Step by step guide on the procedures for private placement in Nigeria


7/28/20232 min read

Private placement is a method of raising capital by offering securities to a select group of investors, such as institutions, high-net-worth individuals, or sophisticated investors, without conducting a public offering. In Nigeria, private placements are regulated by the Securities and Exchange Commission (SEC) and follow certain procedures. Here are the general steps involved in the private placement process in Nigeria:

1. Engage Professional Advisors: The issuer of the securities, typically a company, should engage professional advisors such as lawyers, investment bankers, and stockbrokers who are registered with the SEC to guide them through the private placement process.

2. Draft Private Placement Memorandum (PPM): The issuer prepares a Private Placement Memorandum (PPM) that provides detailed information about the company, its operations, financials, and the terms of the offering. The PPM should comply with the disclosure requirements specified by the SEC

3. Submit Documents to SEC: The issuer submits the necessary documents to the SEC, including the PPM, audited financial statements, board resolutions approving the private placement, and any other required forms or reports. The SEC reviews the documents for compliance and may request additional information.

4. Appointment of Trustees: The issuer appoints a trustee registered with the SEC to oversee the interests of the investors. The trustee ensures that the issuer complies with the terms of the private placement and safeguards the interests of the investors

5. Due Diligence: The SEC conducts due diligence on the issuer to verify the accuracy and completeness of the information provided in the PPM. This may involve site visits, interviews with key personnel, and scrutiny of financial records.

6. Approval and Allotment: Once the SEC is satisfied with the documents and due diligence, it grants approval for the private placement. The issuer can then proceed with the allotment of securities to the selected investors according to the terms outlined in the PPM

7. Escrow Account and Payment: The issuer sets up an escrow account with a designated bank to receive the funds from the investors. Investors transfer their funds to the escrow account, and the securities are released to them upon successful payment.

8. Reporting and Compliance: The issuer must comply with reporting obligations to the SEC, providing periodic updates on the private placement, financial statements, and any material events that may affect the investors

It is important to note that the procedures and regulations surrounding private placements in Nigeria may change over time, so it is advisable to consult with professional advisors and refer to the latest guidelines issued by the Securities and Exchange Commission for specific requirements.