NIGERIA Law and Practice Contributed by: Tosin Ajose, Izuchukwu Ubadinma, Deborah Leshi and Precious Omope, DealHQ Partners
with reviewing the transaction independently, providing recommendations to the full board, and ensuring that proper governance procedures are followed. Special committees are often established when: • certain directors have a conflict of interest (eg, they stand to benefit personally from the transaction); • the transaction is complex or material, requiring focused expertise or detailed assessment; or • independent judgment is needed to protect minor- ity shareholder interests or comply with SEC and stock exchange disclosure requirements. 9.3 Role of the Board The board of directors is expected to exercise active oversight in a business combination but does not direct- ly negotiate on behalf of the company unless specifically mandated to do so. Its primary functions include: • evaluating the terms of the proposed transaction and assessing whether it aligns with the company’s best interests; • recommending for or against the transaction to shareholders, based on independent review, fair- ness assessments and compliance with statutory and regulatory requirements; and • actively defending the company in the sense of ensuring that shareholders are fully informed and that competing or unsolicited offers are considered properly. However, the shareholders – particularly minority shareholders – may challenge the board’s recommen- dation, alleging breach of fiduciary duties, conflicts of interest not properly managed or lack of transparency in the recommendation process. Therefore, buyers should be aware of: • potential delays or injunctions if litigation is filed before or during the transaction; • the need for thorough disclosure and fairness procedures, including independent valuations, to mitigate risk of challenges; • documented board deliberations and committee recommendations to demonstrate compliance with CAMA and SEC requirements; and
• regulatory approvals and shareholder consent processes, which can be impacted by ongoing litigation. By ensuring a transparent, well-documented process and engaging with independent advisers, the buyer can reduce exposure to shareholder claims while rein- It is common practice for directors to seek the follow- ing independent outside advice in connection with a takeover or business combination, to ensure that they fulfil their fiduciary duties and make informed decisions. Financial Advice Directors commonly seek independent financial advice from advisers or investment banks in a takeo- ver or business combination, which may include a fair- ness opinion to assess whether the offer price is fair to shareholders. Such advice helps the board dem- onstrate that its recommendation is both reasonable and impartial, supporting informed decision-making and fulfilment of fiduciary duties. Legal Advice Law firms provide directors with legal advice to ensure compliance with the laws on mergers, takeovers and acquisitions and with stock exchange requirements, covering regulatory obligations, disclosure, contrac- tual matters and risk mitigation. Other Advisory Services Valuation experts may be engaged to provide independ- ent asset or business valuations, while tax advisers guide directors on the tax implications of the transaction. It is customary for a financial adviser to provide a fair- ness opinion in Nigeria, especially for significant or material transactions. A fairness opinion strengthens the board’s position by demonstrating that its rec- ommendation is reasonable, impartial and informed, which can help mitigate shareholder litigation risk. forcing the legitimacy of the transaction. 9.4 Independent Outside Advice
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