A law to compel private companies operating in Nigeria to become public companies is underway

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The Private Companies Conversion and Listing Bill is undergoing legislative proceedings at the National Assembly. The Bill seeks to compel private companies to convert to public companies by becoming listed on the Nigerian Stock Exchange. The treshhold for mandatory conversion is shareholders fund of NGN 40 billion (around USD 250 million), turnover or total assets of NGN 80 billion (USD 500 million). Tax waivers of up to one-third of applicable tax rate may be granted while a fine of 10% of annual turnover and imprisonment of at least 2 years may be imposed for non compliance.

The Private Companies Conversion and Listing Bill (“PCCL” or the “Bill”) 2013 was read or the second time in the House of Representatives in July 2014. In the current form of the Bill, all private companies that meet any of the following thresholds:

  • Share holders’ funds in excess of NGN40billion.
  • Annual turnover in excess of NGN80billion.
  • Total assets in excess of NGN80billion

Must be converted to ‘public liability companies’ and listed in the Nigerian capital market within 12 months of conversion. The Bill adopts the definition of private companies in the Companies and Allied Matters Act (CAMA) and goes further to extend the definition to cover anybody corporate, firm or partnership or any other entity that participates in the sectors contemplated in the Bill. Attention must also be drawn to the use of the phrase “public liability company” throughout the Bill. The phrase was not defined in the Bill and it is also not used in CAMA. The term used in CAMA is “public limited company” and this means that the liability of the shareholders is limited to the unpaid amount on shares held in the company.

Culled from PWC tax Blog by Taiwo Oyedele

http://pwcnigeria.typepad.com

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