By Dipo Olowookere
An expert in the capital market, Mr Asue Ighodalo, has expressed concerns over a part of the Company and Allied Matters Act (CAMA), which he said could make it extremely difficult for public firms to raise fresh capital from the stock market.
Mr Ighodalo, who is the co-founder of Banwo and Ighodalo, a reputable law firm in the nation’s capital market, noted that Section 142 of the CAMA 2020 mandates companies to first allot shares to all shareholders before offering them to new investors.
According to him, this law does not give room for equities of any company to be sold to new investors without first being issued to existing shareholders.
He said with this, raising fresh funds through the allocation of new shares to fresh investors, probably through private placement, will most likely be a difficult task to complete.
“Section 142 of the Act provides that a company shall not, in any event, allot newly issued shares unless they are offered in the first instance to all existing shareholders of the class being issued in proportion as nearly as may be to their existing holdings.
“The applicability of this provision does not distinguish private and public companies,” the Chairman of Sterling Bank said at the 2020 conference of the Chartered Institute of Stockbrokers (CIS), where he was among the guest speakers. He spoke on the topic, Rebirth of CAMA: Implications for the Capital Market Ecosystem.
The capital market expert thereafter joined others to call for a review of some sections of the piece of legislation, noting that, “This amendment has raised concern amongst operators, corporates and investors, and is a significant deviation from the provision of the repealed act, which only specified pre-emptive rights for private companies.”
“I align with these concerns,” Mr Ighodalo said, arguing that “this provision may restrict public companies intending to undertake equity capital raise and restrict (or at best delay) the admission of strategic investors because the offensive provision implies that companies will not be able to undertake public offer transactions or private placements without first going through the process of formally making an offer to their shareholders.”
According to him, if the Nigerian capital market is to be transformed and made to be at par with others in the world, some sections like the above in the CAMA 2020 must be critically looked into.
The CIS annual seminar with the theme Navigating through the Storms-Reenergizing the Economy through the Capital Market was attended by several stakeholders in the space including the Chairman, House Committee on Capital Market, Mr Babangida Ibrahim, amongst others.
