The Nigeria Securities and Exchange Commission led by Emotimi Agama, the director-general has proposed new rules for the issuance and allotment of private companies’ securities.
Security and Exchange Commission – SEC
Information on the SEC’s website states, “The rules shall become effective on the date approved by the Commission”.
SEC said the rules shall be applicable to: debt securities issuances by private companies either by way of public offer, private placement or other methods as may be approved by the commission, registered exchanges and platforms which admit debt securities issued by private companies for trading, price discovery or information repository purposes. And registered capital market operators who are parties in issuances and allotment of debt securities of private companies
On the existing Debt securities, it proposes that “Where at the issuance of these rules, a private company has existing debt securities held by qualified investors, within the meaning provided in these rules, it shall no later than three (3) months from the date of issuance of these rules, file an application for the registration of the securities to the Commission through the securities exchanges.
Thus, failure to comply with this provision shall attract a penalty of not less than N2,000,000 (Two Million Naira) and a further sum of N100,000 for every day the violation continues.
While stating the eligibility, it noted that a private entity seeking to issue securities under these rules shall:
“be a company duly incorporated under Companies and Allied Matters Act (CAMA), or other enabling Laws; have at least three (3) years track record of operation, and no Issuer shall offer bonds if it is in default of payment of interest or repayment of principal in respect of previous debt issuance(s) for a period of more than six (6) months.
Other criterion includes; “All issuers and the bonds to be issued shall be rated by a rating agency (optional for private placements), the credit rating of a bond shall not be below investment grade. That is all necessary approvals (where applicable) in relation to the issue, from other regulatory authorities shall be obtained and filed with the Commission, through the securities exchange. Any conditions imposed by such regulatory authorities, shall be complied with throughout the tenor of the bond.
Generally,
“the rules shall apply only to debt securities issued by a private company, private companies may issue debt securities under a shelf programme in accordance with the Commission’s rules on Shelf Registration. There is also the “option of book building in the issuance of debt securities shall be available to a private company, in accordance with the provisions of the Commission’s rules on book building and ‘any party that makes any misrepresentation to prospective investors or violates the provisions of these rules shall be subject to sanctions/penalty as prescribed in these rules and the ISA.
In terms restriction, the proposed SEC’s law on issuance stipulated, that:
“A private company shall not offer its equity securities (shares) to the public under any circumstance, Debt securities issued under these rules, shall be sold only to qualified investors and only registered capital market operators shall be parties to debt securities issuances under these rules”.
Accordingly, it stressed that “no private company or any person acting on its behalf shall offer, sell or allot securities to the public without the prior clearance of the securities exchange and registration of the securities by the Commission. While Securities purchased in a public offer pursuant to these rules shall only be traded on a registered securities exchange.
On the condition for Securities Issuance, the news rules indicates that “A private company may issue its securities under these Rules provided that: Only plain vanilla bonds/debentures and other debt instruments including sukuk and as may be determined by the Commission from time to time, shall be issued. For sukuk issuances, the issuer shall comply with the provisions on Sukuk (as applicable) and set out in Rules 569 – 588 of the Commission’s Rules, as amended from time to time.
Also,
“the securities shall be offered to only qualified investors, and a private company may undertake a maximum of three debt securities issuances within a one-year period, whether through a shelf program or one-off offering, the total amount to be raised not exceeding ₦15 billion, provided that where a private company intends to undertake any further debt securities issuance, it shall be required to re-register as a public company.
On registration requirements,” the proposed new rule stated that a private company intending to offer its debt securities by way of an offer to the public or private placement under these rules, shall, along with a duly completed checklist for debt securities issued by private companies, file the following through the Securities Exchange: A copy each of the board and shareholders’ resolutions authorizing the issue, current CAC report on the statutory information of the issuer including, evidence of registration, statement of share capital, particulars of directors and company secretary, and shareholders and their respective holdings.
Others include; memorandum and articles of association of the issuer. Provided that where the document has already been filed with the securities exchange and there has been no change since the previous filing, the issuer shall file an undertaking that there has been no change(s) to the document; a signed copy of the Issuer’s latest audited accounts for the preceding 3 years, with the latest account not more than 9 months old at the time of filling with the securities exchange.
SEC added,
“provided that the account shall remain valid throughout the offer period; a draft prospectus containing the following information: amount of securities offered; basic terms of the securities to be offered, including status of the bond, minimum subscription, coupon rate, maturity, listing; Offer period; purpose of the offering/use of proceeds; risks of investment; tax considerations, company’s profile/business; management and board; extract of 3 years audited account reporting accountant’s report; rating reports (where applicable) and any other information that the Commission may require from time to time.
The proposes rules underscores , draft trust deed (in the case of a shelf programme, a programme trust deed); draft vending agreement between the issuer and issuing house; draft joint issuing houses’ agreement (where applicable); draft underwriting agreement and sub-underwriting agreement (where applicable); Form SEC 6 (duly completed); Letter of “No Objection” from the relevant regulatory body (where applicable); details of any asset or collateral provided to secure the debt issue, or third-party guarantee (where applicable).
Others are;
“a copy of the mandate letter from the issuer to the issuing house, letters of consent given by the parties to the issue, sworn to before a Notary Public or Commissioner for Oaths. Consent letters shall not be notarized by a person who is also a named signatory on the consent letter or who is a member or employee of the firm whose consent is required”.
“Where the consent is contained in a power of attorney, it shall be executed and stamped by the stamp duties office; A sworn declaration that the Issuer has fully disclosed all material facts in the offer document. The declaration shall be signed by two directors and the company secretary, schedule of claims & litigations of the Issuer and the solicitor’s opinion, letter of confirmation of going concern from the directors of the issuer; and other document required by the Commission under these Rules and Regulations” SEC said.
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