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Preliminary agreements

What preliminary agreements are commonly drafted?

In an acquisition, the agreements commonly drafted before the purchase include:

  • an agreement between the acquiree and the acquirer agreeing to be acquired;
  • a share purchase agreement; and
  • a financial service agreement between the acquirer and the acquiree and the respective financial advisers.

Principal documentation

What documents are required?

In a scheme of merger, the main document is the scheme document. Section 428 of the Securities and Exchange Rules and Regulations requires that the document contain the following:

  • separate letters from the chairpersons of the merging companies addressed to their respective shareholders;
  • an explanatory statement to the shareholders by the financial advisers addressing issues relating to the proposals;
  • any condition precedent;
  • reasons for the merger;
  • synergies and benefits;
  • a plan for employees;
  • capital gains tax information; and
  • other relevant issues.

Other information set out in scheme documents include:

  • background information on the merging companies;
  • a memorandum on profit forecast;
  • information on the enlarged company;
  • statutory and general information about the merging companies;
  • the basis of valuation and allotment of new shares;
  • the scheme itself;
  • notices of court ordered meetings to the shareholders of the merging companies; and
  • proxy forms.

Other important documents include the merger implementation agreement (where one exists), the court processes and the resolutions.

In a takeover, the main document is the takeover bid. Section 446 of the Securities and Exchange Rules and Regulations provides that a takeover bid must state the following:

  • the full name and address of the offeror;
  • the maximum number and offer particulars of the shares in the target proposed to be acquired by the offeror;
  • the price and other terms on which the shares will be acquired;
  • the number and particulars of shares held by the offeror (or any of its group companies) in the target immediately before the date of the takeover bid;
  • whether the offer is for all shares of a class in the target;
  • whether the offeror intends to invoke the right under the Investment and Securities Act to acquire shares of dissenting shareholders in the target;
  • whether the offeror intends to buy shares of the target in the market during the offer period; and
  • the manner and date on which the obligations of the offeror will be satisfied.

Other important documents include the information memorandum (where applicable) and the resolutions.

In an acquisition, the main documents are the memorandum of information (containing background information on the acquirer, the offer, the acquired and the effect of the acquisition on the relevant industry) and the extract of board resolutions.    

Which side normally prepares the first drafts?

In M&A proceedings, the acquirer prepares the first draft by filing a letter of intent. The Securities and Exchange Rules and Regulations requires that, before the commencement of a takeover, a takeover bid must be made by such person or group of persons or through their agent to the shareholders of the target.

What are the substantive clauses that comprise an acquisition agreement?

An acquisition agreement should contain:

  • the parties to the acquisition;
  • the background information on the acquirer and the acquiree;
  • the number of shares and purchase price;
  • a list of assets to be acquired and their value;
  • the purchase consideration;
  • the terms and conditions of the acquisition;
  • the representations and warranties;
  • any tax issues;
  • the shareholders consent;
  • the treatment of dissenting shareholders; and
  • the employee pension and benefit plans.    

What provisions are made for deal protection?


Closing documentary

What documents are normally executed at signing and closing?

At closing, the documents usually executed include the following:

  • the share purchase agreement;
  • the asset purchase agreement;
  • the purchase consideration; and
  • the agreement on transfers of employment.

Are there formalities for the execution of documents by foreign companies?


Are digital signatures binding and enforceable?

Electronic and digital signatures are legally recognised in Nigeria under Section 93(2) of Evidence Act 2011, which states that “where a rule of evidence requires a signature, or provides for certain consequences if a document is not signed, an electronic signature satisfies that rule of law or avoids those consequence”. Further, Section 17 of the Cybercrime (Prohibition and Prevention) Act 2015 provides that “electronic signature in respect of purchases of goods and any other transaction shall be binding. The joint provisions of these laws make digital signatures binding and enforceable and they are admissible in Nigerian courts as long as the legal requirements are satisfied.

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