Share Charge Agreement (Nigeria)

A Share Charge Agreement in Nigeria sets out the rights, duties and consideration binding the parties to it.

Under CAMA 2020, Section 204, a charge created over shares in a company must be registered with the Corporate Affairs Commission (CAC) within 90 days of its creation by filing CAC Form CAC 9. Failure to register renders the charge void as against a liquidator or any creditor of the company under Section 206 of CAMA 2020. The Collateral Registry Act 2017 established the National Collateral Registry (NCR), operated by the Central Bank of Nigeria (CBN), which enables movable assets — including shares — to be registered as collateral. Registration on the NCR provides priority notice to subsequent creditors and lenders.

A Share Charge Agreement in Nigeria should be distinguished from a pledge (where the share certificates are physically deposited with the chargee), a mortgage of shares (a formal transfer of legal title subject to redemption on repayment), and a lien over shares. The Companies and Allied Matters Act 2020, Section 177, permits a company to have a lien on shares for unpaid calls, but this is distinct from a commercial share charge in favour of a third-party lender.

For banks and other financial institutions regulated by the Central Bank of Nigeria (CBN), share charges over shares in regulated entities (banks, insurance companies, pension fund administrators) require the prior approval of the relevant regulator — CBN, National Insurance Commission (NAICOM), or National Pension Commission (PenCom) — before the charge can be validly created and registered.

The legal framework governing the Share Charge 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 Share Charge 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.

A Share Charge Agreement in Nigeria is needed whenever a shareholder uses their shares as collateral to secure a loan or credit facility from a bank, financial institution, or private lender.

A Share Charge Agreement is required when a major shareholder of a Nigerian company seeks a term loan from a commercial bank and the bank requires security over the shareholder's shares in the company as a condition of the lending. This is a common structure in Nigeria for acquisition financing and working capital facilities.

A Share Charge Agreement is needed when a private equity investor in a Nigerian company borrows against its investment portfolio and creates a charge over its equity stake in one or more portfolio companies in favour of a fund-level lender.

A Share Charge Agreement is required when a Nigerian company uses the shares it holds in a subsidiary as security for a corporate loan or bond issuance, creating an upstream or downstream security package that includes the subsidiary shares.

A Share Charge Agreement is needed when parties to a shareholders' agreement in Nigeria require one shareholder to charge their shares as security for the performance of obligations under the shareholders' agreement — for example, to secure a non-compete undertaking or a put option.

A Share Charge Agreement is required in structured finance transactions in Nigeria where a special purpose vehicle (SPV) holds assets and the SPV's shares are charged to a security trustee on behalf of noteholders or bondholders under a trust deed governed by Nigerian law.

Parties in Nigeria should prepare a Share Charge 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.

A valid Nigeria Share Charge Agreement must include the following essential elements to create an enforceable fixed charge and comply with CAMA 2020 registration requirements.

Parties: Full legal names of the chargor (shareholder granting the charge) and the chargee (lender or creditor taking the charge), with CAMA 2020 RC numbers for corporate parties. The agreement should also identify the company whose shares are being charged.

Charged shares: A precise description of the shares being charged — number, class (ordinary or preference), nominal value, share certificate numbers, and the percentage of the total issued share capital represented by the charged shares.

Secured obligations: The loan, facility, or obligations secured by the charge, including the principal amount in Nigerian Naira (NGN), interest rate, and repayment schedule from the underlying loan or facility agreement.

Fixed charge: An express declaration that a fixed (as opposed to floating) charge is created over the shares, giving the chargee priority over the specific charged assets.

Perfection and registration: The chargor's obligation to deliver the share certificates and blank stock transfer forms to the chargee upon execution, and to register the charge with the Corporate Affairs Commission (CAC) by filing CAC Form CAC 9 within 90 days under Section 204 of CAMA 2020 and with the National Collateral Registry (NCR) under the Collateral Registry Act 2017.

Restrictions on the chargor: Prohibitions on the chargor transferring, encumbering, or otherwise dealing in the charged shares without the chargee's prior written consent during the security period.

Dividends and voting rights: Agreement on whether dividends paid on the charged shares are intercepted by the chargee or paid to the chargor during the security period, and whether the chargor retains voting rights.

Enforcement: The chargee's rights upon default — including power to sell the shares, appoint a receiver, or exercise voting rights — and the process for realising the security.

Governing law: Nigerian law, with disputes resolved by arbitration or before the Federal High Court or the relevant State High Court.

Additional compliance elements for a Share Charge 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.