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Introduction Road to demutualisation Rules on Demutualisation of Securities Exchanges in Nigeria. In the Nigerian Stock Exchange NSE issued a request for proposals from local and foreign financial advisers to assist with its demutualisation. This was the first sign that the demutualisation of the NSE, first proposed in by former Director General Ndi Okereke-Onyiuke, was finally close to implementation.

In February the Securities and Exchange Commission SEC issued the draft Rules on Demutualisation of Exchanges in Nigeria and invited comments from the market.

In the latest development, the SEC recently published the final Rules on Demutualisation of Securities Exchanges in Nigeria. Demutualisation is the process by which a member-owned organisation — such as the NSE, which was set up by its members for their own personal benefit — becomes a public company.

The SEC's new rules explicitly define demutualisation as "the process through which a member owned organization becomes a shareholder owned company".

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The global trend towards demutualisation has been driven largely by increased competition which has, in turn, triggered a need for improved efficiency and technologies. The NSE is currently registered as a company incorporated by guarantee and supporters of demutualisation have identified this as a hindrance to its success: The road to demutualisation has been slow, with regulators reluctant to rush a process that is not regulated by law and that has received mixed responses from members of the exchange.

The negative reception to the proposed demutualisation process could be attributed to the lack of clarity surrounding the legal framework for the process, as well as corporate governance and ownership issues. While the Companies and Allied Matters Act provides for the conversion of private companies into public companies and vice versa, it does not provide for the conversion of a company limited by guarantee into a public company.

It has been suggested that before demutualisation takes place, such a process must be provided for and regulated under Nigerian law.

Similarly, stockbrokers have argued against the demutualisation process on the grounds that it is against the memorandum and articles of association of the NSE and cannot be implemented until there is a members' resolution at a general meeting approving the process.

There are also corporate governance concerns with regard to having a public interest company owned by private individuals. Issues under debate include:.

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Demutualisation would involve extending ownership of the exchange from members and participants to non-members; indeed, it would open the gateway for foreign investors to own a part of the NSE. Rules on Demutualisation of Securities Exchanges in Nigeria. In the NSE started working with stockbrokers to develop a roadmap for demutualisation. The SEC in turn inaugurated a member technical committee to develop a legal framework for the demutualisation of the NSE and advise the SEC on the process.

The committee submitted its recommendations to the SEC in March ; since then, the SEC has been working on ways to address the committee's findings, as reflected in the new SEC rules.

Under the SEC rules, a securities exchange that wishes to demutualise must draw up an accurate list of members of the exchange and the process of demutualisation must include an exchange of membership rights for ownership of shares. The rules further provide that an application for demutualisation must be made to the SEC, which must include:.

Following the demutualisation of the NSE, it is expected that the exchange will seek investment from within and outside Nigeria. The materials contained on this website are for general information purposes only and are subject to the disclaimer. ILO is a premium online legal update service for major companies and law firms worldwide.

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Cookies We use cookies to customise content for your subscription and for analytics. Home About Updates Awards Contact Directory OnDemand Partners Testimonials. Introduction Road to demutualisation Rules on Demutualisation of Securities Exchanges in Nigeria Introduction In the Nigerian Stock Exchange NSE issued a request for proposals from local and foreign financial advisers to assist with its demutualisation.

Road to demutualisation Demutualisation is the process by which a member-owned organisation — such as the NSE, which was set up by its members for their own personal benefit — becomes a public company.

Issues under debate include: Rules on Demutualisation of Securities Exchanges in Nigeria In the NSE started working with stockbrokers to develop a roadmap for demutualisation. The rules further provide that an application for demutualisation must be made to the SEC, which must include: Register now for your free newsletter. Home About Updates Awards Contact My account Directory OnDemand Partners Testimonials Disclaimer Privacy policy Terms Cookie policy Follow on Twitter.

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