Introduction
The Nigerian Communications Commission (NCC) and the Corporate Affairs Commission (CAC) have collaborated on another position affecting companies in the telecommunications sector. The NCC and the CAC informed the general public, investors, and all stakeholders in the communications sector about compliance requirements regarding changes in the ownership structure of licensed communications companies in Nigeria.
Under this requirement, telecommunication companies can no longer independently approach the CAC for a change of ownership or shareholding of 10% or more without obtaining prior NCC approval. By doing so, both the NCC and CAC reaffirmed their commitment to working together to maintain a stable and competitive business environment across the sector.
This newsletter provides an overview of the regulatory collaboration, implications for stakeholders and compliance considerations for the telecommunication companies.
Overview of the NCC–CAC Collaboration
According to the notice, “Effective immediately any proposed transfer of ownership or control of shares in a licensee of the Nigerian Communications Commission, amounting to ten percent (10%) or more of the total share capital, as well as any series of share transfers which in aggregate exceed ten percent (10%) of the total share capital of the Licensee shall require a Letter of No Objection from NCC in order for the changes to be effected and registered with the CAC.” The essence of this regulatory procedure is to ensure that, while the CAC performs its functions of regulating and administering company/corporate affairs in Nigeria, companies still engage in appropriate competition practices through the involvement of the NCC.
Additionally, the notice states that “this requirement is pursuant to the provisions of Section 90 of the Nigerian Communications Act 2003 (NCA 2003), Regulation 28 (2) of the Competition Practices Regulations, 2007, and Regulation 42 of the Licensing Regulations, 2019”. Pursuant to these provisions, the NCC have statutory power and competence to determine, pronounce upon, administer, monitor and enforce compliance of all persons with competition laws and regulations. The law further requires that prior approval of the NCC be obtained by way of a written notification
submitted at least 60 days before the completion of the proposed transaction under the Competition Practices Regulations, 2007, and 90 days under the Licensing Regulations, 2019.
Furthermore, “the requirement is designed to preserve a fair and competitive market structure within the communications sector by preventing direct or indirect anti-competitive practices, while strengthening regulatory oversight of significant changes in ownership and control.”
Implications for Communications Companies and Investors
1. Strict Regulatory Oversight: The precondition of the NCC approval for registration, places more regulatory oversight on the activities of the companies within the sector.
2. Long-Term Industry Stability: The policy aims to improve long-term business sustainability and enhance corporate governance, giving investors clearer, more predictable regulatory rules.
3. No “Post-Acquisition” Filings: A prior NCC approval requirement eliminates post-acquisition filings, as failing to obtain the approval halts and possibly delays the registration and filing process of the transaction.
4. Consolidation and Competition Control: The NCC stands in a position to have an initial review of transactions and ensure fair market competition practices within the sector.
5. Compliance Considerations: Companies in the sector must have increased compliance considerations in their operations and daily transactions.
Conclusion
The collaboration of regulatory authorities has become essential for effective administration and regulation of companies within the sector. This policy is necessitated by the competitive nature of telecommunication companies in the sector and thus will be very beneficial in preventing unfair competition among companies and eliminating monopoly.
Stakeholders and investors must also note that the requirement relates only to the transfer of shares which may imply the transfer of ownership of the company, and not to all other changes or registrations of telecommunications companies. Those changes can still be made with CAC without any prior consent or approval from the NCC.
This newsletter is provided for general information purposes only and does not constitute legal, regulatory, or professional advice. While reasonable care has been taken in preparing this publication, readers are advised not to rely on its contents as a substitute for specific legal advice. Institutions and individuals are encouraged to consult their legal, compliance, or other professional advisers to obtain advice tailored to their particular circumstances.
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