Raising Capital in Nigeria: What Every Founder Must Get Right Before Approaching Investors

A strong pitch deck and a willing investor are not enough to close a funding round. What stops most Nigerian startups from converting investor interest into committed capital is not the business it is the legal foundation underneath it.

Investors, particularly institutional ones, conduct legal due diligence before committing funds. When they do, they are looking at your corporate structure, your shareholder agreements, your regulatory compliance, and your cap table. If any of these are missing, inconsistent, or poorly documented, the deal does not slow down it stops.

This is the part of fundraising that gets the least attention and creates the most problems. This post covers the four areas that matter most and the specific mistakes that cost founders deals.

01

Your Legal Structure Is the First Thing Investors Check

Before an investor evaluates your market size or revenue projections, they will verify that your company actually exists in a form that can receive investment. That means proper incorporation under the Companies and Allied Matters Act (CAMA) 2020, a clear share capital structure, and corporate records that are current and accurate.

The most common structure for investment-ready Nigerian startups is a Private Company Limited by Shares. This gives the company separate legal existence from its founders, limits shareholder liability, and provides the legal mechanism through which shares can be issued to investors.

What trips founders up most often at this stage: a cap table that does not match the CAC register. If your internal understanding of who owns what percentage is different from what is officially recorded, you have a problem that needs to be resolved before any investor gets involved not during due diligence.

02

The Shareholder Agreement Is Not Optional

The shareholder agreement is the document that governs the relationship between founders and investors. It defines how the company is managed, how key decisions are made, how disputes are resolved, and how shareholders exit. In a capital raise, it is the primary legal framework that investors are negotiating against.

Many early-stage Nigerian startups do not have one. This is the single most common legal gap we see and it is the one with the most serious consequences, because the absence of a written agreement does not mean the absence of expectations. It means those expectations are undocumented, which creates the conditions for conflict.

What investors will expect to negotiate

• Board representation and director appointment rights

• Anti-dilution protections if future shares are issued at a lower price

• Liquidation preferences: who gets paid first and in what order if the company is sold

• Veto rights over significant corporate decisions: new share issuances, large debt, asset sales

• Tag-along and drag-along rights governing how shareholders exit

These are not aggressive demands. They are standard terms that any experienced investor will expect to see. Founders who understand them before entering negotiations are in a far stronger position than those encountering them for the first time across a negotiating table.

03

Due Diligence Will Surface What You Have Been Avoiding

Investor due diligence is a structured review of your company's legal, financial, and operational position. It is not a formality it is the process through which investors verify everything you have told them, and identify everything you have not.

The companies that move fastest through due diligence are almost always the ones that treated legal structure as a priority from the beginning. The ones that stall are the ones resolving basic issues under time pressure, which weakens their negotiating position at exactly the wrong moment.

The areas investors examine most closely

• CAC filings, certificate of incorporation, shareholder register, MEMART all current and consistent with internal records: Corporate records

• Audited accounts, management financials, revenue projections, tax compliance gaps here raise questions about the entire financial picture: Financial transparency

• That the company actually owns the IP it operates on code, trademarks, content. This is where tech startups most commonly have undocumented gaps: Intellectual property

• Employment agreements, vendor contracts, loan obligations, and any change-of-control clauses that could be triggered by an investment transaction: Contracts and liabilities

The IP point deserves particular attention. Software built by contractors or co-founders who were never formally assigned their rights to the company means the company does not own its own product. That is not a minor administrative issue it fundamentally undermines the investment thesis.

04

Regulatory Compliance Is Not Just a Filing Exercise

Capital raising in Nigeria is regulated. Depending on the structure of your raise, obligations arise under the Companies and Allied Matters Act, the Investments and Securities Act 2007, and SEC Nigeria regulations. Meeting these obligations is not optional and getting them wrong creates exposure that will surface in a future transaction.

What this means practically

• New share issuances must be properly authorised and filed with the CAC your investor's ownership is only legally recognised once this is done

• Certain private placements trigger SEC registration and disclosure obligations

• All investors must receive sufficient information about the transaction: business plan, financial projections, risk disclosures, and governance structure post-investment

The consequence of non-compliance is not limited to regulatory fines. An improperly documented securities offering can render the transaction itself legally defective a problem that re-emerges in every subsequent round and is especially damaging in an exit scenario.

Legal Readiness Is Commercial Readiness

The founders who raise capital successfully are not the ones with the most compelling vision though that matters. They are the ones who arrive at investor conversations with their legal house in order: a properly incorporated company, a shareholder agreement framework ready to negotiate against, clean financial and corporate records, and a clear understanding of their regulatory obligations.

That preparation does not happen overnight. It needs to be built before the fundraising process begins because the due diligence process will not wait for it.

The legal work behind a capital raise is not a box to tick. It is the foundation that determines whether the raise closes, what terms you accept, and how protected your interests are throughout the life of the investment.

Need advice on structuring your capital raise?

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LEGAL DISCLAIMER

This article is published for informational purposes only and does not constitute legal advice. It does not create an attorney-client relationship between the reader and Maverick Solicitors. Readers should seek independent legal counsel before making any decisions based on this material.