NIGERIA Law and Practice Contributed by: Chinyerugo Ugoji, Tiwalola Osazuwa, Onyinyechi Chima and Edidiong Antai, ǼLEX
Single-Shareholder Structure for Private Companies
efforts and 16 of them had already met or exceeded the new capital thresholds. As the compliance window narrows, the recapitalisa - tion exercise continues to shape deal activity within the banking sector, with institutions considering stra - tegic combinations and mergers and acquisitions as pathways to meeting the new thresholds. CBN’s Revised Guidelines for the Nigerian Foreign Exchange Market In furtherance of its efforts over the years to stabilise foreign exchange fluctuations and boost investor con - fidence, the CBN introduced the Revised Guidelines for the Nigerian Foreign Exchange Market in Novem - ber 2024. The new guidelines consolidate all FX windows into a unified system, redefine the roles of market partici - pants, and introduce stricter compliance and trans - parency measures. A key aspect of the reforms is the requirement for all FX transactions to be conducted through the Elec - tronic Foreign Exchange Matching System, a central - ised platform that ensures pricing transparency and real-time reporting. Additionally, authorised dealers and financial institutions are now subject to enhanced reporting obligations to prevent market distortions and ensure stability. These reforms have significant implications for foreign investors and businesses. The move towards a more transparent and regulated FX market is expected to improve investor confidence, enhance liquidity and reduce market volatility. For M&A transactions and foreign investments, the revised framework provides a clearer structure for FX repatriation and currency conversions, reducing uncertainty in cross-border transactions. Investors previously concerned about FX liquidity and regulatory unpredictability may now find a more stable and transparent environment for capital flows, making Nigeria a more attractive invest - ment destination.
A significant court decision was the Federal High Court’s ruling in Primetech Design and Engineering Nigeria Limited v Corporate Affairs Commission in July 2024. The case addressed the ambiguity surround - ing Section 18 (2) of the CAMA 2020, which permits private companies to have a single shareholder. The key issue was whether this provision applied only to companies incorporated after the enactment of the CAMA 2020 or also to pre-existing companies. The CAC had interpreted the provision restrictively, asserting that only private companies incorporated under the CAMA 2020 could adopt a single-share - holder structure. However, the Court held that Section 18 (2) applies to all private companies, regardless of their incorporation date. This ruling clarified that both new and pre-existing private companies can lawfully operate with a sole shareholder, resolving previous uncertainty on the matter. This ruling introduces practical benefits for corporate restructuring and operational efficiency. Investors that were previously restricted to using nominee arrange - ments due to the CAC’s restrictive interpretation can now transition to a direct single-shareholder structure, enhancing transparency and simplifying ownership arrangements. Upon transitioning to a single-member structure, a company is exempt from the legal require - ment to hold an annual general meeting, thereby elimi - nating associated costs. This reduction in compliance obligations and enhanced decision-making process makes single-shareholder companies an attractive option for investors seeking streamlined governance structures. Revised Service Fee Schedule for Business Registration and Pioneer Status Incentive Applications In September 2024, the Nigerian Investment Promo - tion Commission (NIPC) introduced a Revised Service Fee Schedule for business registration and Pioneer Status Incentive applications, marking a significant adjustment in the cost structure for investors seek - ing these approvals. The changes, which took effect from 1 October 2024, include increased application fees from NGN15,000 (approximately USD11) to
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