Emerging Areas in Law: Unveiling the Opportunities for Nigerian Lawyers [With Particular Focus on Fintech and Capital Market]

A Presentation by O.M. Atoyebi, SAN at the Maiden Webinar of the Pioneer Law Hub Limited, Abuja, held on the 18th December, 2020.

Introduction

As modern society continues to evolve and various technologies emerge, changes and approaches to performing daily tasks and transactions continue to be witnessed on a gargantuan scale. The legal profession is not left out as various areas of law continue to emerge as responses to societal innovations. 

Indeed, it is against this backdrop of globalisation, technology and economic diversification which have fuelled societal changes, that a number of novel fields in the practice of law have emerged. The focus here however will be on Fintech and the Capital Market as emerging areas and opportunities available to Nigerian lawyers therein. 

Fintech

In basic terms, financial technology (Fintech) is simply defined as the creative and innovative technology of providing financial services through electronic platforms (such as mobile phones and mobile financial applications) as opposed to regular and traditional banking methodsFintech plays the vital role of financial inclusion, improvement and enhancement of traditional financial institutions, and providing efficient communication services.

Owing to its novelty in Nigeria, it is important to note that there is currently no standalone legislation for fintech companies in Nigeria. The consequence of this is that there currently exist a lot of grey areas as to operations within the fintech space. 

Indeed, it is this absence of laws, legal guides, and defined rights of consumers that afford a career and earning opportunity to lawyers. This is so as lawyers would be constantly needed to navigate all of the legal issues and due diligence required in providing financial services engineered by technology. In the circumstance lawyers would be needed to provide the following services:

  • Advisory and company secretarial services to fintech companies;
  • Obtaining Operational Licences from regulatory agencies
  • Data protection compliance. 
  • Fintech Private Equity and Venture Capital Investor guidance 
  • Employment law
  • Tax Compliance
  • Intellectual Property rights in to respect innovation, creativity, trademark, digital inventions, patents and individual or corporate rights protection
  • Merger & Acquisition 
  • Legal representation in the event of legal disputes; and
  • Soliciting services (preparation of contractual agreements and the review of same) etc. 

One of the firms in Nigeria offered advisory services to Stripe (an American fintech company), in its $200,000,000 (Two hundred million dollar) purchase of Paystack, (advised another Nigerian Firm), a Nigerian Fintech company is proof of the earning potential open to lawyers within the fintech industry. It is therefore advised that Nigerian lawyers should continue to grow their capacity and competence in navigating legal issues within the industry as their services will always be needed. 

Corporate Finance

CAPITAL MARKET

In basic terms, Capital can be described as accumulated wealth available to create further wealth. It is wealth engaged in a reproductive process. The Capital Markets are vantage points where those who require additional capital seek out those who wish to invest their excess. They are also places where risk can be distributed, shared and diversified. Those with surplus wealth spread their risk across a wide range of attractive investments. Back in the days, the places where physical, such as the stock exchange houses, city centres, golf courses etc. today, they are also located in the cyber space and accessible through the internet from the comfort of our homes and offices.

The Capital Market is essentially a market where financial instruments known as securities (i.e. shares and bonds) are issued/sold to finance a company, and where such securities are subsequently traded after their initial issue. The Capital Market comprises of two segments which are;

  • The primary market – The market for new issues or Initial Public Offerings; and
  • The secondary market – The market for trading in already issued securities of Public Companies.

The Role of a Lawyer(Solicitor) in the Capital Market

The Capital Market is not like every other overt market. It is guided by laws and regulations enforced by the Nigerian Securities and Exchange Commission. To this end, the expertise of lawyers (as solicitors) are typically needed to navigate dealings within the market as purchasers and issuers(sellers) would rely on such expertise to reach informed decisions. By the provisions of Rule 180 of the Securities Exchange Commission (Consolidated Rules) 2017, a Solicitor performs a myriad of functions in the Capital Market which include:

  • Carry out due diligence to ensure that all information material to a transaction are disclosed in the transaction documents;
  • Advise on the legal structure of the transaction and on legal risks associated with it;
  • Negotiate, draft and review all legal documentations required for a transaction including but not limited to the prospectus, offer/scheme documents, trust deeds, vending agreements, powers of attorney/consents and underwriting agreements;
  • Advise parties on disclosure obligations and general observance of and compliance with sound corporate governance principles, rules and regulations as they relate to a transaction;
  • Advise on compliance with the requirements of the Corporate Affairs Commission, the Securities and Exchange Commission, the listing requirements of the Nigerian Stock Exchange and other relevant industry specific regulatory requirements;
  • Certify or obtain certification of compliance with all statutory requirements by the issuer and other parties to a transaction;
  • Make all statutory filings and provide confirmations (legal opinion) as to the enforceability and effectiveness of transaction documents; and
  • File necessary applications in Court in support of transactions and any other roles ancillary to any of the above.

NOTE:  Owing to the high level of abuse and fraud that occurs in the Capital Market, engaging a lawyer timeously is pertinent to prevent such unwanted eventualities. Therefore, the germane legal expertise offered by lawyers to stakeholders in the capital market is what creates a career and earning opportunity for lawyers.

CORPORATE RESTRUCTURING: MERGERS AND ACQUISITION

Corporate restructuring is essentially a corporate action taken to significantly modify the structure or the operations of a company. There are a number of methods available with the most common being Mergers and Acquisitions. 

A growing trend of corporate law activities the world over is Mergers and Acquisitions (M&A). A merger occurs when two separate entities combine forces to create a new joint organization.  Whilst an acquisition refers to the takeover of one entity by another.  Mergers and acquisitions may be completed to expand a company’s reach or to gain market share in an attempt to create shareholder value. Solicitors need to understand the dynamics of M&A’s.  Ultimately, to be successful in M&A and securities transactions, companies and their advisers need a thorough understanding of tactics and strategy and how they fit within the law, policies and procedures.

Over the past quarter of a century, we have noticed that merger waves have become more frequent. The time periods between waves have also reduced. When these trends are combined with the fact that M&A has rapidly spread across the modern world, we see that the field is increasingly becoming an ever more important part of the worlds of corporate finance and corporate strategy. As the field has evolved we see that many of the methods that applied to deals of prior years are still relevant, but new techniques and rules are also in effect. These new methods and techniques consider the mistakes of prior periods along with the current economic and financial conditions.

The world of M&A is interdisciplinary, it involves the expertise of economists, investment bankers, accountants, marketers, finance practitioners, financial advisors, lawyers and so on. The increase in M&A has given rise to the growth of academic research in this area. In fact, M&A seems to generate more research than other areas of finance.

M&A IN NIGERIA

Before 2019, the Securities and Exchange Commission (SEC) via the powers vested in it by the Investment and Securities Act 2007 (ISA), particularly Section 118 to 218, was the leading regulatory body for mergers and acquisition. Today, the Federal Competition and Consumer Protection Act (FCCPA) 2019, repealed Sections 118-218 of the ISA and transferred the regulatory responsibility of mergers and acquisition to the Federal Competition and Consumer Protection Commission (“The Commission”). Other regulatory laws are the Companies and Allied Matters Act, the Securities and Exchange Commission Consolidated Rules of 2013 (SEC Rules), the Central Bank act the Bank and other Financial Institutions Act among others that are sector specific, like the Electricity Power Sector Reform Act on deals involving the Power sector.

The Commission as of today has not published any financial threshold for merger deals, therefore the SEC Rules remains authority, and its thresholds are: 

  • Small Mergers – This is the smallest scale to be considered as it is based on the combination of assets and turnovers of below N1,000,000,000 (One Billion Naira). This threshold does not mandate the parties involved to notify SEC of the intended transaction.
  • Intermediate Mergers – This threshold involves a combination of assets and turnovers between N1,000,000,000 (One Billion Naira) and N5,000,000,000 (Five Billion Naira).
  • Large Mergers – This involves a combination of assets and turnovers above the threshold sum of N5,000,000,000 (Five Billion Naira).

THE ROLE OF LAWYERS IN M&A DEALS

Lawyers typically assist in drafting legal documents like the letter of intent and acquisition agreement, Non-Disclosure Agreements, and even employment agreements to keep key employees at the company after the deal closes. They also assist with due diligence and negotiations and answer any legal questions that may arise. During legal due diligence, the buyer’s lawyers look at the various aspects of the seller’s or target’s business to identify, assess, allocate and mitigate legal risks.

In particular, the lawyers seek to establish who owns the target. They also investigate the compliance status of the target at the Companies Registry (CAC) and if the company has met other licensing requirements. Additionally, the lawyer seeks to discover whether there are any material loans the target is servicing, the material contracts the target is a party to, the extent and status of the real estate owned or leased by the target, ongoing or potential litigation involving the target as well as the employment contracts and any other emerging areas that expose the target to legal risk.

Lawyers also provide guidance on deal structures so you can structure the deal to your advantage for tax and legal purposes. 

Other Emerging Areas of Law Worthy of Note

  • Medical law
  • Intellectual Property
  • Tax Law
  • Blockchain and Cryptocurrency 
  • Sports Law
  • Entertainment Law
  • Cyber Security Law

Conclusion

It is pertinent to note in closing, that in whatever field of practice a lawyer elects to delve into, what is key is that he develops competencies and is able to satisfy the needs of clients. Lawyers are therefore encouraged to improve their competencies and skills via constant and continuous learning.  

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