The Corporate Affairs Commission (CAC) has released new guidelines for the recapitalization and merger of banks and other financial institutions. These guidelines were disclosed in a statement posted on its official X page on Friday, July 26, 2024.
Understanding Recapitalization
Recapitalization involves restructuring an institution’s debt and equity mix to stabilize its capital structure.
CAC’s Guidelines
The guidelines are issued under Section 8 (1) (e) of the Companies and Allied Matters Act (CAMA) No. 3 of 2020, which empowers the CAC in matters of business management, formation, and registration.
New Incorporation Requirements
For new incorporations, the following are required:
- Approved Name Reservation or Availability.
- Approval-in-Principle from Sector Regulator.
- Completed online incorporation form.
- Payment of stamp duty and filing fees for the relevant license authorization.
The CAC advises that certificates of incorporation will be issued within 24 hours for applications meeting all requirements as outlined in the Commission’s Operations Checklists available at www.cac.gov.ng/resources.
Increase in Share Capital
For increases in share capital (through private placements, rights issues, or offers for subscription), the following are required:
- A duly signed company resolution and return of allotment.
- Statutory declaration by directors verifying that the issued share capital is fully paid-up.
- Notice that regulatory approval is required.
- Affidavit by a director affirming that regulatory approval is required.
- Amended memorandum of association reflecting the new share capital.
- Payment of stamp duties and filing fees.
- Issuance of a letter acknowledging the notice of increase and the requirement of regulatory approval.
- Filing of regulatory approval.
- Issuance of a certificate of increase.
- The CAC specified that notices indicating regulatory approval requirements must comply with Section 127 (3), (4) & (5) of CAMA. Additionally, annual returns and information on persons with significant control must be up-to-date. The certificate of increase will be issued within 24 hours of filing regulatory approval.
Merger Requirements
For the merger of banks or financial institutions, the following documents are required:
- Special resolution for the merger by each of the merging companies.
- Scheme of Merger approved by the Securities and Exchange Commission (SEC).
- Certified true copy (CTC) of the Court order authorizing the Extraordinary General Meeting (EGM) of each merging company.
- Evidence of publication of the Court-ordered meeting in two newspapers and the Federal Gazette.
- CTC of the Court order sanctioning the Scheme of Merger.
- The CAC also mandates that annual returns and information on persons with significant control must be current.
License Authorization Changes
No consequential filing is required for the upgrade or downgrade of license authorization.
Contact Information
Inquiries and complaints regarding these guidelines and applications related to the recapitalization exercise should be directed to bankrecapitalization@cac.gov.ng or +234 816 920 9551.
Context and Importance
This announcement follows the Central Bank of Nigeria (CBN)’s directive for deposit money banks to enhance their capital base to bolster the financial system against potential risks. This directive was highlighted by CBN Governor Olayemi Cardoso during a press briefing after the 294th meeting of the Monetary Policy Committee (MPC) on Tuesday, March 26, 2024, in Abuja. In November 2023, Cardoso had also discussed plans for banking recapitalization at the 58th Annual Bankers’ Dinner organized by the Chartered Institute of Bankers of Nigeria (CIBN). He emphasized the role of banks in achieving the nation’s target of a $1 trillion Gross Domestic Product (GDP) by 2030, as set by President Bola Ahmed Tinubu.
Governor Cardoso stressed the critical need for banks to be recapitalized to meet the significant developmental roles expected of them over the next seven years.
