The Securities and Exchange Commission (SEC) in Nigeria has mandated all persons or entities operating an investment/crowdfunding portal or digital commodities investment platform in Nigeria to restructure all operations in accordance with the requirements of its new rules and apply for registration and obtain the requisite licenses on or before June 30, 2020.
“This is to inform all stakeholders that as part of efforts to ensure investor protection while encouraging innovation in the conduct of securities business, the rules governing Crowdfunding business in Nigeria came into effect on the 21st day of January, 2021,” a statement from SEC reads.
“While the transitional period elapsed on the 21st day of April, 2021, the Commission hereby directs all existing investment crowdfunding portals/digital commodities investment platforms to note the requirements and eligibility criteria for raising funds through and/or operating a Crowdfunding Portal and comply with the registration requirements or cease operations by the 30th of June, 2021, failing which the operations of such platform would be categorized as illegal and attract regulatory sanction as stipulated in the Rules,” it further adds.
Under SEC’s new regulation, only MSMEs (Micro, small and medium enterprises) registered as a company in Nigeria with a minimum of two years operating track record are eligible to raise funds through a Crowdfunding Portal registered by the Securities and Exchange Commission. However, if the MSME has been less than 2 years in operation, but has a strong technical partner who has been in operation for at least 2 years, it will qualify. It will also qualify if it has a core investor on ground.
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However, some MSMEs are prohibited from raising funds through a crowdfunding portal, and they include those with (i) complex structures (that is, an MSME without adequate clarity about its ownership or control which make it difficult to immediately ascertain the beneficial owners of the entity) ; (ii) public listed companies and their subsidiaries; (iii ) MSMEs with no specific business plan; (iv) MSMEs that propose to use the funds raised to provide loans or invest in other entities.
NB:
- Micro Enterprises in Nigeria are those enterprises whose total assets (excluding land and buildings) are less than Ten Million Naira with a workforce not exceeding ten employees.
- Small Enterprises are those enterprises whose total assets (excluding land and building) are above Ten Million Naira but not exceeding One Hundred Million Naira with a total workforce of above ten, but not exceeding forty-nine employees.
- Medium Enterprises are those enterprises with total assets excluding land and building) are above Fifty Million Naira, but not exceeding One Billion Naira with a total workforce of between 50 and 199
employees — Source: SMEDAN Nigeria
SEC Investment licenses Nigeria
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer