How to Change the Nominal Value of Shares with CAC - A Comprehensive Guide for Nigerian Businesses 2026

Introduction: Navigating Share Capital Changes with the CAC

As a business owner in Nigeria, understanding the intricacies of your company's share capital structure is fundamental to its growth and legal compliance. The Corporate Affairs Commission (CAC) is the primary body responsible for company registration and regulation in Nigeria. From time to time, companies may find it necessary to alter fundamental aspects of their structure, one of which is the nominal value of shares.

Changing the nominal value of your company's shares might seem like a complex process, but with a clear understanding of the requirements and steps involved, it can be executed smoothly. This comprehensive guide, brought to you by BusinessHelp CONSULT, will demystify the process, providing you with a step-by-step roadmap to successfully change the nominal value of your shares with the CAC, all while adhering to the provisions of the Companies and Allied Matters Act (CAMA) 2020.

Whether you are looking to make your shares more affordable for new investors, consolidate shares to reduce administrative burden, or simply optimize your capital structure, this article will equip you with the knowledge you need to navigate this important corporate action.

Understanding Share Capital and Nominal Value

Before delving into the process of change, it's crucial to grasp what share capital and nominal value truly mean in the context of a Nigerian company.

What is Share Capital?

Share capital represents the money invested by shareholders into a company in exchange for ownership shares. It is the financial foundation of a company. Under CAMA 2020, companies are no longer required to have a 'Memorandum of Association' stating an 'Authorised Share Capital.' Instead, companies now simply have a 'Share Capital' which must not be less than the prescribed minimum share capital for private or public companies.

• Issued Share Capital: This is the portion of the company's total share capital that has been issued to shareholders.
• Paid-up Share Capital: This refers to the amount of money shareholders have actually paid for the shares issued to them.

What is Nominal Value (Par Value)?

The nominal value, also known as par value, is the minimum price at which a company's shares can be issued. It is a fixed value assigned to each share at the time of the company's incorporation or when shares are created. For example, if a share has a nominal value of N1.00, it means that the company cannot issue that share for less than N1.00. While companies can issue shares at a premium (above nominal value), they cannot issue them at a discount (below nominal value).

It's important to distinguish nominal value from market value. While nominal value is a statutory fixed value, market value is the price at which shares trade on a stock exchange or are valued by investors, which can fluctuate based on market demand, company performance, and other economic factors.

Why Companies Change the Nominal Value of Shares

There are several strategic reasons why a company might consider altering the nominal value of its shares. These reasons often tie into optimizing the company's capital structure, improving liquidity, or preparing for future corporate actions.

1. Share Split

A share split involves dividing existing shares into a larger number of shares, thereby reducing the nominal value per share. For instance, if a company has 1,000 shares with a nominal value of N10.00 each, a 2-for-1 share split would result in 2,000 shares with a nominal value of N5.00 each. The total share capital remains the same, but the number of shares increases, and the nominal value per share decreases.

• Purpose: To make shares more affordable and attractive to a wider range of investors, increase market liquidity, and improve the perception of the company's stock.

2. Share Consolidation (Reverse Stock Split)

Share consolidation is the opposite of a share split. It involves combining multiple existing shares into a smaller number of shares, thereby increasing the nominal value per share. For example, if a company has 10,000 shares with a nominal value of N0.50 each, a 1-for-10 consolidation would result in 1,000 shares with a nominal value of N5.00 each.

• Purpose: To increase the share price (nominal value and often market price) to meet stock exchange listing requirements, make the shares appear more substantial, or reduce administrative costs associated with a large number of low-value shares.

3. Optimizing Capital Structure

Companies may also change nominal value as part of a broader strategy to simplify their capital structure, align with industry standards, or facilitate future corporate transactions like mergers, acquisitions, or capital raising.

Legal Basis: CAMA 2020 Provisions

The Companies and Allied Matters Act (CAMA) 2020 governs all aspects of company operations in Nigeria, including alterations to share capital. Section 127 of CAMA 2020 empowers a company to alter its share capital by ordinary resolution, subject to certain conditions. However, for a change in nominal value (which often involves subdivision or consolidation of shares), a Special Resolution of the shareholders is typically required. This signifies a significant corporate action that requires a higher level of shareholder approval.

It is important to note that any alteration to the share capital must be filed with the CAC within 15 days of the resolution being passed. Failure to do so can result in penalties.

The Step-by-Step Process for Changing Nominal Value with CAC

Changing the nominal value of your company's shares is a structured process that involves internal company decisions and formal filings with the CAC. Here's a detailed breakdown:

Step 1: Convene a Board Meeting

1. Purpose: The company's Board of Directors must first discuss and approve the proposed change to the nominal value of shares. This initial approval is crucial as it demonstrates that the management supports the action.
2. Notice of Meeting: Ensure proper notice is given to all directors according to the company's Articles of Association.
3. Board Resolution: A board resolution must be passed, recommending the proposed change to the nominal value of shares and authorizing the company secretary or a designated director to convene an Extraordinary General Meeting (EGM) of shareholders to consider and approve the proposed alteration.
4. Minutes: Accurate minutes of this board meeting must be taken and duly signed, as they may be required for CAC filing.

Step 2: Convene an Extraordinary General Meeting (EGM)

Shareholder approval is paramount for any significant alteration to a company's capital structure.

1. Notice of EGM: A formal notice must be sent to all shareholders entitled to attend and vote at the EGM. This notice must clearly state the purpose of the meeting, which is to consider and pass a Special Resolution for the alteration of the nominal value of shares. CAMA 2020 generally requires a minimum of 21 days' notice for an EGM where a special resolution is to be proposed.
2. Content of Notice: The notice should explicitly state the current nominal value, the proposed new nominal value, and how this change will affect the number of shares (e.g., 'to subdivide each N1.00 ordinary share into two N0.50 ordinary shares').
3. Special Resolution: At the EGM, shareholders will vote on the proposed change. For a special resolution to pass, it requires the approval of not less than three-fourths (75%) of the votes cast by members present and voting.
4. Minutes: Detailed minutes of the EGM, including the exact wording of the Special Resolution passed and the voting results, must be recorded and signed by the Chairman. This document is critical for the CAC filing.

Step 3: Prepare and File Documents with CAC

Once the Special Resolution has been passed, the company must file the necessary documents with the Corporate Affairs Commission within 15 days of the resolution being passed.

1. Access CAC Online Portal: All filings with the CAC are now done electronically through their online portal. The company secretary or a designated representative will need access to the company's profile on the portal.
2. Initiate Filing: Navigate to the appropriate section for 'Post-incorporation' filings and select the option for 'Alteration of Share Capital' or 'Change in Nominal Value.'
3. Upload Required Documents: You will be required to upload certified true copies (CTCs) of the following documents:
• The Special Resolution passed at the EGM.
• The Board Resolution recommending the EGM.
• An application letter addressed to the Registrar-General, CAC, explaining the purpose of the filing.
• Evidence of payment of the prescribed filing fees.
4. Update Company Information: The online form will require you to input the details of the new share capital structure, including the new nominal value and the resulting number of shares.
5. Payment of Fees: Pay the requisite filing fees as calculated by the CAC portal. These fees can vary based on the nature of the alteration and the company's share capital.
6. Submission: Submit the application electronically. The CAC will review the submitted documents for compliance.

Step 4: Post-Filing Actions and Updates

After successful filing and approval by the CAC, there are a few more steps to ensure your company's records are fully updated.

1. CAC Approval: The CAC will issue a certificate or an approval letter confirming the alteration of the nominal value of shares. Keep this document safely as proof of the change.
2. Update Register of Members: The company's internal Register of Members (shareholders) must be updated to reflect the new nominal value and, if applicable, the new number of shares held by each shareholder.
3. Issue New Share Certificates: If the nominal value change results in a different number of shares (e.g., a share split or consolidation), new share certificates should be issued to shareholders, and the old ones should be recalled and cancelled.
4. Update Financial Records: Inform the company's accountants and auditors of the change to ensure all financial statements and records reflect the updated share capital structure.
5. Inform Stakeholders: Communicate the change to relevant stakeholders, including banks, creditors, and other business partners, if necessary.

Required Documents Checklist for CAC Filing

To ensure a smooth filing process, prepare these documents thoroughly:

Potential Challenges and Important Considerations

While the process is straightforward, certain aspects require careful attention to avoid delays or issues:

1. Adherence to Notice Periods

Strictly follow the notice periods for board meetings and EGMs as prescribed by your company's Articles of Association and CAMA 2020. Failure to do so can invalidate the resolutions passed.

2. Correct Drafting of Resolutions

The wording of both the Board Resolution and the Special Resolution must be precise, clearly stating the current and proposed nominal values, and the impact on the number of shares. Ambiguity can lead to queries from the CAC.

3. Ensuring Annual Returns Are Up-to-Date

The CAC often places a hold on new filings for companies that have outstanding annual returns. Ensure your company's compliance record is clean before attempting any significant corporate action.

4. Professional Assistance

It is highly recommended to engage the services of a qualified company secretary or legal professional. They can provide expert guidance, draft the necessary resolutions, ensure compliance with CAMA 2020, and handle the filing process efficiently, saving you time and potential errors.

5. Impact on Existing Share Certificates and Shareholder Rights

Consider the logistical implications for existing share certificates. A change in nominal value, especially with a split or consolidation, will necessitate the issuance of new certificates. Also, ensure that the change does not unfairly prejudice any class of shareholders.

6. Tax Implications (Indirect)

While changing nominal value itself may not directly trigger immediate tax liabilities, it can have indirect implications for future transactions involving shares (e.g., capital gains tax on subsequent sale, stamp duties on new share certificates). Consult with a tax advisor if you have concerns.

Benefits of Proactive Share Capital Management

Managing your company's share capital, including its nominal value, is a key aspect of good corporate governance. Proactive management can lead to several benefits:

• Improved Investor Attractiveness: A suitable nominal value (e.g., lower value after a split) can make shares more appealing and accessible to a broader investor base.
• Enhanced Liquidity: A higher number of shares resulting from a split can increase the liquidity of the company's stock in the market.
• Simplified Share Transfers: Shares with more manageable nominal values can simplify transfer processes and calculations.
• Compliance and Good Corporate Governance: Properly documented and filed changes ensure your company remains compliant with regulatory requirements and maintains transparent corporate records.
• Strategic Flexibility: An optimized capital structure provides greater flexibility for future capital raising, mergers, or other strategic corporate actions.

Conclusion

Changing the nominal value of shares is a significant corporate action that requires careful planning, strict adherence to legal procedures, and precise execution. By following the steps outlined in this guide and understanding the underlying reasons and implications, Nigerian business owners can navigate this process with confidence.

Remember, the Corporate Affairs Commission (CAC) is committed to fostering a business-friendly environment, and their online portal has significantly streamlined many filing processes. However, due diligence and professional guidance remain invaluable. For expert assistance with this or any other corporate compliance matter, BusinessHelp CONSULT is always ready to provide tailored support to ensure your business thrives and remains fully compliant.

By taking the time to understand and correctly implement changes to your company's share capital, you not only meet regulatory obligations but also position your business for sustained growth and success in the dynamic Nigerian economy.