We operate in a fast-paced business environment where many private companies aim to expand their reach, attract public investments, access capital markets, and ultimately enjoy the benefits of public visibility. This objective can be achieved by converting a private company into a public company. The process of this conversion is known as re-registration. It is fully governed and regulated by the Companies and Allied Matters Act 2020, which provides the legal and regulatory framework for transitioning from a private to a public company. Additionally, a private company can be converted into either a public company limited by shares or a public unlimited company.
Whether you’re a budding investor or a company director looking to transition from a private company to a public one without going through new incorporation or disrupting your business, it is essential to understand the procedural steps involved in making this change. In this article, we will provide a comprehensive overview of the steps and procedures to convert a private company to a public company.
What are the benefits of converting a private company to a public company?
Taking the bold step to convert a private company to a public company affords your business a wide range of valuable opportunities which includes:
- Access to capital through the issuance of shares to the public
- Growth enhancement of the company
- Brand visibility and increased business opportunities via listing on the exchange market
- Enhanced credibility and accountability: Public companies are required to observe stricter corporate governance rules, hence boosting the trust of investors and shareholders.
Can a private company be changed to a public company?
Yes, a private company can be changed to a public company. This is made possible under the Companies and Allied Matters Act. It succinctly provides that;
“A company may by re-registration under this Part, alter its status from-
- a private company to a public company”[1]
A private company, whether limited or unlimited, can be converted into a public company limited by shares, provided that it has not previously been re-registered as an unlimited company. This conversion must adhere to the steps and requirements outlined by the law.
Requirements for converting a private company to a public company in Nigeria
Before a private company can be re-registered as a public company, the following conditions must be met;
- The private company is required to have a minimum issued share capital of not less than N2,000,000 and net assets that must comply with the requirements of the law[2].
- The private company has not been re-registered as an unlimited company.[3]
The relevant documents for re-registration are as follows[4];
- An application for re-registration
- A copy of the special resolution that the company be re-registered as a public company
- A copy of the MEMART of the company
- A copy of the balance sheet as of the date not exceeding 7 months before applying for re-registration.[5]
- Evidence of payment of at least one-quarter of the companies’ issued share capital
- A copy of the valuation report
- A statutory declaration of compliance
How to convert a private company to a public company
- A general meeting of the board of directors and shareholders will be held, where a special resolution will be passed for the company to be converted to a public company.
- Thereafter, an application for re-registration will be submitted to the Corporate Affairs Commission. The application shall contain the following;
- Details of the private company, including name and RC number
- Proposed name of the new company for re-registration
- The statement of proposed secretary, including the personal details and service address[6]
- Statement of compliance
- Payment of the prescribed fees
- Where the Commission is satisfied that the application complies with the provisions of the law and relevant guidelines, the company shall be re-registered accordingly[7]
- Thereafter, a certificate shall be issued by the Commission, and the change of name shall be reflected on the MEMART of the company[8].
Conclusion
Converting a private company to a public company is a complex legal procedure that still affords businesses a potentially rewarding experience, including access to the capital market, increased visibility, and enhanced credibility. Hence, the need to have access to the right legal, financial, and even accounting expertise for a smooth transition.
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[1] Section 55 (a) CAMA 2020
[2] S 56 (2) (a)-(d), S 58 (6) and S 27 (2) CAMA 2020
[3] S 56 (2) (e) CAMA 2020
[4] S 60 (2) CAMA
[5] S 58(1) (a) CAMA 2020
[6] S 60 (1) and 61 (1) & (3) CAMA 2020
[7] Section 62 (1) CAMA 2020
[8] S 62 (3) CAMA 2020
