PRINCIPLE OF CORPORATE GOVERNANCE IN NIGERIA
The main goal of corporate governance in Nigeria is to increase the management of companiess' accountability, responsibility, and sensitivity to the interests of creditors, shareholders, and the general public.
PRINCIPLE OF CORPORATE GOVERNANCE IN NIGERIA
The main goal of corporate governance in Nigeria is to increase the management of companiess' accountability, responsibility, and sensitivity to the interests of creditors, shareholders, and the general public. The primary laws in Nigeria that serve as the foundation for the principles of corporate governance are:
The Companies and Allied Matters Act: The Companies and Allied Matters Act creates the Corporate Affairs Commission, which is in charge of regulating the establishment, operation, and dissolution of businesses in Nigeria.
Investment and Securities Act: This provides for the establishment of the Securities and Exchange Commission charged with the responsibility of regulating the capital market, securities investment and mergers and acquisitions.
Banks and other Financial Institutions which governs financial institutions in Nigeria
Insurance Act; among othersFinancial Reporting Council of Nigeria Act
One important law governing corporate governance in Nigeria is the Companies and Allied Matters Act, Cap. 20. It offers some mechanisms for corporate governance, including those for the appointment of directors of a business, their removal, the establishment of audit committees and rules for auditors, as well as the requirement that shareholders participate in corporate decision-making. However, the Securities and Exchange Commission (SEC) controls corporate governance in the public sector and continuously adopts regulations and guidelines. A number of laws for corporate governance are also made by the various sector regulators, such as the Central Bank of Nigeria (CBN) in different economic sectors.
The various codes that regulate corporate governance in Nigeria include the followings: Code of corporate governance for public companies, 2011 (Sec code) which applies to all public companies and quoted private companies in the capital market in Nigeria. Code of corporate governance for banks and discount houses in Nigeria and for guidelines of whistleblowing in the Nigerian banking industry. Code of corporate governance for other financial institutions in Nigeria, 2019 which applies to microfinance banks, finance companies, and bureau the change. Securities and exchange commission rules 2013 Listing rules of the Nigerian Stock Exchange Code of business ethics and principles on corporate governance for the insurance industry. Financial Reporting Council (FRC) code of corporate governance.
The Financial Reporting Council published the 2018 Nigerian Code of Corporate Governance on January 15th, 2019. (FRC). The "Apply and Explain" idea underlies the application of the codes. This presupposes the application of all principles, and it necessitates that corporate organisations justify how they have applied the principles to their particular organisational setting while still fulfilling the goals of the principles.
The following are some of the fundamental guidelines for corporate governance in 2018:
Users are given the authority to choose the size and make up of their boards under Section 2 of the Code, taking into account the scope and complexity of their operations, the necessity for enough people to serve on their committees, the requirement for a quorum at meetings, and diversity. Additionally, the Code suggests that there should be a majority of non-executive directors and a suitable balance of independent non-executive members. Despite this, the Code suggests that the majority of the non-executive directors on a board should be independent non-executive directors. The Code does not, however, specify the number of independent non-executive directors that must serve on a board. The code's implication is that, within the parameters of the established regulations, Companies will now have the freedom to choose the size and makeup of their boards on their own. The Code's users have a lot of control over how much their governance costs will be thanks to this flexibility.
The duties of the board chairman in directing efficient board operations are outlined in Section 3 of the Code. He is responsible for overall leadership of the business. The chairman shouldn't participate in day-to-day business activities, the report further advises. This guideline implies that the board must make sure that the non-executive directors, including the chairman, and the executive directors, have distinct functions that are distinct from one another. In the letters appointing directors, the roles and duties of each director post must to be expressly outlined.
The duties of the chairman of the board in directing efficient board activities are outlined in Section 3 of the Code. It also suggests that the chairman should not be involved in the day-to-day management of the business. As a result of this code, the board must make sure that the non-executive directors, including the chairman, and the executive directors have distinct functions. The appointment letters to directors should officially outline the duties of each director post.
• The Code also suggests creating committees to handle the company's audit, risk management, nominations, and governance, as well as compensation. However, organisations might mix these duties in board committees while taking the company's size, requirements, and operations into account. Additionally, the Code advises that the board committees in charge of nominating, governance, compensation, and audit should only be made up of non-executive directors (a majority of whom should be Independent Non-Executive Directors if possible. possible).
The audit committee of the company now has further duties thanks to Section 11 of the Code. They are specifically expected to oversee the creation of a thorough internal control system, get annual assurance, and report annually on the efficacy of the company's internal controls as measured by audited financial and operational metrics.
To evaluate the effectiveness of the board, board committees, and individual directors in carrying out their duties and obligations within the corporation, the Code also suggests an annual board evaluation. Additionally, it states that a Corporate Governance Evaluation will be conducted annually with an emphasis on how well the Code is being followed. At least once every three years, both evaluations must be conducted outside with the assistance of a reputable consultant. The company's annual report and investors' portal will both provide the summary report of this appraisal.
Regarding compliance, the Code advises the board to ensure that the corporation complies with all relevant rules and regulations, including those of the Federal Republic of Nigeria. Additionally, it mandates that external auditors notify any regulatory body in cases where businesses or anyone connected to them commits an offence that is punishable by imprisonment, regardless of whether it was or will be mentioned in the management letter sent to the board or the audit committee.
NB: This article is not a legal advice, and under no circumstance should you take it as such. All information provided are for general purpose only. For information, please contact chamanlawfirm@gmail.com
WRITTEN BY CHAMAN LAW FIRM TEAM
EMAIL: chamanlawfirm@gmail.com
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