development and code review while protecting aspects of the software that are unique to their business or provide a competitive advantage.[ii]

Another example is the Advanced Technology Research Council (ATRC) in Abu Dhabi, which developed and released a series of large language models named Falcon for free. This open-source approach bolstered the UAE’s credibility in the AI field and allowed global developers to download, modify, and integrate these models, fostering widespread adoption and collaboration. [iii]

These cost-conscious approaches allow startups to safeguard core innovations while fostering industry collaboration, market penetration, and increased adoption. By striking a balance between proprietary protection and selective openness, businesses can optimize their IP assets while allocating resources strategically.

Enforcing and Protecting IP Assets

Securing IP rights is only part of the equation; enforcement is equally important. Startups should actively monitor for potential infringements by using an IP lawyer to carry out watch services and deploy digital tracking tools. Additionally, establishing clear IP ownership agreements with employees and contractors helps prevent disputes and unauthorized disclosures. In the event of infringement, businesses can explore alternative dispute resolution mechanisms to address conflicts in a cost-effective manner. The Nigerian Copyright Act 2022 provides legal frameworks for startups to enforce copyright protection, offering provisions for seeking damages and injunctions against unauthorized use.[iv] By utilizing these mechanisms, startups can protect their creative assets and deter exploitation.

IP as a Fundraising and Investment Tool

For startups seeking investment, a strong IP portfolio can significantly enhance credibility and valuation. Some investors may frequently assess the extent to which a business has protected its intellectual assets before committing financial resources. Highlighting registered patents and trademarks in investment pitches can strengthen a startup’s appeal, in addition to demonstrating how IP protection mitigates competitive risks. Some businesses also explore IP-backed financing, using their intangible assets as collateral for securing funding. Effectively leveraging IP in fundraising efforts increases a company’s chances of securing long-term financial support.

Conclusion

An efficient IP portfolio strategy is more than a legal necessity; it is a fundamental driver of business growth. Startups and SMEs must integrate IP management into their overall strategy, identifying and prioritizing key assets while leveraging their IP for competitive advantage. Protecting and enforcing IP rights ensures that businesses retain control over their innovations while enhancing their appeal to investors and commercial partners. By taking a proactive approach, startups can transform their intellectual assets into powerful economic tools that sustain long-term success.

Endnotes

[i] 2022 Nigeria Startup Act, s 31.

[ii]  Gideon Myle, ‘Balancing Open Source and Proprietary IP’:Dropbox Tech Blog, December 2017 <https://dropbox.tech/infrastructure/balancing-open-source-and-proprietary-ip-they-can-co-exist?>  accessed 9 March 2025

[iii] Harry Booth, ‘Time100 AI 2024’: Time Magazine, September 2024 < https://time.com/7012755/faisal-al-bannai/> Accessed 9 March 2025

[iv] 2022 Copyright Act, s 52.

Level Up Your Startup: Top Incubators & Accelerators to Join in 2025!

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Introduction

The startup journey can be daunting: from building a market fit technology product, growing a formidable team to raising funds required for the execution of your tested idea. However, the startup journey can be more rewarding when founders join tech communities.

 🚀 Joining an incubator or accelerator potentially fast-tracks a startup’s growth, because it connects the founder with networking opportunities, mentorship, and access to resources that propels the startup to the next phase in business and opens such business to strong networks.

💡 From Seedstars in Nigeria to Y Combinator in Silicon Valley, discover the best programs that will take your startup to the next level in 2025 and learn about notable startups that leveraged incubator and accelerator programs for success.

Understanding the Basics

Startup incubators generally take a more flexible, long-term approach towards supporting early-stage ventures. They focus on helping startups develop and mature by providing access to shared office spaces, mentorship, funding advice, and networking opportunities.

For Nigerian startups, joining incubators can be a game-changer. Incubators like Co-Creation Hub (CcHUB) in Lagos provide a collaborative environment where startups can develop innovative solutions that addresses societal challenges. Their Pre-Incubation program supports entrepreneurs in crafting tech solutions, offering mentorship and resources that give life to your business concepts.

Startup accelerators, also known as seed accelerators or startup incubators, are essential in fostering the growth and success of early-stage businesses. These programs follow a fixed-term, cohort-based structure, delivering intensive support and resources to the startups involved. Through a combination of mentorship, education, networking, and seed funding, accelerators help startups achieve rapid growth and scalability. Accelerators are equally crucial for small and medium-sized enterprises (SMEs) aiming to scale. Programs like Seedstars have been instrumental in supporting Nigerian startups. Notable companies such as Chaka and Quickcheck have benefited from Seedstars’ accelerator program, gaining access to funding, mentorship, and a global network.

By participating in these programs, startups not only gain essential support but also increase their chances of long-term success. This year, you can elevate your startup by exploring incubator and accelerator programs today to unlock your venture’s full potential!

Here are some notable programs along with their application timelines:

Global Programs:

  1. Y Combinator: Based in Silicon Valley, Y Combinator offers seed funding, mentorship, and resources to early-stage startups. They run two batches annually, with application deadlines typically in March for the Summer batch and September for the Winter batch. Notable alumni include Airbnb and Dropbox.
  2. Techstars: With a global presence, Techstars provides mentorship-driven accelerator programs, connecting startups with a vast network of mentors and investors. Application deadlines vary by location and program, so it’s advisable to check their official website for specific dates.
  3. Plug and Play Tech Center: Located in California, Plug and Play offers a 12-week program focusing on tech startups, providing mentorship and opportunities to connect with corporate partners. They have multiple programs throughout the year, each with its own application deadline. Details can be found on their official website.

Programs with a Presence in Nigeria:

  1. Seedstars: An accelerator that has been instrumental in supporting Nigerian startups, offering funding, mentorship, and access to a global network. Application periods are announced annually, and interested startups should monitor their official channels for updates.
  2. Founder Institute: A global accelerator with chapters in over 200 cities, including Lagos, offering a structured program to help entrepreneurs launch their startups. They typically run two cohorts per year, with application deadlines in the first and third quarters. Specific dates are available on their website.

Participating in these programs can provide startups with essential support, mentorship, and access to networks crucial for success. By engaging with incubators and accelerators, startups can enhance their growth trajectory and increase their chances of long-term success.

Explore incubator and accelerator programs today to unlock your venture’s full potential!

Strategies for Managing Attrition & Retaining Top Talents in Nigerian Law Firms.

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In the wake of mass migration of Nigeria’s vibrant youths’ scurrying to western climes for greener pasture, employee attrition poses a significant challenge for law firms, which impacts both operational efficiency and client service delivery. Thus, retaining top talents while maintaining high performance levels is crucial to Nigeria’s contemporary realities of legal practice.
This post provides the insights required to address attrition in law firms, retain top talents, which will invariably sustain efficient service delivery.

A. Strategies to Deploy.

  1. Prioritize Work-Life Balance.
    Long working hours and high-pressure deadlines can lead to burnout among legal professionals. To mitigate this, law firms should consider:
    (i) Encouraging Flexible Working Arrangements by implementing options for telecommuting and flexible work hours to help employees manage their professional and personal time.
    (ii) Promote Wellness Initiatives by organizing stress management workshops, fitness challenges, or provide access to wellness programs to support employees’ mental and physical health, in addition to creating communities in work spaces to foster social connections among employees.
    “Employees who feel their personal well-being is prioritized tend to stay longer and perform better.” – Lawyers Mutual NC.
  2. Offer Professional Development Opportunities.
    Providing avenues for career growth can boost morale and demonstrate a law firm management’s commitment to advancing its team members professional development through:
    (i)Hosting Training Sessions and Workshops law firms give employees the freedom to deploy skillsets that will promote their personal brands in professional and interest-based communities where training and project planning capacities are required. Involvement in extracurricular activities will enable employee create outlets for expressing secondary skills which can be useful to them in their future career aspirations and transitions.
    (ii) Support Certifications or Continuing Education by advancing financial assistance towards part funding continuous learning and professional certifications. These are key deposits capable of advancing employee morale and invariably retention because it demonstrates that the management have vested interest in their professional growth.
    (iii) Implement Mentorship Programs by connecting junior employees with experienced professionals within the law firm and the law firm’s affiliate professional relationships, which will foster knowledge transfer and career guidance, in addition to honing the interests of junior lawyers in the practice of law.
    “When law firms invest in their employees’ growth, they invest in their future success.”
  1. Foster a Supportive and Inclusive Culture
    A positive work environment where employees feel valued is essential for retention. To achieve creating a supportive and inclusive culture, it is important for law firms to:
    (i) Promoting DEI Initiatives by actively supporting diversity of interests and aspirations, equity, and inclusion to create a welcoming environment for all. With this in perspective, employees are more likely to have a sense of belonging.
    (ii) Recognizing and Rewarding Achievements are integral towards celebrating individual and team successes, in addition to motivating and acknowledging contributions.
    (iii) Encouraging Open Communication which fosters an environment where feedback is welcomed and addressed without fear of retaliation.
    (iv) Creation of Alumni Community of past employees to advance the law firm’s network, as well as promoting cross selling agenda, are also key components for creating the law firm’s alumni community. It also presents opportunities for the firm to assess the current workforce capabilities with its team of alumni who have progressed in their careers, whilst forming the basis for evaluating the firm’s key values and the need to reinvent the law firm’s culture if need be.
    “An inclusive firm culture isn’t just a strategy; it’s a necessity for long-term success.”
  2. Enhance the Physical Work Environment
    The office setting significantly influences employee morale, inducing productivity considering that its an expression of the firm’s corporate brand. To improve work environment, law firms should:
    (i) Ensure Ergonomic Workspaces by providing comfortable, secure and aesthetic furniture both shared and personalised, capable of impacting employees psychologically, and increasing work productivity connected to the required hours on a task and/or project.
    (ii)Invest in Up-to-Date Technology by equipping the office with modern tools to streamline workflows, increase productivity and promote remote work.
    (iii) Create Collaborative and Quiet Spaces designating areas for teamwork and focused work, to accommodate different work styles.
    “Comfortable employees are productive employees.”

5. Develop Open Communication Policies.
Transparency and regular communication strengthens trust within the firm. Law firms are required to take the following action:
(i) Regular Check-Ins by supervisors to ensure they frequently engage with staff to discuss workloads, concerns, and suggestions.
(ii).Solicit Feedback on Firm Policies by encouraging employees to provide input on policies and procedures, demonstrating that their opinions are valued.
(iii) Implement Employee Recognition Programs to acknowledge and reward performance which will translate in morale enhancement and reinforce desired behaviours consistent with the core values of the law firm.
“Feedback isn’t a critique—it’s a tool for growth.”

B. Conclusion

These nuggets are not exhaustive, however adopting these strategies can create a work environment that not only reduces attrition but also enhances efficiency and client service delivery. Prioritizing employee well-being and professional growth leads to a more committed and productive workforce, ultimately contributing to the firm’s success.


If this post provided the insights you need to develop human capital capacities for your law firm, please engage with us across social media platform. We also looking forward to receiving your contributions.

Key Provisions of the Nigeria Start-Up Act 2022 Every Tech Founder Should Know.

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The Nigeria Start-Up Act 2022 (the ‘Act’) is a transformative legislative instrument designed to stimulate innovation, entrepreneurship, and economic growth within Nigeria’s startup community. Enacted as a collaborative effort between the Nigerian government and the tech community, the Act’s foremost objective is to position Nigeria as a key player in Africa’s innovation and technology industry by addressing critical challenges facing startups, streamlining processes, and establishing support mechanisms to ensure that Nigeria remains competitive in the global digital economy. The Act fundamentally creates the right incentives and ecosystem for startups to innovate and grow.

The key provisions outlined below are legal and regulatory requirements every tech founder should be familiar with, emphasizing their implications for new and existing startups.

1. Definition of a Start-Up

The Act provides a detailed definition of what constitutes a startup. According to the Act, a startup must:

a). Be a company incorporated under Nigerian law and in existence for no more than ten years;

b). Engage in the development of digital technology products, or improvement of innovative processes i.e products or services;

c). Be predominantly Nigerian-owned, with at least 51% of its shares held by Nigerians;

d). Possess the capacity to scale and generate revenue.[1]

This definition ensures that only genuinely innovative businesses qualify for the benefits provided under the Act. Tech founders are advised to align their business structures to meet these criteria where possible.

2. Start-Up Label Certification

One of the most crucial aspects of the Act is the introduction of the startup label, which is granted to eligible companies by the National Information Technology Development Agency (the ‘Secretariat’) through a digital portal. The certification process involves submitting an application via the portal, that meets the criteria outlined in the Act, subject to the standard assessment. Once these requirements are fulfilled, the company receives a start-up label, valid for 10 years.

Certified startups gain access to several benefits, including:

  • Tax exemptions;
  • Incentives for investment;
  • Government grants and loans;
  • Capacity-building opportunities.[2]

Startups should ensure that their applications are comprehensive and adhere strictly to the requirements of the Act.

3. Tax Incentives[3]

The Act prioritizes tax incentives for angel investors and venture capitalists to attract investment into the startup ecosystem for the purpose of reducing the financial burden on startups. These include:

a. Tax Holidays

Startups are entitled to tax holiday of up to four years from the date of certification under the Act.

b. Research and Development (R&D) Deductions

Expenses incurred on R&D activities are deductible from taxable income, encouraging startups to innovate and remain competitive.

4. Access to Funding[4]

The Act prioritizes access to funding, by introducing key mechanisms to ensure that startups can access funding efficiently:

a. Start-Up Investment Seed Fund

A Start-Up Investment Seed Fund is established with a minimum annual allocation of N100,000,000 managed by the Nigerian Sovereign Investment Authority (NSIA), to provide grants, loans, and equity investments to certified startups, inclusive of export-focused supports such as the Export Development Fund, Export Expansion Grant, and Export Adjustment Scheme Fund.

b. Credit Guarantee Scheme

Additionally, labelled startups can benefit from affordable credit through a dedicated Credit Guarantee Scheme to reduce risks borne by lenders when financing startups.      

5. Regulatory Flexibility[5]

Startups often face significant regulatory hurdles, which can stifle growth. The Act addresses this by offering regulatory flexibility through sandbox programs, allowing startups to test innovative products and services under relaxed regulatory conditions.

6. Market Access and Regulatory Support

The Act simplifies regulatory processes and enhances market access for startups, that ensures they focus on business growth rather than navigating complex regulations. Central to this initiative is the Startup Portal, a one-stop platform for registration, prioritizing startup applications, and facilitating interactions among investors, regulators, and startups. Launched in 2023, the portal is accessible at https://startup.gov.ng.[6]

The Act also mandates the Secretariat to facilitate regulatory support for startups by collaborating with relevant regulators to ease compliance processes and foster access to local and international markets.[7]

To qualify as a startup under the Act, a business must satisfy all requirements listed in the definition section of this article.

7. Intellectual Property (IP) Protections[8]

Startups often operate in industries where intellectual property is a core asset. The Act places strategic emphasis on intellectual property (IP) rights, as highlighted in Section 31, recognizing their pivotal role in fostering innovation and entrepreneurship. The Act actively promotes the creation, protection, and commercialization of IP assets by startups, while also facilitating their penetration into global markets. This effort is anchored in partnerships with key institutions such as the Nigerian Copyright Commission and the Trademarks, Patent, and Design Registries.

A significant innovation under the Act is the inclusion of a dedicated IP registration channel within the Startup Portal, exclusively accessible to startups that have obtained the required labelling from the Secretariat. This initiative simplifies the process for registering trademarks and patents internationally, enabling Nigerian startups to compete on the global stage more effectively. The Secretariat’s active role in this process ensures that startups can navigate international IP frameworks with greater ease and efficiency.

This enhanced IP registration and protection framework is a critical step in boosting Nigeria’s startup ecosystem, empowering businesses to secure their innovations while expanding their market reach. Such progress aligns with Nigeria’s ongoing economic diversification efforts, as the Information and Communication Technology (ICT) sector contributed 19.78% to the country’s GDP in the second quarter of 2024, reflecting the nation’s shift away from reliance on oil.

8. Innovation Hubs and Incubators[9]

The Act empowers the National Information Technology Development Agency (NITDA) to collaborate with relevant stakeholders to establish hubs and incubators that will promote collaboration, mentorship, and networking. These hubs are designed to serve as centres for knowledge exchange and support, providing startups with the resources needed to develop and scale innovative ideas.

9. Dispute Resolution

The Act provides a streamlined dispute resolution mechanism to handle conflicts involving startups. It promotes the use of alternative dispute resolution mechanisms and establishes a Start-Up Tribunal to handle disputes related to its provisions[10].

Conclusion

The Nigeria Start-Up Act 2022 is a landmark legislation that substantially supports technological innovation. Its provisions on certification, funding, tax incentives, and regulatory flexibility create a conducive environment for startups to thrive.

However, it is worth noting that the year 2023 witnessed a sharp decline in global investment in startups and innovation, signaling a marked reversal from the funding boom of 2020-2022. According to the 2024 Global Innovation Index Tracker, venture capital funding and scientific output regressed to pre-pandemic levels, with the downturn hitting emerging regions like Latin America and Africa particularly hard. Nigeria’s startup ecosystem was not immune to these challenges, as the total funding received by local startups plummeted.[11]

Several factors contributed to this funding drought. The global economic slowdown has made institutional investors more cautious, particularly in high-risk areas like startup investments, where only a fraction of ventures eventually become profitable. In Nigeria, the challenges are compounded by the volatile foreign exchange (forex) market, which significantly reduces the value of returns when capital and profits are repatriated. This has deterred foreign investors, who are critical to the country’s tech ecosystem.[12]

Another significant factor is the rise of emerging technologies, particularly artificial intelligence (AI). Investors have begun to pivot their strategies, channeling funds toward innovators in AI and other emerging verticals, sometimes at the expense of broader startup ecosystems. This shift reflects a global recalibration of priorities as technological advancements reshape the landscape of innovation.[13]

The broader innovation landscape has also suffered setbacks. Corporate research and development (R&D) spending has slowed, mirroring stagnant revenue growth and recalling the post-2009 financial crisis. Although R&D investment levels remain historically high, their growth has plateaued, and international patenting activity has declined.

Looking ahead, while some central banks have started to cut interest rates, conditions for innovation financing remain tight. This environment may continue to weigh negatively on investments in startups and innovation, particularly in emerging economies like ours (Nigeria). The outlook for 2024 and 2025 remains unusually uncertain, raising concerns about how startups in these regions will navigate these financial headwinds.

For tech founders, while understanding and leveraging the Act is essential for building resilient and scalable businesses. Aligning business operations with the Act’s requirements will become more beneficial in promoting innovation in Nigeria’s digital economy, if Nigerian startups and policymakers prioritize fostering local investment sources, diversifying funding strategies, and aligning with global trends in emerging technologies to stay competitive.

Written by Adeola Osifeko Esq LLB, LLM, ACIS

Partner, Corporate-Commercial Practice Group, AEO Law Practice

[1] Nigeria Start-Up Act 2022, s 2

[2] World Intellectual Property Office, ‘Nigeria’s Startup Act’s Impact on Innovation’ 14 March 2024 <https://www.wipo.int/en/web/global-health/w/news/2024/news_0004> Accessed on 2 December 2024

[3] Nigeria Start-Up Act 2022, s 24

[4] Nigeria Start-Up Act 2022, ss 19 and 21

[5] Nigeria Start-Up Act 2022, s 37

[6] Nigeria Start-Up Act 2022, s 13

[7] Nigeria Start-Up Act 2022, s 18

[8]  WIPO (n2)

[9] Nigeria Start-Up Act 2022, s 28(1)(e)

[10] Nigeria Start-Up Act 2022, s 47-48

[11] WIPO, ‘ Global innovation Inde 2024’ September 2024 https://www.wipo.int/web-publications/global-innovation-index-2024/en/  Accessed on 3 December 2024

[12] Ibid

[13] Ibid

THE LEGAL REQUIREMENTS FOR THE ACQUISITION OF A NIGERIAN COMPANY’S SHARES.

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Introduction.

Under the Companies and Allied Matters Act (CAMA) 2020, acquiring shares in a company, whether a private limited liability company (Ltd) or a public limited liability company (Plc) follows distinct legal procedures. Shares represent ownership in a company, and acquiring them grants an investor rights, such as dividends and voting power.

For private companies limited by shares, share acquisition requires internal approval due to limitations on public trading. Conversely, public companies limited by shares offer more flexibility, allowing shares to be acquired through stock exchange purchases for listed public companies, public offerings, rights issues, and private placements. Understanding the specific provisions for allotment and other forms of trading of shares is essential for any investor or stakeholder seeking to acquire shares in a Nigerian company.

1.    Acquiring Shares from a Private Limited Liability Company (Ltd) Under CAMA 2020

Private companies limited by shares, as governed by CAMA 2020, are subject to specific rules on how shares can be acquired. They have restrictions on the transfer of shares, as shares are not freely transferable in comparison with public companies limited by shares.[1] Below are ways in which shares are acquired in companies limited by shares.

1.1    By Allotment (Issuance of New Shares)[2]

Allotment refers to the issuance of new shares by a company, including the conversion of any security into shares in the company other than shares so allotted. By virtue of Section 149, the power to allot new shares is vested in the company, and in relation to private companies, allotment of new shares may be offered to either existing shareholders or new investors subject to the authorisation of directors as provided in the articles of association or as authorised by the directors following a special resolution passed at the company’s general meeting. Here are steps to follow:

1.1.1  Application by the Subscriber

For new companies, shares are allotted to the subscribers of the Memorandum and Articles of Association at the point of registration.[3] Subsequent investors or shareholders wishing to subscribe to the newly issued shares must apply for them by submitting a formal application. This application is typically made in response to the company’s invitation to subscribe and the subscriber shall state the number of shares s/he (in respect to an individual) or it (in respect to a corporate entity) wishes to acquire.

1.1.2  Acceptance of Application and Board Approval

On receipt of the application for allotment of shares,[4] the company shall wholly or partly allot shares to the applicant within 42 days after the receipt of the application and inform the intending investor of the number of shares allotted. Under Section 151, when an application for shares is made and subsequently accepted by the company, this acceptance constitutes a legally binding contract. The acceptance signifies the company’s agreement to allot a specific number of shares to the applicant in exchange for the consideration (payment/payment other than cash) outlined in the application.

1.1.3 Payment for the Shares

Section 152 provides that payment for shares must be made in accordance with the terms specified in the company’s articles with respect to the share allotment and section 160 wherein it further provides that the shares of a company and any premium on them shall be paid up in cash, or where the articles so permit by valuable consideration other than cash or partly in cash and partly by valuable consideration other than cash.

Typically, payment for shares must be made on or before the date specified in the allotment notice.

1.1.4 Return of Allotment to CAC

The legal requirement is that within one month after making the allotment,[5] the company must file a return of the allotment with the Corporate Affairs Commission (CAC). The return includes details of the allotment, such as the names, address and description of the allottees, and the number of shares allotted to each shareholder/investor.

1.1.5 Issuance of Share Certificate and Update of the Register

Once payment is received and the shares are allotted, the company is obligated to:

  • Register the allotment with the Corporate Affairs Commission within one (1) month as required by law.[6]
  • Issue within two months after the allotment of any of its shares, a share certificate to the subscriber as proof of ownership[7]  and;
  • Update the register of members to reflect the new shareholder.[8]

1.2   Acquisition of Shares by Transfer (Purchase from an Existing Shareholder).[9]

   Share transfers in a private limited company is primarily governed by section 175. This involves the sale of shares by an existing shareholder to another individual, subject to certain restrictions.

  1. Restriction on Transferability:

Section 175(1) provides that a transfer of shares shall be effected by an instrument of transfer and except expressly provided in the articles, transfer of shares restriction and the instrument of transfer shall include electronic instrument of transfer. In subsection 4, it is provided that notwithstanding the restriction of a company’s article, the shares to be transferred whether wholly or partly shall also be effected by any other form which may be approved by the company’s director.

1.2.2 Requirement of the Instrument of Share Transfer

The instrument of transfer of shares shall be executed by and on behalf of the transferor and transferee and the former shall be deemed to remain a holder of shares until the name of the transferee is entered in the register of members in respect of the share

  1. Conditions in which a share transfer may be refused:

By law, a share transfer of a share not being fully paid as well as share on which a company has a lien may be refused registration.[10]

On the other hand, the company shall recognise the instrument of transfer and register same where the following conditions are being satisfied:

  • the fees determined by the company is paid in respect of the instrument of transfer
  • the instrument of transfer is accompanied by the certificate of the shares to which it relates and as such other evidence as the directors may reasonably require to show the right of the transferor to make the transfer.
  • the instrument of transfer is in respect of only one class of shares: and
  • If a company refuses to register a transfer of any share, it shall, within two months after the date on which the transfer was lodged with it, send notice of the refusal to the transferee.
  1. Transmission of Shares[11]

The law provides for the transmission of shares in cases where a shareholder passes away or becomes incapacitated. This process occurs by operation of law and differs from the voluntary transfer of shares, which is initiated by a shareholder during their lifetime.

1.3.1   Transmission in the Case of a Deceased Shareholder

When a shareholder dies,[12] it is required that the company only recognizes the following individuals as having the authority to deal with the deceased’s shares:

  • The legal representative of the deceased shareholder (in the case of sole ownership of shares); or
  • The surviving joint holder (if the deceased was a joint holder of shares).These individuals are recognized by the company as being entitled to inherit or manage the shares of the deceased/bankrupt shareholder.

1.3.2  Evidence of Transmission

According to Section 179(2), the company may require the legal representative or surviving joint holder to provide evidence to the directors of the company that proves their right to act on behalf of the deceased or bankrupt/incapacitated shareholder. Such evidence could include a death certificate, grant of probate, or letters of administration, depending on the circumstances and the company’s requirements, judgment for a bankrupt shareholder or a medical report for an incapacitated.

The provision further provides that the legal representative or surviving joint shareholder has the right to nominate either themselves as the holder of the shares; or another person to be registered as the shareholder in place of the deceased.

If the legal representative chooses to nominate themselves, they must provide written notice of their intention to the company and sign the necessary documents.[13] If they wish to nominate someone else, they must execute a transfer of shares instrument on behalf of the deceased/bankrupt/incapacitated person in favour of the nominated person.

1.3.3 Company’s Rights Regarding Transmission

Under Section 179(4), all the limitations, restrictions and provisions of CAMA 2020, the company’s articles relating to rights to transfer and the registration of transfer of shares, are applicable to such notice as mentioned in subsection (3) as if the death or bankruptcy or incapacitation of member had not occurred and the notice or transfer was signed by that member. The company retains the right to refuse or suspend the registration of the transmission of shares. This refusal can be based on the same grounds that would apply to the transfer of shares, such as failure to comply with the company’s articles of association or other conditions. This section ensures that companies maintain control over the entry of new shareholders, even when the transmission arises by the operation of law.

2.   Acquiring Shares from a Public Limited Liability Company (PLC) Under CAMA 2020

Public limited companies (Plcs) can issue and trade shares depending on if it listed or unlisted, and various methods exist for these acquiring shares. Under CAMA 2020, public companies can offer their shares to the general public through several avenues, including public offerings, rights issues, private placements, and buying on the stock exchange for publicly listed companies.

2.1     Public Offering (IPO)[14]

A Public Offering or Initial Public Offering (IPO) is when a company offers shares to the public for the first time. Public offerings are regulated by the Investment and Securities Act (ISA) and the Securities and Exchange Commission (SEC).

2.1.1     Review the Prospectus:

When a company issues shares to the public, it must issue prospectus, which contains all the accurate and necessary information about the company and the share offering. Investors can use this document to make informed decisions about purchasing the shares.

  • Application and Payment:

If you wish to purchase shares based on the IPO, you must submit an application form along with payment. The shares are usually priced per unit in the prospectus.

  • Allocation and Issuance of Share:

After the IPO closes, the company will allocate shares to the applicants. If successful, the shares will be credited to your Central Securities Clearing System (CSCS) account, and you will become a shareholder.

2.2     Rights Issue[15]

A rights issue allows a company whether public or private company limited by shares to raise additional capital by offering more shares to its existing shareholders, often at a discounted price. This process is governed by Section 142 on pre-emption rights. Notwithstanding, the following steps are required for rights issue:

2.2.1 Rights Circular: The company will send a rights circular to existing shareholders, informing them of the number of new shares available and the price at which they can be purchased.

2.2.2 Subscription to Rights: As an existing shareholder, you have the right to purchase additional shares in proportion to your current shareholding by subscribing to the rights issue. Once the rights issue is complete, the company will a subsequent share certificate evincing the issue the new shares.

2.2.3 Renunciation and Trading of Rights: If you do not want to participate in the rights issue, you can renounce your rights and sell them to another investor.

2.3  Private Placement[16]

Private placement refers to the sale of shares to a select group of investors, typically institutional or high-net-worth individuals. This method is often used by public companies to raise funds quickly and is governed by Securities Exchange Commission Rules

Rule 339 defines private placement as the issuance of securities by a public company to a select group of persons. Rule 340 further outlines the conditions under which public companies must comply for SEC approval.

2.4   The private placement process involves several key steps:

Board Resolution: The company’s board of directors passes a resolution to hold a general meeting to authorize the private placement.

General Meeting: The general meeting is held, and a special resolution is passed by the shareholders to approve the private placement, specifying the number of shares and the price.

Publication of Notice: The notice of the general meeting is published in two national daily newspapers.

Application to SEC: The company applies to the SEC for approval, attaching necessary documentation such as proof of the general meeting notice and the special resolution, and evidence supporting the need for the private placement.

Offer to Subscribers: The offer is made to a limited number of subscribers (not exceeding 50) for a period not exceeding 10 working days unless otherwise extended by the SEC.

Compliance with Rule 341: The private placement must not be advertised or discussed in the media. Any breach of this rule could result in the suspension or withdrawal of SEC approval, and capital market operators advising on the placement may also face sanctions.

Issuance of Shares: After the placement is complete, the company issues the shares to the selected investors, and they are entered into the register of members.

2.4 Stock Market Purchase[17]

Once a public company is listed on the Nigerian Exchange (NGX) , its shares can be bought and sold freely in the primary and secondary market.

NGX operates a fair, transparent, and orderly market, connecting top African enterprises with global investors. Investors can participate in the market by acquiring securities either through the primary market (during new offerings by issuers) or by trading existing listed securities on the secondary market via the NGX platform.[18]

To invest in either the primary or secondary market, an investor must engage a securities dealer/stockbroker who is a registered Trading License Holder of NGX. This broker will facilitate both account opening and trading activities. As part of the account opening process, investors are required to submit documents to their broker that fulfill the Know-Your-Client (KYC) regulatory requirements.

Both domestic and foreign investors who wish to trade on NGX can opt to hold their assets with the Central Securities Clearing System Plc (CSCS), which serves as the central depository for clearing and settling transactions in the Nigerian capital market. Investors may do this through their appointed stockbroker or a licensed domestic custodian of their choosing.

Checklist Under CAMA 2020:

Pre-emption Rights: Existing shareholders in both private and public companies have the right to be offered new shares before they are made available to others (Section 142).

Register of Members: After any share acquisition (whether by allotment, transfer, or transmission), the company must update the register of members as provided in section 109 CAMA 2020 for private companies or the index of members for public companies pursuant to section 111 CAMA 2020.

Share Certificate: After a transfer, transmission or allotment of shares, the company must issue a share certificate.

Written by Adeola Osifeko Esq LLB, LLM, ACIS

Partner at AEO Law Practice, Corporate Commercial Group

[1] Companies and Allied Matters Act 2020 s22

[2] CAMA 2020, s149

[3] CAMA 2020, s27(1),(2),(3) & (5)

[4] CAMA 2020, s150(1)(c)

[5] CAMA 2020, s154(1)

[6] CAMA 2020, s156(1)

[7] CAMA 2020, s171(2)

[8] CAMA 2020, s109

9. CAMA 2020, s171, 175,176 & 177

[10] CAMA 2020, s176(3)

[11] CAMA 2020, s179

[12] CAMA 2020, s179(1)

[13] CAMA 2020, s179(3)

[14] Investment and Securities Act 2007 (ISA), s67

[15] CAMA 2020, s142

[16] Securities Exchange Commission Rules & Regulations 2013, rr339 & 340

[17] Nigerian Exchange Group, “Becoming A Member” < https://ngxgroup.com/exchange/trade/becoming-an-investor/> Accessed on 30 September 2024.