NIGERIA Law and Practice Contributed by: Tosin Ajose, Izuchukwu Ubadinma, Deborah Leshi and Precious Omope, DealHQ Partners
3.2 Tax Consequences A spin-off can be structured as a tax-free transaction at the corporate level in Nigeria, if it qualifies as a bona fide reorganisation and receives formal approval (“direction”) from the Federal Inland Revenue Service (FIRS) under Section 29 (9) of the Companies Income Tax Act and clearance under Section 29 (12) of the Capital Gains Tax Act. For a spin-off to qualify as a tax-free transaction at the shareholders’ level in Nigeria, it must be executed purely as a corporate reorganisation and not as a dis- tribution of profits. To achieve this, the spin-off must meet the following key requirements: • the transferring and acquiring companies must be related; • the transfer must be for the better organisation of the trade or business, not a sale for profit; • the parties must obtain FIRS approval (“direction”) confirming that the transfer qualifies for tax exemp- tion; • the parent/transferring company must secure tax clearance from the FIRS, showing that all tax obli- gations have been satisfied; and • the acquiring company must not dispose of the transferred assets within 365 days of the transac- tion. However, as of 1 January 2026, Nigerian tax dis- pensation will change substantially with the coming into force of the Nigerian Tax Act 2025, which may substantially change the tax treatment for spin-offs, especially because it has no specific provision for the treatment thereof. It is therefore likely that the general provisions on business restructure will apply. 3.3 Spin-Off Followed by a Business Combination There is no prohibition on business combinations immediately following a spin-off under the current tax laws, but it is likely that such transactional sequence will attract heavy tax scrutiny and may be recharacter- ised if the layers of restructure taken together are ruled as having been undertaken to avoid tax or as lacking commercial substance. Whether or not the transaction is permitted will be determined by how the transaction is structured – ie, whether statutory reliefs for reor-
ganisation have been applied, and whether the tax authority will apply the substance over form principle to recharacterise the transaction where it is deemed artificial. 3.4 Timing and Tax Authority Ruling The timing for completing a corporate spin-off typi- cally ranges from six to 12 months, depending on the complexity of the transaction and regulatory involve- ment. Historically, parties were required to obtain a formal ruling or “direction” from the FIRS before completing the spin-off, a process that usually takes about eight to 12 weeks to complete. However, with the implementation of the Nigeria Tax Act 2025, prior notification to the relevant tax authority is now suffi- cient for corporate restructurings, eliminating the need for formal pre-approval. 4. Acquisitions of Public (Exchange- Listed) Energy and Infrastructure Companies 4.1 Stakebuilding There is no mandatory requirement for stakebuilding prior to making a takeover bid under Nigerian law; it will therefore be a function of preference or choice, although it is more common than not for a bidder to hold existing shares in a public company before mak- ing a takeover bid. Under the Companies and Allied Matters Act 2020 (CAMA), any person who acquires significant control, including holding at least 5% of shares or voting rights, having rights to appoint or remove a majority of directors or partners, or exer- cising significant influence, must notify the company within seven days. The company then informs the CAC within one month and discloses information in its annual return. To this end, a disclosure obligation is automatically triggered at any time prior to a takeover bid where the bidder’s interest in the business reaches 5%. Similarly, substantial shareholders must notify the company within 14 days of acquiring such status, and the company must notify the CAC within 14 days of receipt. Public companies must also disclose any person holding 5% or more of shares to the Nigerian
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