HOLDING SHARES IN TRUST – NOMINEE SHAREHOLDING IN NIGERIA
Who is a nominee shareholder?
A Nominee Shareholder is a person who holds assets on behalf of another person without any beneficial interest in the assets. A nominee is an agent of the actual shareholder(s).
Reasons for the Appointment of A Nominee Shareholder
Some notable reasons for the appointment of a nominee shareholder are:
- To protect the details and privacy of actual shareholders or directors from the public.
- The inability of the actual shareholder to be physically present
- To utilise the expertise of the Nominee.
- Regulatory requirements.
The legality of the Appointment of A Nominee Shareholder
The Companies and Allied Matters Act, 2020 (CAMA), is the principal legislation governing the administration of companies in Nigeria. Although CAMA does not expressly provide for nominee shareholding, it made provisions for the appointment of agents to carry out certain duties of a director and shareholder in sections 110 and 254.
Section 110(1)(b) of CAMA allows a company to appoint an agent to prepare on behalf of the company, the register of members and to keep same in the agent’s custody or premises. Section 254(1) of CAMA allows a shareholder to appoint another person as his proxy (whether a member of the Company) to attend and vote on his behalf. The proxy appointed to attend and vote on behalf of a member has the same right as the member.
Additionally, CAMA 2020 provides the obligations to disclose a beneficial interest in Companies. Sections 119 and 120 of CAMA provides that persons who hold significant control in any type of company are required to disclose the particulars of such control to the relevant companies within seven (7) days of acquiring such significant control. All Companies are mandated to inform the Corporate Affairs Commission (CAC) within one (1) month of receipt of such information, update the registers of members with the information and disclose the information in the annual returns to be filed at the CAC. This disclosure is mandatory even where these interests are held through nominal holders or in trust. Accordingly, it would appear that holding shares by way of trust arrangements is permissible under CAMA, 2020.
Nominee Agreement (Declaration of Trust)
A nominee Agreement is an agreement executed between a nominee and the principal before the appointment of the nominee. The agreement protect the interest of the parties and set out the duties of the nominee and the extent of the powers conferred on the nominee.
This Agreement is used where a nominee shareholder, who is the registered owner of shares, holds shares for the benefit of another person (the beneficial owner). A beneficial owner may choose as part of the shareholding arrangements of a company to appoint a nominee because it does not wish to have its name appear on the share register or it is a requirement to appoint a nominee by, for instance, the company’s articles of association.
Conclusion
The holding of shares in nominee capacity is neither expressly disallowed nor allowed under the CAMA, 2020 and other relevant laws in Nigeria. However, it can be inferred from CAMA particularly sections 110(1)(b), 254(1), 119 and 120 holding shares in trust is allowed. The law mandates the full disclosure of every person holding any shares in the company.
Any person appointed in nominee capacity to hold shares in a company for another person or organization is liable to contribute any unpaid share capital to the extent of shares subscribed in his or her name in case of the winding-up of the company on the petition of creditors.
Reference
- https://www.banwo-ighodalo.com/grey-matter/companies-and-allied-matters-act-2020-reforming-provisions-that-impact-the-nigerian-business-community-1
- https://www.mondaq.com/nigeria/shareholders/1066926/overview-of-nominee-services-in-nigeria
- https://www.resolutionlawng.com/appraisal-of-the-appointment-of-nominee-director-and-shareholder-in-nigeria/#:~:text=A%20shareholder%20in%20a%20limited,the%20interest%20of%20the%20company.&text=Although%20the%20holding%20of%20shares,by%20any%20law%20in%20Nigeria.
