Private Fundraising in Nigeria: When Does a Capital Raise Become Public?

A company may raise capital without conducting a public offering. The legal character of the transaction, however, cannot be determined by the description attached to it. The relevant considerations include: the nature of the instrument, the class of investors, the manner in which the offer is made, and the regulatory framework applicable to the transaction. For founders, the analysis should begin before the fundraising is placed in circulation.

START WITH THE INSTRUMENT

The first question is fundamental:

What, precisely, is the investor acquiring? It may be:

ordinary or preference shares; bonds or debentures; notes or convertible instruments; rights or options; an investment contract; or another instrument falling within the statutory definition of a security.

Under the Investments and Securities Act 2025, that definition is deliberately broad. The legal analysis begins with substance, not nomenclature.

THEN CONSIDER THE INVESTOR

A fundraising directed at a defined and identifiable group of investors is not necessarily equivalent to an invitation to the public. The distinction may turn on who receives the offer and the circumstances in which it is made. The investor pool may comprise: existing shareholders; angel or strategic investors; institutional investors; family offices and high-net-worth investors; or members of the general public. Who is entitled to participate matters.

THE METHOD OF SOLICITATION MATTERS TOO

Consider a founder who publishes: “We are raising ₦500 million. Investors can acquire an interest in the company. Contact us for details.”

The announcement appears on LinkedIn, Instagram and X, and is subsequently circulated through WhatsApp groups. The founder may regard this as a private capital raise.

The law may require a more careful examination of the manner in which the investment opportunity has been disseminated. A private transaction can acquire public-offer characteristics through the manner in which it is promoted.

CAMA IMPOSES A DISTINCT RESTRICTION ON PRIVATE COMPANIES

For private companies, the analysis does not begin and end with the ISA 2025.

Section 22(5) of CAMA 2020 provides that a private company shall not, except as authorised by law, invite the public to subscribe for its shares or debentures.

Accordingly, incorporation as a private company does not provide a general exemption from securities considerations. Corporate status does not authorise a fundraising structure that the law otherwise prohibits.

THE SEC FRAMEWORK FOR PRIVATE COMPANIES IS MORE NUANCED

The regulatory landscape has evolved. In 2025, the SEC introduced the Rules on Issuance and Allotment of Private Companies' Securities, establishing a framework for qualifying private companies to issue specified debt securities subject to prescribed conditions.

The framework includes requirements concerning: qualified investors; permitted instruments; issuance limits; transaction documentation; and other regulatory conditions.

The appropriate analysis therefore depends, in part, upon whether the company is raising equity or debt.

EQUITY IS NOT DEBT

A founder considering a: ₦500 million equity raise cannot assume that the same regulatory analysis applies to a: ₦500 million private-company debt issuance.

The legal character of the instrument matters. A private company's ability to issue qualifying debt securities under the SEC framework should not be mistaken for a general permission to offer its equity securities to the public.

Different instruments can carry different regulatory consequences.

YOUR PITCH DECK IS NOT THE WHOLE TRANSACTION

Founders often focus on the principal investment agreement.

That is only part of the picture. The transaction may also comprise: the term sheet; subscription or investment agreements; shareholders' agreements; convertible instruments; information memoranda; pitch decks; and digital communications made to prospective investors.

These materials should tell the same legal and commercial story. The document's title will not determine the legal character of the transaction.

PRIVATE DOES NOT MEAN UNREGULATED

The fact that an offering is private does not eliminate the importance of accurate disclosure, proper documentation and compliance with applicable law.

In Stanbic IBTC Bank Plc v. Longterm Global Capital Ltd & Ors, litigation arising from a private placement raised issues concerning, among other matters, representations, disclosure and the transaction documentation.

The lesson for issuers is enduring: A private placement remains a legally structured investment transaction. Its private character does not relieve the parties of obligations imposed by law or contract.

THE COST OF GETTING THE STRUCTURE WRONG

A fundraising undertaken without appropriate legal analysis may expose the company and, in relevant circumstances, its officers or advisers to issues concerning: regulatory compliance; unauthorised offers; investor claims; misrepresentation or inadequate disclosure; validity and enforceability of transaction documents; and statutory sanctions.

Under the ISA 2025, certain securities and public offers are subject to registration and regulatory requirements, with significant consequences for non-compliance. The most expensive time to identify a regulatory problem is after the capital has been raised.

BEFORE THE FIRST INVESTOR IS APPROACHED

A founder should be able to answer, with precision:

What are we issuing? Who are we permitted to approach? How will the offer be communicated? Is the company permitted to undertake the proposed issuance? What SEC requirements apply? What corporate approvals and disclosures are required? Does the proposed structure fall within a specific regulatory framework or exemption? Have the transaction documents been reviewed as an integrated whole?

THE BOARDROOM QUESTION

The question should not simply be: “Can we raise this money?” The more important question is: “What is the most appropriate legal and regulatory structure through which this capital should be raised?” That question protects more than the transaction. It protects the company's governance, investor relationships, regulatory standing and future financing options.

CLOSING CAPITAL RAISING REQUIRES MORE THAN A COMPELLING PITCH.

It requires a structure that is legally sound, commercially coherent and capable of withstanding regulatory scrutiny. Before capital enters the company, ensure the legal framework is already in place.

SEC Regulation in Nigeria

Corporate Finance & Capital Markets Legal Insight