NIGERIA Law and Practice Contributed by: Ben Unaegbunam, Omolola Coker, Sanford Mba, Promise Osimhen, Chidera Chikere and Oluwaseun Denagan, Dentons ACAS-Law (Adepetun, Caxton-Martins, Agbor & Segun)
4.3 Foreign Lenders or Non-Money Centre Bank Lenders The principal fiscal and regulatory tax implications for foreign and non-money centre bank lenders extend- ing credit facilities within Nigeria are the imposition of withholding tax on interest payments remitted to non-resident lenders. Foreign and non-money bank lenders also have the obligation to adhere to the arm’s length principle and documentation requirements stip- ulated under Nigerian transfer pricing regulations. These material considerations may be effectively miti- gated through the implementation of several prudent measures, including strategic utilisation of bilateral investment and double taxation treaties, and express incorporation of gross-up and tax indemnity clauses within facility agreements to allocate withholding tax risk. Secured assets typically include real estate, material contracts, insurance proceeds, book debts, intellec- tual property, shares, and investment proceeds, etc. These assets may be constituted under a general security document or an all-asset debenture. Real Estate Real estate security is created by a legal mortgage, transferring proprietary interest to the mortgagee sub- ject to redemption – or an equitable mortgage where legal formalities are incomplete. A legal mortgage is required to be registered at the state land registry, with governor’s consent obtained. State-specific fees range from 1%–13% of the secured value. Industry- specific fees may be payable for the perfection of the security where the secured asset is a regulated asset, such as petroleum assets, intellectual property, ships or aircraft. Contractual Rights and Insurances Rights arising under a contract or agreement, includ- ing intellectual property licences and insurance pro- ceeds, are commonly assigned by way of security to lenders with a provision to reassign the assigned rights to the assignor upon the full discharge and sat- 5. Guarantees and Security 5.1 Assets and Forms of Security
isfaction of all obligations secured under the relevant finance documents. Bank Accounts Bank accounts can be secured by fixed or floating charges. Fixed charges restrict account use with- out lender consent; floating charges permit ordinary dealings until crystallisation. Perfection is achieved by notifying counterparties or account banks. A legal assignment of contractual rights and charges over bank accounts is perfected by giving notice of the security interest to the counterparty, and in case of bank accounts, to the account banks. Share Pledges Pledges of shares are usually created by a deed of share pledge under which a security interest is cre- ated in favour of the lender. To perfect a pledge over shares, the borrower is often required to deposit the share certificates with the lender or the security agent. In addition, and as part of the security package, the lender is provided with a signed but undated share transfer form in respect of the shares executed in blank. These documents will also be accompanied by a signed and undated resolution of the board of directors of the company in which the shares are held approving the transfer of the shares in the event of an enforcement. Perfection of Security Interest The nature of the secured asset typically determines the perfection required. However, CAMA generally requires that all securities created over assets of a company be registered with the CAC within 90 days of creation. Where the security includes assets that are specifically regulated (eg, petroleum assets and intellectual property), such security interest may be required to be registered at the relevant regulatory registry. In addition to registration at the CAC, stamp duties are required to be paid on any instrument exe- cuted in Nigeria or relating, wheresoever executed, to any property situated or to anything done or to be done in Nigeria. Any instrument not duly stamped is inadmissible in civil proceedings in court.
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