The legal process for restructuring is the most significant for a Nigerian company, and arguably, one that is the most often initiated incorrectly. Those who get restructuring right treat it as a thoughtful, planned process – one with clear commercial objectives and the benefit of legal advice that understands both the relevant legal and regulatory framework, and the desired business outcome. Those who get it wrong approach restructuring reactively: when time-critical, after a term sheet is signed or in the midst of a shareholder dispute that is already causing damage to the relationships the restructuring is intended to resolve. Below are the five typical triggers that can give rise to a restructuring in Nigeria: what options are available and what mistakes are the costliest when dealing with them. Please note that all references to stamp duties and other related fiscal levies apply in accordance with the Nigeria Tax Act (NTA) 2025, effective January 1, 2026.
1. An Incoming Investor Requires a Holding Company Structure
It is quite common in Nigeria that, when dealing with private equity investors, development finance institutions or strategic acquirers, they insist on conducting investment into a clean holding company, from which investment into the target operating company will be made. The argument for a holding company is quite clear:it gives clear access, separates investment from operating risks, and allows room for further investment, offshore subsidiaries and exiting. A restructured company will need to complete its holding structure arrangements before the close of the investment when there is a new investor already talking, a process which will likely cost more money and is more time-consuming. The following regulatory and tax procedures are needed to put in place a holding company above a Nigerian company:
- Either a share for share exchange, or a new subscription into the holding company (newly created).
- Filing with Corporate Affairs Commission (CAC) in relation to the transfer with each of the companies (if any) being transferred, and with the new holding company itself under Companies and Allied Matters Act (CAMA), 2020. Section 175 of CAMA dictates that share transfers need to be duly effected and entered into the company’s register, and as required by Section 176 of CAMA, CAC must be informed of any such transfer before it becomes effective.
- Stamp duty implications under NTA 2025 retains the exemption on shares and stock transfers. Generally, ad valorem on instruments like the shareholders’ agreements and subscription documents need to be considered under NTA 2025. If offshore entities are being used, NIPC notification might be required in addition to regulatory clearances. Under NTA 2025, there have been important changes in relation to Capital Gains Tax (CGT); it is now taxed at income tax rates (30% on the company rate, and 0% on small companies, that is, companies having less than N100 million and less than N250 million on fixed assets, respectively). CGT now applies even to offshore share sales. Where indirect foreign share transfers have taken place, a CGT charge will apply, although it is possible to obtain relief based on applicable treaties. Such issues can significantly impact the tax consequences of structuring. A company can make a deliberate and conscious decision regarding its holding company’s domicile depending on the relevant investors, sectors and countries that the company is being implemented in and operates within; these countries which include Ireland Mauritius and Netherlands can offer exemptions from double tax treaties and different treatments on the taxation of dividends.
- Nigeria Tax Act 2025’s controlled foreign company rules (CFC) which levy tax on untaxed profits from offshore subsidiary businesses, should be evaluated for all holding company choices.
2. A Shareholder Dispute Makes the Current Structure Unworkable
No structure is ideal and shareholder disputes mean one company has become a battleground rather than a business. For co-founders who invested in an equal partnership and without reserved matters rights at inception, they have become stalemated over a major commercial decision. An early investor who failed to properly document their rights over the shares of a company might seek to impose conditions which are beyond what other stakeholders envisaged. The returning co-founder, for whom the company was always structured in an equal part despite holding no significant role, might seek a share sale based on an agreed initial valuation that no longer appears justifiable. Whatever the situation, restructures that are driven by disputes need the utmost care since they should have an immediate impact on the overall result of the disputes. Each of a share buy-back, demerger, capital reduction, or the transfer of a business into a new company has a different impact upon each shareholder, tax implications under NTA 2025 and regulatory requirements in Nigeria. The most appropriate tool will be determined based on the overall legal status of each party and the business goals being pursued through the restructure. The foremost principle is that the documentation must correctly document the arrangement agreed between the shareholders before regulatory actions can be taken. Creating additional legal risk for companies on an already fragile shareholder arrangement by attempting to justify post-facto the circumstances, rather than preceding the corporate restructuring, means there is additional legal risk.
