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Preference Shares Investment Agreement Template for Nigeria

A comprehensive legal agreement governed by Nigerian law that establishes the terms and conditions for the investment in preference shares of a company. The document details the rights, privileges, and obligations attached to the preference shares, including dividend rights, voting rights, and capital rights in accordance with the Companies and Allied Matters Act (CAMA) 2020. It covers crucial aspects such as subscription details, completion mechanics, warranties, information rights, transfer restrictions, and exit provisions, while ensuring compliance with Nigerian corporate and investment laws, including requirements under the Investment and Securities Act and relevant tax regulations.

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What is a Preference Shares Investment Agreement?

A Preference Shares Investment Agreement is a crucial document used when a company seeks to raise capital by issuing preference shares, which offer specific rights and privileges to investors. This agreement, governed by Nigerian law, particularly CAMA 2020 and the Investment and Securities Act, is commonly used in corporate finance transactions where investors require preferential rights over ordinary shareholders, such as priority in dividend payments or capital returns. The document is essential for both domestic and foreign investments in Nigerian companies, detailing the terms of investment, share rights, protection mechanisms, and exit options. It needs to comply with Nigerian corporate law requirements, including those relating to share capital, foreign investment regulations (where applicable), and corporate governance standards. The agreement is particularly important for protecting investor interests while maintaining the company's operational flexibility.

What sections should be included in a Preference Shares Investment Agreement?

1. Parties: Identification of the Company, the Investor(s), and any other relevant parties to the agreement

2. Background: Context of the investment, including company status and purpose of the preference share issuance

3. Definitions and Interpretation: Definitions of key terms and interpretation rules for the agreement

4. Subscription and Payment: Details of the preference shares being issued, subscription amount, and payment terms

5. Completion: Conditions precedent, completion obligations, and timing of the investment

6. Preference Share Rights: Detailed rights attached to the preference shares including dividend rights, voting rights, and capital rights

7. Company Warranties: Warranties given by the company regarding its status, operations, and financial position

8. Investor Warranties: Basic warranties from the investor regarding capacity and authority to invest

9. Information Rights: Investor's rights to receive financial and operational information from the company

10. Transfer Restrictions: Limitations on the transfer of preference shares and any applicable pre-emption rights

11. Exit Rights: Provisions for exit including redemption rights and conversion rights

12. Confidentiality: Obligations regarding confidential information

13. Notices: Process for giving formal notices under the agreement

14. General Provisions: Standard boilerplate clauses including governing law, jurisdiction, and entire agreement

15. Execution: Signature blocks and execution formalities

What sections are optional to include in a Preference Shares Investment Agreement?

1. Anti-dilution Protection: Protection against dilution of shareholding, used when there's likelihood of future share issuances

2. Tag-Along Rights: Right to join in sale of shares by other shareholders, important for minority protection

3. Drag-Along Rights: Right to force other shareholders to join in a sale, useful for exit scenarios

4. Board Appointment Rights: Rights to appoint directors to the board, included when investor requires board representation

5. Dividend Policy: Detailed dividend calculation and payment terms, used when specific dividend arrangements are required

6. Reserved Matters: List of actions requiring investor consent, included for stronger investor protection

7. Foreign Investment Provisions: Additional provisions required when investor is foreign, addressing exchange control and repatriation

8. Put Option: Right to require company/other shareholders to purchase shares, included for exit protection

What schedules should be included in a Preference Shares Investment Agreement?

1. Schedule 1: Company Information: Detailed information about the company including corporate information, capitalization, and subsidiaries

2. Schedule 2: Subscription Details: Detailed breakdown of the preference shares being issued, including price and payment terms

3. Schedule 3: Warranties: Comprehensive list of company warranties

4. Schedule 4: Preference Share Terms: Detailed terms and conditions attaching to the preference shares

5. Schedule 5: Completion Obligations: List of documents and actions required at completion

6. Schedule 6: Reserved Matters: Detailed list of matters requiring investor consent

7. Schedule 7: Form of Deed of Adherence: Template deed for new shareholders to adhere to the agreement

8. Schedule 8: Management Accounts: Latest management accounts of the company

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

Nigeria

Publisher

Genie AI

Cost

Free to use

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