The Securities and Exchange Commission (SEC) is set to release new rules on mergers, acquisitions and takeovers which will shorten their application stages.
The new framework aligns the SEC’s rules with the relevant provisions of the Investments and Securities Act (2007).
Business Day learnt that the draft amendments have already been exposed to the market for comments with the final version awaiting the approval of the Minister of Finance. Sources at the Commission say it will soon be released.
As appetite for mergers and acquisitions (M&A) deals in Nigeria continues to increase, analysts see need for a robust regulatory framework that will enhance the ability of investors to conclude such deals.
The amendments will achieve a lot of the objectives the market had clamoured for while addressing weaknesses observed in the old framework. For example, the new rules will shorten approval timelines for M&A deals while potentially reducing related transaction costs. Under its provisions, the approval process shall now be in two stages instead of the previous three-stage process.
Applicants are now required to file a merger notification along with a draft scheme document to the commission as part of the first stage. Once the commission conveys its approval-in-principle, the applicant can then file for a court ordered meeting at a Federal High Court. Under current requirements, the applicant must first obtain a letter of ‘No Objection’ before proceeding with any of the processes.
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There may be reason for optimism on the revival of mergers among companies as the regulatory fees charged for such transactions have been reviewed in the expected framework. Typically, SEC fees on M&A transactions were charged based on the nominal value of the company’s issued and paid-up capital. This will no longer be the case as regulatory fees will now be calculated based on the total consideration offered for the deal.
The drafters of the new rules apparently had the interest of protecting share holders and strengthening disclosure at the back of their minds. Important new provisions have been included to ensure shareholders, especially minority shareholders, are carried along throughout the M&A process.
For instance, SEC will make it mandatory in the rules for the Directors of a company to issue a ‘Directors’ Circular’ to all shareholders notifying them of a take-over bid intention at least seven days before the date on which the take-over bid takes effect. Additionally, court ordered meetings must now be adequately disseminated while a copy of notice to employee unions shall be forwarded to the Commission as part of necessary filings.
At a time of acute uncertainties in our economy, it is highly commendable that the SEC has taken steps to remove ambiguities within the M&A legal framework, align it with the ISA 2007 and make it more robust.
