Nigeria
Answer ... The key requirements for a primary listing on the NGX are as follows:
- The company must be a public limited company with no restrictions on the transfer of its fully paid shares.
- All securities for which listing is sought must first be registered with the SEC.
- The securities must be fully paid-up at the time of allotment in compliance with applicable SEC rules.
- Financial statements must be prepared and audited in accordance with International Financial Reporting Standards.
- The company shall pay the prescribed listing fee.
In addition to the above, the company shall comply with such other requirements prescribed by the listing category chosen by it, i.e., the Growth Board – Entry and Standard, Main Board – Standards A, B and C, or Premium Board. Some of the other requirements are shown in the table below:
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Growth Board |
Main Board |
Premium Board |
Criteria |
Entry |
Standard |
Standard A |
Standard B |
Standard C |
Pre-tax Profits |
No requirement |
NGN300 million over the last 3 years, with at least NGN100 million pre-tax profits in 2 of the years |
NGN600 million over the last 1 or 2 years |
No requirement |
Satisfy main board requirements |
Market Capitalization |
not less than NGN50 million. |
not less than NGN500 million. |
No requirement |
not less than NGN4 billion. |
equal to or greater than NGN200 billion. |
Shareholders’ Equity |
No requirement |
No requirement |
NGN3 billion |
No requirement |
No requirement |
Operating Track Record |
Has been in operation for at least 2 years OR; a new business that can provide evidence of investment in it by a core investor or a strong technical partner that has a minimum of two (2) years operating track record, or a majority shareholder who is either a high net-worth individual or is a director of a listed company |
Has been in operation for at least 2 years OR; a new business that can provide evidence of investment in it by a core investor or a strong technical partner who has a minimum of four (4) years operating track record, or a majority shareholder who is a high net-worth individual |
3 years minimum operating track record |
3 years minimum operating track record; or evidence of 3 years minimum operating track record of a core investor |
Score a minimum rating of 70% under the NGX’s Corporate Governance Ratings System (CGRS) |
Financials (date of last audited accounts must not be more than 9 months) |
2 years financials or evidence of investment in it by a core investor or strong technical partner that has a minimum of 2 years operating track record or a majority shareholder who is either a high net-worth individual or is a director in a listed company |
2 years financials or evidence of a core investor or strong technical partner who has a minimum of 4 years operating track record or a majority shareholder who is a high net-worth individual |
3 years financial statements |
3 years financial statements or evidence of a strong technical partner with substantial equity holding and involvement in the issuers’ management, who has a minimum of 3 years’ operating track record and financial statements |
Satisfy other main board requirements |
Free Float |
10% of the issuer’s share capital made available to the public and held by not less than 25 shareholders |
15% of the issuer’s share capital made available to the public and held by not less than 51 shareholders |
20% of the issuer’s issued share capital made available to the public and held by not less than 300 shareholders. |
20% of the issuer’s issued share capital made available to the public and held by not less than 300 shareholders |
A company may also list its securities on the Alternative Securities Market (ASeM) Board, which is for emerging businesses, and the Technology Board. A foreign issuer seeking a primary listing must comply with the additional requirements contained in the NGX Cross-Border Listing Rules.
The following restrictions and exemptions apply:
- The NGX may refuse an application for listing if this is in the interest of the investing public or if the securities are not suitable for listing.
- Mineral companies (i.e., mining, oil and gas) that wish to be listed on the NGX main board are exempted from the three-year track record requirement. Such companies must produce a competent person report describing, among other things, the nature and extent of their rights of exploration.
- With respect to foreign issuers, the SEC may – if it is in the public interest and where a reciprocal agreement exists between Nigeria and the issuer’s country or where the issuer’s country is a member of the International Organization of Securities Commissions – grant an exemption from compliance with any of the requirements for the registration of securities in Nigeria.
To list debt securities on the FMDQ Exchange, an issuer must comply with the following provisions of its Bond Listing and Quotation Rules of 2014:
- Be a registered company.
- Have a minimum of three (3) years’ operating track record.
- Have a pre-tax profit from continuing operations of not less than NGN300 million cumulatively for the last three fiscal years, and a minimum of NGN100 million in two of those years.
- Have audited financial statements covering the last three fiscal years, provided that the most recent statement at the time of submission of the application is not more than nine (9) months old. Where the issuer does not have audited financial statements for the last three years, the issuer shall provide evidence of a strong technical partner who has a minimum of three (3) years operating track record, with substantial equity, involvement in management and the audited financial statements for the last three years of the technical partner.
- Have the lower of shareholders’ equity of not less than NGN3 billion, or a market capitalisation of not less than NGN4 billion, at the time of the listing/quotation.
- Ensure that the securities are fully paid up at the time of allotment and registered in compliance with the applicable SEC rules.
- Undertake to promptly pay listing/quotation fees.
The requirements for listing on the NASD OTC are provided in its Market Rules.
Nigeria
Answer ... The key requirements for secondary listing on the NGX include the following:
- The foreign issuer shall be duly incorporated and validly established according to the laws of its place of incorporation, with no restriction on the transfer of fully paid shares.
- The jurisdiction of the issuer must be subject to company laws and other laws and regulations which have standards at least equivalent to those in Nigeria, particularly with respect to corporate governance.
- The issuer shall have a primary listing on another exchange which is accredited by the NGX, which may be a member of the World Federation of Exchanges or such other exchange recognised by the NGX, and a market capitalisation of at least NGN28 billion, or its equivalent, at the time of the listing.
- The issuer’s financial statements shall be prepared and audited in accordance with the International Financial Reporting Standards, or any other standard as stipulated by the Financial Reporting Council of Nigeria.
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The issuer shall supply copies of annual reports for three (3) consecutive years and any subsequent interim report. The most recent financial statement must not be more than nine months old at the time of application.
- Ensure that the securities are fully paid-up at the time of allotment or registration in compliance with the applicable SEC rules.
- An issuer of equity securities must have at least 300 shareholders and at least 10% of the entire class of equity securities that it is applying to list on the NGX must be held by the public.
- The issuer shall pay listing fees in such sums and at such intervals as may be prescribed by the NGX.
With regard to restrictions and exemptions, please see question 4.1. In addition, the NGX may approve a lower free-float threshold if the issuer’s market capitalisation at the time of its listing is up to NGN200 billion or such other amount as is stipulated by the NGX.
Nigeria
Answer ... The most common listing structures are as follows.
Initial public offer (IPO): This can be by way of an offer for sale or an offer for subscription.
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Advantages:
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- It is a cost-effective way to raise capital – companies can raise capital for their business cost effectively and seamlessly through an offer for subscription. In an offer for sale, the selling shareholder cashes in on its investment.
- Securities offered can be sold almost instantly, thus providing high liquidity.
- It provides an avenue for diversification for investors, thus bringing down the quantum of risk. Investors can allocate their investments across asset classes in multiple financial instruments.
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Disadvantages:
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- Shareholders lose the level of control that they had before the IPO.
- The listing requirements are more stringent.
- It is expensive due to the listing requirements and professional parties required.
Listing by introduction:
- Advantages:
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- The existing shareholders maintain the same level of control of the company that they had before the listing, since the shares are not offered to the public.
- The shares become tradable and liquid.
- It is less expensive than an IPO, as there are fewer requirements for listing.
- The issuer gets the benefit of the public scrutiny and standards that listing brings without diluting its shares to the public as in an IPO.
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Disadvantages:
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- The issuer cannot raise capital from the public.
- Public awareness of the issue is limited, as the marketing is not meant for the public. This may impact on its share liquidity for some time.
Nigeria
Answer ...
- Requirements for listing: Bonds – being a debt issue – more often than not require a sinking fund to service the debt and trustees to manage them and protect the interests of bondholders. This also means that different documentation will be required, such as trust deeds, deeds of legal mortgage and deeds of guarantee where there is a guarantor(s).
- Purpose of listing: Shares are listed by companies in order to raise equity, as the purchasers of such shares literally own part of the company. On the other hand, when bonds are listed by corporations, state governments or the federal government, they are issued as debt, such that investors are owed periodical interest payments over the life of the bonds plus principal reimbursement.
- Duration/lifespan: Shares are listed in such a way that they possess an infinite life, while bonds have a finite life. Bonds always have a maturity date.
Nigeria
Some of the advisers typically involved in a listing process are:
- issuing houses;
- underwriters;
- broker/dealers;
- sub-brokers;
- receiving banks;
- registrars;
- trustees;
- fund/portfolio managers;
- rating agencies;
- custodians;
- reporting accountants;
- solicitors; and
- auditors.
The claims which can be brought against advisers with regard to their role in a listing process include:
- misappropriation of clients’ funds by a stockbroker;
- non-remittance of issue proceeds by an issuing house to the issuer;
- claims arising from the failure of an issuing house or a registrar to return surplus moneys and moneys for rejected applications;
- disputes or claims arising from misrepresentations; and
- claims arising from false statements in offer documents or in securities transactions.
Advisers involved in a listing process can mitigate their liability by:
- limiting the timeframe within which representations, warranties and indemnities made by such advisers will remain in force and in effect (eg, for two years after completion of the transaction);
- limiting the scope of liability in the contract documents;
- placing a cap on the quantum of liability which can be claimed; and
- taking out a professional indemnity insurance.
Nigeria
Answer ... The factors to be considered when deciding on a listing strategy will vary from one company to the next. They include the following:
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the company’s end result or purpose for embarking on the listing – for example:
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- increased access to capital for business expansion;
- increased participation (ownership) by the public by increasing the company’s share capital and offering those shares for sale;
- better visibility of the company; and
- increased accountability;
- an opportunity for the company to leverage on a succession plan and to separate management from ownership – for example, where the shareholder with the highest percentage of shareholding offers a portion of its shares for sale to the public; and
- where listing is a requirement to carry on business under a certain structure.
Nigeria
Answer ... The typical reasons for voluntary delisting are as follows:
- There has been little or no trading activity on the shares held by the minority shareholders and a considerable fall in trading volumes over the last 12 months;
- The shareholders and the company are not benefiting from the continued listing;
- The delisting will afford the company the opportunity to carry out an imminent corporate restructuring to take advantage of emerging market opportunities; or
- The company wants to reduce regulatory reporting complexities and overheads.
Under the NGX Rules, the grounds for compulsory delisting include the following:
- persistent non-compliance with the listing rules of the exchange;
- failure to meet the financial requirements of listing on the exchange;
- insufficient securities in the hands of the public; and
- where the company becomes a subsidiary of another company.
Under the FMDQ Bond Listing and Quotation Rules, the grounds for compulsory delisting include:
- failure to comply with all relevant FMDQ Rules;
- unsatisfactory level of operations or insufficient assets to warrant the continued listing of the issuer’s securities;
- failure to meet corporate governance standards as may be prescribed by FMDQ and other relevant regulatory authorities; and
- a determination of the exchange that the issuer or its business is no longer suitable for listing.
NASD may delist an admitted company if it falls below the applicable minimum admission requirements.
The process for delisting depends on whether the delisting is voluntary or compulsory.
Voluntary delisting of equity securities from the Daily Official List of the NGX: The issuer shall:
- convene a meeting of its Board of Directors, at which the Board shall consider a recommendation to the shareholders of the issuer that the issuer should be voluntarily delisted, and pass a board resolution in this regard;
- notify the NGX of the Board’s recommendation to delist and obtain its approval to hold a general meeting at which the shareholders shall consider the recommendation;
- obtain the approval of its shareholders by way of a resolution passed by at least 75% of the members present and voting during the general meeting;
- appoint professional advisers and obtain all relevant approvals;
- where the delisting is the result of a merger or other reconstruction, apply for a court-ordered meeting of shareholders to consider and, if thought fit, approve any Scheme and other relevant matters;
- notify the SEC five (5) days prior to filing its application to delist with the exchange; and
- submit to the NGX, through its dealing member, an application to delist its shares and pay the delisting fee.
At least three years must have elapsed since the issuer’s initial listing before the NGX shall consider its application for the delisting of its shares. The NGX will dispose of an application for delisting within ten (10) business days of receipt thereof and notify the SEC of its decision within two (2) days.
An issuer may voluntarily withdraw its listing or quotation on FMDQ if it gives the holders of the affected class, and the holders of any securities convertible into the affected class, of its listed/quoted securities and FMDQ at least ninety (90) days’ advance written notice providing clear and adequate explanations of its decision and if (a) the issuer has or will have at the time of delisting an alternate listing/quotation on another securities exchange acceptable to FMDQ; or (b) the issuer has obtained the approval of the holders of the affected class, and the holders of any securities convertible into the affected class, of its listed/quoted securities by way of three quarters vote at duly convened meetings of such holders.
Compulsory delisting by the NGX: The process is as follows:
- The issuer shall be notified of the impending enforcement action and given twelve (12) weeks to regularise its listing status.
- If the issuer fails to regularise its position, it will be served with a notice of delisting.
- The notice of delisting will be published in national daily newspapers and/or other media outlets.
- The notice will provide the issuer with three (3) months to regularise its listing status.
- At the end of this three-month period, a non-compliant issuer will be delisted and the market will be notified.
- The NGX shall notify the SEC seven (7) days prior to the day of delisting the issuer and within twenty-four (24) hours thereafter.
Nigeria
Answer ... The tax considerations from an issuer’s perspective are as follows:
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Following the expiration of the exemption granted under the Companies Income Tax (Exemption of Bonds and Short-Term Government Securities) Order, 2011 (which was gazetted in 2012 with a commencement date of 2 January 2012 and a validity period of 10 years), the following are no longer exempt from taxes imposed under the Companies Income Tax Act:
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- bonds issued by state and local governments, their agencies, or corporate bodies; and
- interest earned from such short-term securities and bonds.
- However, bonds issued by the federal government and interest earned therefrom remains exempt from companies’ income tax. The expiration of the above-mentioned exemption is likely to increase the cost of borrowing for issuers.
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The issuer should ensure that:
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- tax assets are not lost; and
- the steps taken during reorganisation do not trigger transfer taxes, capital duty or stamp duty insofar as is possible.
- Restructures to simplify or optimise the current corporate structure of an issuer must be carefully considered, as they can have a significant tax impact on the company or its shareholders.
- Value added tax (VAT) is a consumption tax on all taxable goods and services payable by any consumer, including companies, firms and individuals. In the primary market, all intermediaries providing a service are obliged to register for and charge VAT at a rate of 7.5%. Thus, for example, issuing houses are entitled to deduct VAT from the proceeds of an offer before paying them over to the issuer.