Share Charges, Registrability and Section 197 of the Nigerian Companies and Allied Matters Act 2004

Abstract

Deeds of share charges are security documents by which a chargor creates a security interest over shares held by it in a company in favour of a chargee. Share charges are usually part of the security package found in financing transactions. The chargor might be the borrower who is providing the share charge to the lender as part of the financing security or it could be a third party providing the lender with the security in support of the loan the lender is advancing to the borrower who might be connected in some way with the borrower.From the point of view of transaction costs, one of the advantages of the share charge is that it is nominally stamped at the revenue office and as a matter of practice filed at the Corporate Affairs Commission (the “CAC”) as a miscellaneous document which does not require registration as a company charge under Section 197 of the Companies and Allied Matters Act. Such filing under the miscellaneous category at the CAC attracts just a nominal fee.Recently, the CAC has sought to include share charges as a registrable document and have expectedly met with resistance from practitioners. It is believed that this position of the CAC was informed strongly (besides the proclivity of regulators in Nigeria to unreasonably seek to extend the ambit of their powers) by the custom of practitioners over the years to file share charge instruments at the CAC as a miscellaneous document. It is this writer’s conviction that the position of the CAC on share charges is unfounded in law.A resolution of this controversy one way or another is important as the outcome will definitely have an impact in real terms. If resolved in favour of the CAC, registration of share charges would ensure a potential increase in revenue generation for it through registration fees while a resolution in favour of the parties to the share charge would ensure that the very limited transaction cost involved in this security documentation remain intact.In the final analysis, the resolution of this controversy is one that turns on statutory interpretation. Thus, this article is designed to explore the corridors of Section 197 of CAMA, case laws and legal texts for signposts in aid of such resolution.