A Stock Cancellation Agreement is a crucial document used in Nigerian corporate transactions when a company needs to reduce its share capital by cancelling existing shares. This agreement is commonly utilized in scenarios such as corporate restructuring, share buybacks, or implementing employee exit arrangements. The document must strictly comply with the Companies and Allied Matters Act 2020 and other relevant Nigerian regulations, including obtaining necessary corporate and regulatory approvals. The agreement typically covers essential elements such as share identification, consideration details, tax implications, and required regulatory filings with the Corporate Affairs Commission. It's particularly important in private companies and listed entities, though the requirements and complexity may vary depending on the company's status and the transaction's nature.
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1. Parties: Identification of the company and the stockholder(s) whose shares are being cancelled
2. Background: Context of the agreement including company details, share ownership, and reasons for cancellation
3. Definitions: Key terms used throughout the agreement
4. Agreement to Cancel: Clear statement of the number and class of shares to be cancelled and effective date
5. Consideration: Details of any payment or compensation for the cancelled shares
6. Representations and Warranties: Stockholder's confirmation of share ownership and authority to enter agreement
7. Corporate Authority: Company's confirmation of authority to execute the cancellation
8. Compliance with Law: Confirmation of compliance with CAMA 2020 and other applicable regulations
9. Release: Mutual release of claims related to the cancelled shares
10. Tax Matters: Acknowledgment of tax implications and responsibilities
11. Governing Law: Specification of Nigerian law as governing law
12. Execution: Signature blocks and execution requirements
1. Regulatory Approvals: Required if the cancellation needs specific regulatory clearances
2. Share Certificate Surrender: Include if physical share certificates need to be surrendered
3. Escrow Arrangements: Include if consideration is to be held in escrow
4. Shareholder Approval: Required if shareholder approval is needed per articles of association
5. Non-Competition: Include if the cancelling shareholder needs to be restricted from competing
6. Confidentiality: Include if sensitive information needs protection
7. Survival: Include if certain provisions need to survive termination
1. Share Details Schedule: Detailed description of shares being cancelled including certificate numbers
2. Corporate Authorizations: Copies of board resolutions and other corporate approvals
3. Calculation of Consideration: If applicable, detailed calculation of consideration for cancelled shares
4. Regulatory Filings: Forms and notices required for CAC and other regulatory bodies
5. Tax Computations: Schedule showing tax implications and calculations if applicable
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