Venture Capital Agreement (Nigeria)
VENTURE CAPITAL INVESTMENT AGREEMENT
Investments and Securities Act 2007 (ISA 2007) | Companies and Allied Matters Act 2020 (CAMA 2020)
THIS VENTURE CAPITAL INVESTMENT AGREEMENT is made on [Agreement Date]
BETWEEN:
(1) [Investor Name] of [Investor Address] ("the Investor"); AND
(2) [Company Name], a private company limited by shares incorporated under CAMA 2020, RC No. [CAC Number], with registered office at [Company Address] ("the Company").
1. INVESTMENT
1.1 Subject to the terms and conditions of this Agreement, the Investor shall invest [Investment Amount] in the Company in exchange for [Investment Instrument] representing [Investor Share Percentage] of the Company's post-money capitalisation.
1.2 The pre-money valuation of the Company for the purposes of this investment is [Pre Money Valuation].
1.3 The [Share Class] shall be issued at [Issue Price Per Share]. The Company shall, within 14 days of Closing, allot and issue the shares to the Investor and update its register of members under Section 97 of CAMA 2020.
1.4 Closing shall occur on [Closing Date] or such other date as the parties agree in writing, subject to satisfaction of all conditions precedent.
2. INVESTOR RIGHTS
2.1 Board Representation: [Board Seat]. Where a board seat is granted, the Investor shall have the right to appoint one director to the Company's board for so long as the Investor holds at least [Investor Share Percentage] of the Company's issued share capital.
2.2 Liquidation Preference: The Investor shall be entitled to a [Liquidation Preference] liquidation preference on any liquidation, dissolution, or deemed liquidation (including a sale or merger) of the Company, ranking ahead of ordinary shareholders.
2.3 Anti-Dilution: The Investor's [Share Class] shall benefit from [Anti Dilution] anti-dilution protection in the event the Company issues new shares at a price below the Issue Price in a subsequent financing round.
2.4 Information Rights: The Company shall provide the Investor with monthly management accounts within 15 days of month end, quarterly investor reports within 30 days of quarter end, and annual audited financial statements within 120 days of financial year end.
2.5 Pre-Emption Rights: The Investor shall have a right of first refusal on new share issuances by the Company under Section 189 of CAMA 2020, to maintain its pro-rata ownership percentage.
3. EXIT PROVISIONS
3.1 The Company and the Investor shall use their reasonable efforts to achieve a liquidity event — whether by way of initial public offering on the Nigerian Exchange Group (NGX), a trade sale, or a secondary share sale — within [Exit Timeline] from the date of this Agreement.
3.2 Drag-Along: The holders of a majority (75% or more) of the Company's issued shares may require all other shareholders to sell their shares on a third-party acquisition on the same terms and at the same price per share.
3.3 Tag-Along: The Investor shall have the right to co-sell its shares alongside any founder or majority shareholder in a proposed third-party sale, at the same price and on the same terms.
4. GOVERNING LAW
4.1 This Agreement is governed by the laws of the Federal Republic of Nigeria, including CAMA 2020 and the Investments and Securities Act 2007. Disputes shall be resolved by arbitration under the Arbitration and Mediation Act 2023, with the seat of arbitration in Lagos, Nigeria.
Investor
________________
Signature
Company (authorised director)
________________
Signature
What Is a Venture Capital Agreement (Nigeria)?
A Venture Capital Agreement in Nigeria records the obligations the parties accept and the terms governing their arrangement.
The startup company receiving venture capital investment is typically incorporated under the Companies and Allied Matters Act 2020 (CAMA 2020) as a private company limited by shares. The venture capital agreement interacts with the company's Memorandum and Articles of Association (MEMART) — which must be amended to accommodate investor-specific rights — and with the shareholders' agreement among the existing promoters and the new investor. Under CAMA 2020, Section 22, a private company may not offer its shares to the public, which limits fundraising mechanisms to private placements to accredited investors.
The Lagos State Startup Law 2022, the first state-level startup legislation in Nigeria, and the National Information Technology Development Agency (NITDA) National Startup Policy 2021 provide administrative frameworks supporting technology-focused startup investments, including one-stop registration for startups meeting eligibility criteria. The Nigerian startup ecosystem — centred on Lagos 'Yaba' technology cluster, with hubs such as Co-Creation Hub (CcHub) and iHub Abuja — has attracted significant VC investment from firms including Andela, Konga, Paystack (acquired by Stripe), Flutterwave, and Interswitch.
Key Nigerian VC-specific legal issues include: the foreign exchange implications of inbound USD-denominated investments under the Central Bank of Nigeria (CBN) Foreign Exchange (Monitoring and Miscellaneous Provisions) Act (Cap F34, LFN 2004) and CBN circulars on importation of investment capital; the requirement to file with SEC Nigeria for private placements above NGN 500 million under the ISA 2007; and the tax treatment of carried interest and capital gains on exit under the Companies Income Tax Act (Cap C21, LFN 2004) and the Capital Gains Tax Act (Cap C1, LFN 2004).
The legal framework governing the Venture Capital Agreement (Nigeria) in Nigeria draws on several key statutes and regulatory bodies. Under Nigerian law, the Companies and Allied Matters Act 2020 (CAMA) regulates corporate entities through the Corporate Affairs Commission (CAC). The Labour Act (Cap L1 LFN 2004) and the National Industrial Court of Nigeria (NICN) govern employment disputes. The Nigeria Data Protection Regulation (NDPR) 2019 and the Nigeria Data Protection Commission (NDPC) protect personal data. The Federal Inland Revenue Service (FIRS) administers tax obligations under the Companies Income Tax Act. The Federal High Court and state High Courts have jurisdiction over civil matters. Parties executing a Venture Capital Agreement (Nigeria) in Nigeria should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Companies and Allied Matters Act (CAMA) 2020 sets the foundational requirements.
When Do You Need a Venture Capital Agreement (Nigeria)?
A Venture Capital Agreement is needed in Nigeria when a startup or growth-stage company seeks equity investment from a venture capital fund, angel investor, or institutional investor to fund its business expansion.
A VC agreement is required when a pre-seed or seed-stage Nigerian startup raises its first external capital from angel investors or micro-VCs, formalising the equity stake, valuation methodology (pre-money or post-money), and investor rights before closing the investment.
A VC agreement is needed when a Series A, Series B, or later-stage company raises a significant funding round from institutional venture capital funds or corporate venture arms, incorporating sophisticated investor protections including anti-dilution, liquidation preferences, and drag-along rights.
A VC agreement is required when a foreign venture capital fund invests in a Nigerian startup and must comply with the CBN's requirements for importation of capital under the Investment Capital Importation Certificate (ICIC) process, and SEC Nigeria's requirements for foreign portfolio investment registration.
A VC agreement is needed when a startup participating in an accelerator programme — such as the Y Combinator Nigeria cohort, the Lagos-based NITDA Accelerator, or the Tony Elumelu Foundation Entrepreneurship Programme — receives investment under a standardised convertible note or Simple Agreement for Future Equity (SAFE) structure adapted for Nigerian law.
A VC agreement is required when existing venture-backed startup shareholders negotiate a follow-on investment from new investors, requiring amendment of the existing shareholders' agreement and the company's MEMART under CAMA 2020 to accommodate new share classes and investor rights.
Parties in Nigeria should prepare a Venture Capital Agreement (Nigeria) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under Nigerian law, the Companies and Allied Matters Act 2020 (CAMA) regulates corporate entities through the Corporate Affairs Commission (CAC). The Labour Act (Cap L1 LFN 2004) and the National Industrial Court of Nigeria (NICN) govern employment disputes. The Nigeria Data Protection Regulation (NDPR) 2019 and the Nigeria Data Protection Commission (NDPC) protect personal data. The Federal Inland Revenue Service (FIRS) administers tax obligations under the Companies Income Tax Act. The Federal High Court and state High Courts have jurisdiction over civil matters. Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.
What to Include in Your Venture Capital Agreement (Nigeria)
A Nigeria Venture Capital Agreement must contain the following essential elements to protect both investors and founders under Nigerian company and securities law.
Parties and Recitals: Full legal names, addresses, and CAMA 2020 RC numbers of the company and all investor parties. The recitals should set out the company's current shareholding, business description, and the purpose of the investment.
Investment Amount and Instrument: The total investment amount in NGN or USD (with CBN importation certificate requirements addressed), the type of instrument — ordinary shares, preference shares, convertible notes, or SAFE — and the pre-money or post-money valuation of the company at which the investment is made.
Share Terms: For equity investments, the class of shares subscribed, the issue price per share, any preference rights (dividend preference, liquidation preference), conversion rights (for preference to ordinary on IPO), and any cumulative dividend obligations. Under CAMA 2020, Section 144, preference shares must have their rights defined in the MEMART.
Anti-Dilution Protection: The mechanism — weighted average or full ratchet — by which the investor's shareholding is protected if the company issues new shares at a lower price in a down round. Anti-dilution adjustments require amendment to the MEMART under CAMA 2020.
Governance Rights: The investor's right to appoint one or more directors to the company's board under the shareholders' agreement; information rights (monthly management accounts, annual audited accounts); approval rights (veto over material transactions above a threshold); and observer rights at board meetings.
Liquidation Preference: The priority in which investors receive their capital and return upon a liquidation, dissolution, or deemed liquidation (including an acquisition or asset sale) before ordinary shareholders — typically 1x non-participating or 1x participating preference.
Exit Provisions: Drag-along rights enabling majority shareholders (including the investor) to compel other shareholders to sell on an exit; tag-along rights enabling the investor to co-sell alongside founders on a third-party sale; rights of first refusal on share transfers; and agreed exit timelines and mechanisms, including an IPO path on the Nigerian Exchange Group (NGX) or a trade sale.
Representations and Warranties: Founder and company representations covering good standing, title to IP, no undisclosed liabilities, regulatory compliance, and accuracy of financial statements — with customary indemnity provisions for breach.
Additional compliance elements for a Venture Capital Agreement (Nigeria) used in Nigeria include: Under Nigerian law, the Companies and Allied Matters Act 2020 (CAMA) regulates corporate entities through the Corporate Affairs Commission (CAC). The Labour Act (Cap L1 LFN 2004) and the National Industrial Court of Nigeria (NICN) govern employment disputes. The Nigeria Data Protection Regulation (NDPR) 2019 and the Nigeria Data Protection Commission (NDPC) protect personal data. The Federal Inland Revenue Service (FIRS) administers tax obligations under the Companies Income Tax Act. The Federal High Court and state High Courts have jurisdiction over civil matters. Forms-legal.com provides this template as a starting point for Nigeria-compliant documentation.
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note = {Free legal document template. Based on Companies and Allied Matters Act (CAMA) 2020}
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Frequently Asked Questions
Venture capital investment in Nigeria is regulated by the Securities and Exchange Commission of Nigeria (SEC Nigeria) under the Investments and Securities Act 2007 (ISA 2007) and the SEC Rules and Regulations 2013. SEC Nigeria licenses and regulates venture capital fund managers, fund administrators, and private equity funds operating in Nigeria. A venture capital fund that wishes to solicit investments from Nigerian investors must register with SEC Nigeria under Rule 417 of the SEC Rules, which sets out capital requirements, governance standards, and reporting obligations. However, direct bilateral investments between an individual or foreign fund and a specific startup company — without holding out to the public — are generally conducted as private placements exempt from full SEC Nigeria registration requirements, provided the offering is made to fewer than 50 sophisticated or accredited investors. Private placements above NGN 500 million require filing of a disclosure document with SEC Nigeria. The ISA 2007 is expected to be replaced by the ISA 2025 following the passage of the Investment and Securities Bill 2024, which introduces an updated regulatory framework for digital assets, crowdfunding, and technology-enabled investments.
A Simple Agreement for Future Equity (SAFE) and a convertible note are both pre-equity financing instruments used by Nigerian startups to raise early-stage capital, but they differ in structure and legal effect under Nigerian law. A convertible note is a debt instrument under which the investor lends money to the startup at an agreed interest rate, with the principal and accrued interest converting into equity shares at a qualified financing round or maturity. Under the Companies Income Tax Act (Cap C21, LFN 2004), interest paid on a convertible note may be deductible by the company as a business expense. A SAFE, originally developed by Y Combinator, is not a loan — it is a contractual right to receive equity shares in the future upon a trigger event (typically a priced equity round, liquidation, or IPO) without accruing interest. Neither instrument creates an immediate shareholding; both convert into shares upon the agreed trigger event. Under CAMA 2020, the legal characterisation of a SAFE in Nigerian law — whether as a share subscription agreement or a contingent right — is not yet settled by case law or legislation, and practitioners typically structure SAFEs as preference share subscription agreements conditional on a future valuation event to obtain CAMA 2020 clarity.
Capital gains realised by a venture capital fund or investor on the disposal of shares in a Nigerian company are subject to Capital Gains Tax (CGT) at 10% under the Capital Gains Tax Act (Cap C1, LFN 2004), as amended by the Finance Act 2021. The Finance Act 2021 removed the longstanding exemption for gains on disposal of shares, making all share disposal gains chargeable assets for CGT purposes. CGT is computed on the difference between the disposal proceeds and the allowable cost (subscription price plus acquisition costs). For foreign venture capital funds investing in Nigerian startups, the disposal of shares in a Nigerian company by a non-resident person is subject to CGT in Nigeria to the extent the gain is attributable to Nigerian assets. The applicable double taxation agreement (DTA) — if one exists between Nigeria and the investor's country — may limit Nigeria's taxing rights on such gains. The Companies Income Tax Act (Cap C21, LFN 2004) imposes CIT at 30% on corporate investors' share of investment income and carried interest. Nigeria does not have a specific venture capital tax relief regime comparable to the UK's Enterprise Investment Scheme (EIS), though the National Policy on Science and Technology provides for technology investment incentives.
Foreign venture capital investment into a Nigerian startup must comply with the Central Bank of Nigeria (CBN) requirements for importation of investment capital under the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act (Cap F34, LFN 2004) and the CBN Manual of Foreign Exchange Policy. The investor must import capital through an authorised dealer bank in Nigeria — a commercial bank licensed by CBN — which will process the inflow and issue a Certificate of Capital Importation (CCI) confirming the USD or foreign currency amount brought in. The CCI is essential documentation as it entitles the investor to repatriate the invested capital and returns (dividends, capital gains on exit) in foreign currency through the authorised dealer bank under the CBN's capital repatriation policy. Without a CCI, the investor may face difficulty repatriating proceeds on exit, as the authorised dealer bank requires evidence of the original capital importation. The startup must register the foreign investment with the Nigerian Investment Promotion Commission (NIPC) under the Nigerian Investment Promotion Commission Act (Cap N117, LFN 2004), which provides legal guarantees against expropriation for registered foreign investments. The NIPC One-Stop Investment Centre offers online registration for foreign investors.
Standard investor protections in Nigerian venture capital agreements follow international VC practice adapted for CAMA 2020 company law requirements. Anti-dilution protection — typically weighted average — adjusts the investor's conversion price or effective shareholding if the company issues new shares at a price below the investor's entry price in a down round, under a formula set out in the MEMART as required by CAMA 2020, Section 144. Liquidation preference — typically 1x non-participating or 1x participating — gives the investor priority recovery of their invested capital (and sometimes a multiple) before ordinary shareholders in a liquidation or deemed liquidation event such as an acquisition. Information rights require the company to provide monthly management accounts, quarterly investor reports, and annual audited financial statements to the investor. Board representation gives the investor the right to appoint one director (and sometimes an observer) to the company's board, with veto rights over material decisions. Drag-along rights allow a majority — typically 75% of all shares — to compel remaining shareholders to accept an exit offer, preventing minority shareholders from blocking a consensual sale. Tag-along rights allow the investor to co-sell alongside founders in a third-party acquisition at the same price and terms. Pre-emption rights on new share issuances allow the investor to maintain their percentage ownership by subscribing for new shares before they are offered to third parties under CAMA 2020, Section 189.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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