Guarantees and collateral

Related company guarantees

Are there restrictions on the provision of related company guarantees? Are there any limitations on the ability of foreign-registered related companies to provide guarantees?

Unless a company’s articles of association restrict it from providing a guarantee to a related company (or any company at all) or the purpose of that guarantee is unlawful, nothing under Nigerian law generally prevents Nigerian companies and foreign-registered companies from providing related company guarantees. Such arrangements must, however, comply with transfer pricing regulations under Nigerian law. Further, a Nigerian company is restricted from providing a guarantee if the same constitutes prohibited financial assistance.

Assistance by the target

Are there specific restrictions on the target’s provision of guarantees or collateral or financial assistance in an acquisition of its shares? What steps may be taken to permit such actions?

Yes. Section 159 of the CAMA prohibits a Nigerian company, or any of its subsidiaries, from giving financial assistance directly or indirectly for the purpose of acquisition of its shares; and the same also extends to post-acquisition of shares. Financial assistance is defined to include a gift, guarantee, security or indemnity, loan, any form of credit and any financial assistance given by a company, which has the effect of reducing the net assets of the company to a material extent or having no net assets.

Therefore, financial assistance for the purpose of acquisition of shares (or post-acquisition of shares) is prohibited under Nigerian law where such financial assistance will result in the material reduction of the net assets of the target company or where the target company has no net assets.

There is no whitewash process available under Nigerian law.

Types of security

What kinds of security are available? Are floating and fixed charges permitted? Can a blanket lien be granted on all assets of a company? What are the typical exceptions to an all-assets grant?

Securities typically created include charges, mortgages and pledges. The CAMA permits Nigerian companies to create fixed and floating charges. While there is no law that restricts the grant of a blanket lien on all the assets of a company, including future assets, the creation of a legal mortgage on future assets is likely to fail because proof of actual existence of the relevant property is required for registration of a legal mortgage.

Requirements for perfecting a security interest

Are there specific bodies of law governing the perfection of certain types of collateral? What kinds of notification or other steps must be taken to perfect a security interest against collateral?

Depending on the asset, perfection of security in Nigeria generally involves stamping (ie, affixing an official stamp to) the relevant security documents and registering them at the relevant public registry. In addition, the creation of security over certain types of assets may require the consent of certain regulatory bodies.


The relevant regulatory body in charge of the administration of stamp duties, where the borrower is a company, is the Federal Inland Revenue Service (the Nigerian tax authority), and where the borrower is an individual, it is the inland revenue service of the state of residence of that individual. For instance, if the individual is tax resident in Lagos State, the applicable body will be the Lagos State Inland Revenue Service.

Section 22 of the Stamp Duties Act 2004, Cap S8, Laws of the Federation of Nigeria (SDA) requires instruments executed in Nigeria, or relating, wheresoever executed, to any property situated or to any matter or thing done or to be done in Nigeria to be stamped in order for it to be admissible in evidence in civil proceedings before the Nigerian courts. Therefore, unless exempted by any other legislation, documents creating security over assets situated in Nigeria are typically required to be stamped to guarantee their admissibility in evidence in civil proceedings before Nigerian courts.


The relevant body in charge of registration of security will depend on the asset and the type of borrower. First, all Nigerian companies are required, in accordance with section 197 (1) of the CAMA, to register with the CAC certain types of charges created by them over their assets, within 90 days of the date of its creation. Failure to undertake the registration will result in the relevant charge being void against a liquidator and any competing secured creditor of the company (in respect of such asset).

Where the asset in question is real estate, in addition to registering it at the CAC, the relevant legal mortgage will be required to be registered in the lands registry of the state where the land is situated. In the case of ships and marine vessels, that security will also be required to be registered with the Nigerian Maritime Administration and Safety Agency; for security on aircraft, the security shall be registered with the Nigerian Civil Aviation Authority.

Pursuant to the Secured Transactions in Movable Assets Act (also known as the Collateral Registry Act), security interests in movable assets can also be registered at the National Collateral Registry in Nigeria.

Regulatory consent

The consent of a regulatory body may be required to create security on a particular class of assets. For instance, the creation of a legal mortgage over real estate will require the consent of the governor where the land is situated or, in cases of lands situated in Abuja, the consent of the Minister of the Federal Capital Territory. This consent usually attracts the payment of a fee that varies from state to state. Additionally, the creation of a charge on interest in oil and gas assets will require the consent of the Minister of Petroleum. Failure to obtain the relevant consents will result in the creation of inchoate security interests.

Renewing a security interest

Once a security interest is perfected, are there renewal procedures to keep the lien valid and recorded?

We are not aware of any renewal procedures that are required after perfection of the security interest in Nigeria.

Stakeholder consent for guarantees

Are there ‘works council’ or other similar consents required to approve the provision of guarantees or security by a company?

The constitutional documents (and any shareholder agreements) typically set out the relevant corporate approvals that are to be obtained by a company for the purpose of creating security over its assets or issuing guarantees. These corporate approvals include resolutions of the board or the shareholders or any relevant board or shareholder committees designated for that purpose. Except as discussed in question 17, and where the company may have expressly agreed to obtaining the consent of a third party to issue guarantees or provide securities, no employees’ (or similar body by way of a works council) consents are required to approve the provision of a guarantee or security under Nigerian law.

Granting collateral through an agent

Can security be granted to an agent for the benefit of all lenders or must collateral be granted to lenders individually and then amendments executed upon any assignment?

Yes. Under Nigerian law it is possible for security to be granted to a security agent or trustee to be held for the benefit of all lenders.

Creditor protection before collateral release

What protection is typically afforded to creditors before collateral can be released? Are there ways to structure around such protection?

Generally, there are no statutory enactments that afford creditors special protection in connection with the release of collateral under Nigerian law. However, it is important to note that the Nigerian SEC Rules on securitisation prohibit any servicer (designated by an issuer to collect and record payments received on the pool of assets) from releasing or impairing the security interest or doing any act that is likely to have an adverse impact on the receivables except with the written authority of the board of the issuer, trustee or the interim representative, as the case may be.

Fraudulent transfer

Describe the fraudulent transfer laws in your jurisdiction.

Fraudulent transfers are regulated by the CAMA (in relation to companies) and the Bankruptcy Act 2004, Cap B.2, Laws of the Federation of Nigeria (Bankruptcy Act) in relation to individuals. The CAMA, however, incorporates the provision of the Bankruptcy Act by reference. In this regard, section 498 of the CAMA provides that any conveyance, mortgage, delivery of goods, payment, execution or other act relating to property that would, if made or done by or against an individual, be deemed in his or her bankruptcy a fraudulent preference, shall, if made or done by or against a company, be deemed, in the event of its being wound up, a fraudulent preference of its creditors, and be invalid accordingly. In addition, any conveyance or assignment by a company of all its property to trustees for the benefit of all its creditors shall be void.