Analysis of Nine Pillars of Corporate Governance Principles for Small and Med...
2016 ICSAN MCPE Understanding the Financial Reporting Council (FRC)
1. I N S T I T U T E O F C H A R T E R E D S E C R E T A R I E S A N D
A D M I N I S T R A T O R S O F N I G E R I A ( I C S A N )
M A N D A T O R Y C O N T I N U I N G P R O F E S S I O N A L
E D U C A T I O N ( M C P E )
P R E S E N T E D B Y U T O U K P A N A H F C I S
A U G U S T 3 , 2 0 1 6
Understanding the Financial Reporting Council
(FRC) National Code of Corporate Governance
.
2. Financial Reporting Council
• Established pursuant to the Financial Reporting Council (FRC) Act
2011
Vision:
To be the conscience of regulatory assurance in financial reporting
and corporate governance in Nigeria
Mission:
To bring utmost confidence to investors, reputation to oversight and
ensure quality in accounting, auditing, actuarial, valuation and
corporate governance standards and non-financial reporting issues.
2
3. Objects of the Council
The Council’s main objects, as defined in the FRC Act, are to:
protect investors and other stakeholders interest
give guidance on issues relating to financial reporting and corporate
governance to professional, institutional and regulatory bodies in Nigeria
ensure good corporate governance practices in the public and private
sectors of the Nigerian economy
ensure accuracy and reliability of financial reports and corporate
disclosures, pursuant to the various laws and regulations currently in
existence in Nigeria
harmonise activities of relevant professional and regulatory bodies as
relating to corporate governance and financial reporting.
promote the highest standards among auditors and other professionals
engaged in the financial reporting process.
enhance the credibility of financial reporting; and
improve the quality of accountancy and audit services, actuarial,
valuation and corporate governance standards.
3
4. Directorates of the Council
Directorate of Accounting Standards – Private Sector
Directorate of Accounting Standards – Public Sector
Directorate of Auditing Practices Standards
Directorate of Actuarial Standards
Directorate of Inspection and Monitoring
Directorate of Valuation Standards
Directorate of Corporate Governance
4
5. Directorate of Corporate Governance
Develop principles and practices of corporate governance
Promote the highest standards of corporate governance and
public awareness of corporate governance principles and
practices
On behalf of the Council, act as the national coordinating body
responsible for all matters pertaining to corporate governance
Promote sound financial reporting and accountability based on
true and fair financial statements duly audited by competent
independent auditors
Encourage sound systems of internal control to safeguard
stakeholders’ investments and assets of Public Interest Entities
Ensure that the Audit Committees of PIEs keep under review the
scope of the audit, its cost effectiveness, the independence and
objectivity of the Auditors
5
6. Committee on Corporate Governance
The Committee is responsible for:
• Assessing the need for corporate governance in the public and
private sectors
• Organising and promote workshops, seminars and trainings in
corporate governance issues
• Issuing the code of corporate governance and guidelines and
develop a mechanism for periodic assessment of the code and
guidelines
• Providing assistance and guidance in respect of the adoption or
institution of the code in order to fulfil its objectives
• Establishing links with regional and international institutions
engaged in promoting corporate governance
6
7. FRC Codes of Corporate Governance
Steering Committee chaired by Mr. Victor Odiase inaugurated in
January 2013
The Terms of Reference of the Committee mirror those of the
Directorate of Corporate Governance
The Committee developed drafts of the Codes of Corporate Governance
for the Public, Private and Not for Profit Sector
Respective draft codes reviewed and approved by the FRC Board and
exposure drafts issued thereafter
Subsequently public hearings and engagements organized by the FRC
7
8. National Code of Corporate Governance for the
Private Sector
8
Consists of 11 Parts:
Part A – Preliminary Matters
Part B – Application of the Code
Part C – Board of Directors
Part D – Risk Management and Audit
Part E – Relations with Shareholders
Part F – Minority Shareholder Protection
Part G –Relations with other Stakeholders
Part H –Transparency
Part I – Code of Business Conduct and Ethics
Part J – Enforcement
Part K – Miscellaneous
9. Part A – Preliminary Matters
9
Provides background to the Committee’s work
Sets out the Committee’s Terms of Reference
Harmonization of identifiable sectoral codes:
Code of Corporate Governance for Banks in Nigeria Post-Consolidation
2006
Code of Corporate Governance for Licensed Pensions Operators 2008
Code of Corporate Governance for Insurance Industry in Nigeria 2009
SEC Code of Corporate Governance in Nigeria 2011 (acknowledged the
2003 SEC Code)
Exposure Draft of the Revised Code of Corporate Governance for Banks
in Nigeria 2012 CBN Code of Corporate Governance for Banks and
Discount Houses 2014
10. Part A - Preliminary Matters (contd.)
10
The Nigerian corporate governance system is predicated on wide
dispersal having adopted unitary board structure in which the
dominant conflicts are between the shareholders and managers.
The Nigeria investment environment is however replete with
ownership concentration, in which the dominant conflicts are
usually between the controlling shareholders and minorities,
This has created a mismatch between the country’s ownership
structure and its governance system.
The Code has governance safeguards that are more country-
specific, contextual and environmentally congruent, while at the
same time conforming to international best practices
11. Part B – Application of the Code
11
The Code of Corporate Governance for the private sector shall be
applicable to the following:
All public companies (whether listed or not)
All private companies that are holding companies or subsidiaries
of public companies
All regulated private companies (RPCs)
Compliance with the code is mandatory
12. Part C - Board of Directors
12
The main purpose of the board is to provide entrepreneurial,
strategic and ethical leadership to a company. The board shall:
Exercise leadership, enterprise, integrity and judgment in
directing the company so as to achieve continuing survival
and prosperity of the company
Every board shall have a Charter setting out its
responsibilities
Ensure the establishment of a succession plan, appointment,
training and remuneration for both the board and senior
management of the company
Set the company's values and standards (including ethical
standards)
be responsible for Information Technology governance.
13. Part C - Board of Directors (contd.)
13
Board Structure and Composition
• Sufficient board size as well as diversity of experience and gender
• Minimum board size of 8 members (except for RPCs that are not
holding companies or subsidiaries of public companies which
can have 5 Directors of which 3 must be NEDs and majority
INEDs)
• Independent Non Executive Directors (INEDs) to appoint a lead
INED
• Separation of the role of CEO and Chairman
• Discourages cross-memberships on the boards of two or more
companies (unless within a group). The board should disallow it
where this will lead to a conflict of interest situation among
competing companies
14. Part C - Board of Directors (contd.)
14
Concurrent directorships are permitted so long as it does not
interfere with the individual’s ability to discharge his
responsibilities.
In assessing their suitability for appointment as a director, the
board and shareholders are required to carefully consider each
director’s other obligations and commitments
Disclosures required regarding other board appointments
Not more than two members of the same or extended family
shall sit on the board of the same company at the same time
Companies required to establish a policy on diversity and
disclose the policy or a summary of that policy
15. Officers of the Board (contd.)
15
The Chairman:
• Responsible for ensuring effective operation of the board, cohesion
towards achieving the company’s strategic objectives
• A former MD/CEO shall not go on to be the chairman of the same
company. If in very exceptional circumstances the board decides that a
former MD/CEO shall become chairman, the cool off period shall be 7
years
• Both majority and minority shareholders must be consulted in advance
• The regulator must be informed of the appointment and the reasons for
the appointment
• Chairman to meet with NEDs without Executives present
• INEDs may meet without the Chairman present at least annually
• Chairman’s role articulated in 6.1.6 - 6.1.8
• Chairman should not sit on any board Committee except for RPCs
where the Chairman can sit on the nomination & governance
committee and remuneration committee but cannot be chair them
16. Officers of the Board (contd.)
16
The Lead Independent Non Executive Director (LINED):
• Appointed by INEDs
• Presides at the exclusive meetings of non-executive directors and
separate meetings of independent non-executive director
• To serve as intermediary for shareholders if they have concerns
which contact through the normal channels has failed to resolve
or for which such contact is inappropriate
17. Officers of the Board (contd.)
17
Managing Director/Chief Executive Officer
• Leads the Management team and reports to the Board
• Responsible for the day to day running of the company
• A person knowledgeable in relevant areas of the company’s activities;
demonstrate industry, credibility and integrity
• Has the confidence of the board and management
• Shall not be the only ED on the board
• The authority of the MD/CEO and the relationship with the board must
be clearly and adequately described in a letter of appointment
• The board may delegate its powers to the MD/CEO as it deems
appropriate
• The CEO’s remuneration is determined by the remuneration committee
and may include long term performance incentives, stock options and
bonuses
18. Officers of the Board (contd.)
18
Company Secretary (CS):
• A person with relevant qualification and competence necessary to
effectively discharge the duties of the office as articulated in S 298 of
CAMA
• Appointed through a rigorous selection process similar to that of new
directors
• Has the primary duty of assisting the board and management in
implementing the code and developing good corporate governance
practices and culture
• CS must be properly empowered by the board to discharge duties and
responsibilities
• Functional reporting line is through the Chairman to the Board
• Reports administratively to the MD/CEO
• Appointment and termination of the CS are matters for the board
19. Officers of the Board (contd.)
19
In addition to statutory functions, CS’s duties include:
Provide the board and directors individually, with detailed guidance on
how to properly discharged their responsibilities in the best interest of
the company
Coordinate the orientation and training of new directors
Assist the chairman and MD/CEO in coordinating activities regarding
the annual board plan and with the administration of other strategic
issues at the board level
Compilation of board papers and ensuring that the board’s discussions
and decisions are clearly and properly recorded and communicated to
the relevant persons
Notify board members of matters that warrant their attention
Provide a central source of guidance and advice to the board and the
company, on matters of ethics, conflict of interest and good corporate
governance
20. Officers of the Board (contd.)
20
Executive Directors
• Persons knowledgeable in relevant areas of the company’s activities
especially those relating to their specific functions
• Involved in the day-to-day operations and management
• Answerable to the board through the MD/CEO
• Not to be involved in the determination of their remuneration
• Level of remuneration should attract, retain and motivate directors of
the quality required to run the company successfully
• No sitting allowance or directors fees should be paid to EDs
• Permitted to take up NED role in other companies
• Prohibited from more than 1 NED role or chairmanship in a company
unless those companies are part of a group in which he is ED
• Excluded from membership of nomination and governance committee,
remuneration committee or audit committee (statutory or board)
21. Officers of the Board (contd.)
21
Non Executive Directors (NEDs)
• Appointed on the basis of their wide experience, specialist knowledge
and personal qualities
• Responsible for the performance evaluation of the MD/CEO and
Chairman (led by an INED)
Have unfettered access to EDs, CS and the Internal Auditor, while
access to other senior management is through the MD/CEO
Entitled to sitting allowances, directors’ fees and reimbursable travel
and hotel expenses. All payments to be disclosed in the Annual Report
Should be provided with appropriate facilities and administrative
support for the effective discharge of their duties
Entitled to adequate and comprehensive information on all board
matters in a timely manner
22. Officers of the Board (contd.)
22
Independent Non-Executive Directors
• Required to be independent in character and judgment; free from such
relationships or circumstances that will impair his ability to make
independent judgment
• Is not a substantial shareholder i.e. directly or indirectly holdings does not
exceed 0.1% of the company’s paid up capital
• Must not be the nominee of a substantial shareholder
• Is not a representative of a shareholder that has the ability to control or
significantly influence Management
• Has not been an employee of the company or group within the last five
years
• Does not render any professional, consultancy, or other advisory services to
the company or the group, other than in a capacity of a director
• Has not served on the board for more than nine years from the date of his
first election
• Annual meeting of only independent non-executive directors
• INEDs are required to annually declare their continuing independence
23. Officers of the Board (contd.)
23
Independent Non-Executive Directors (contd)
• Is not an extended family member of any of the company’s advisers,
directors, senior employees, consultants, auditors, creditors, suppliers,
customers or substantial shareholder
Does not have, and has not had within the last five years, a material
business relationship with the company either directly, or as a partner,
shareholder, director or senior employee of a body that has, or has had,
such a relationship with the company
Does not hold cross-directorships or significant links with other directors
through involvement in other companies or bodies
An INED may seek and obtain request the company to provide them with
external professional advice
The reclassification of an existing non-executive director into an
independent non-executive director is not permitted
An INED who resigns before the expiration of his term, must disclose to the
appropriate regulator(s) the reasons for such resignation
24. Meetings of the Board
24
The board shall meet at least once every quarter
Each director required to attend at least two-thirds of all board
meetings.
Attendance record shall be among the criteria for the re-
nomination of a director by the board except where there are
cogent reasons which the board must notify the shareholders of,
at the AGM
Where a majority of independent non-executive directors
dissent on an issue decided by the board, such decision can
only be valid where at least 75% of the full board (without
reference to quorum) vote in favour of such decision.
25. Board Committees
25
The number and composition of committees to be determined by the
Board
Membership to be reviewed and reconstituted every 3 years
A Charter should be approved for each committee setting out the terms
of reference and composition
Boards of regulated private companies may merge any of the
committees subject to adequate board oversight and regulatory
concurrence
Where there is a combined audit and risk management committee, the
officer overseeing risk should only be present when the committee is
discussing risk issues and not when audit matters are being considered
The CS, or any other officer in the office of the CS, shall be the secretary
of all board committees
Minutes should be prepared and circulated on a timely basis and must
not be written for meetings not actually held.
26. Nomination and Governance Committee
26
Composed of at least 3 members, all NEDs, a majority being
INEDs
Chaired by INED appointed by the Board duties include:
Annually review the structure, size and composition of the board at
least annually and make recommendations on any proposed changes
Establish the criteria for board and board committee membership,
review prospective candidates’ qualifications and any potential
conflict of interest, assess the contribution of current directors
against their re-nomination suitability for re-nomination and make
appropriate recommendations to the board.
Identify suitably qualified persons for nomination and appointment
as directors
Ensure that the board undertakes an annual performance evaluation
Undertake the annual assessment of the independent status of
INEDs
27. Remuneration Committee
27
Composed of at least 3 members, all NEDs, a majority being INEDs
Chaired by INED appointed by the Board
Duties include:
Development of a formal, clear and transparent procedure for
developing the company’s remuneration policy
Recommendation to the board on the:
Company’s Remuneration policy and structure for all executive
directors and senior management employees
Remuneration of non-executive directors
Compensation payable to executive directors and senior management
employees for any loss of office or termination of appointment to
ensure that it is consistent with contractual terms, fair and not
excessive.
• The remuneration committee may engage an independent remuneration
consultant (name to be disclosed in AR) at the expense of the company for
the purpose of carrying out its responsibilities.
28. Audit Committee
28
Every public company must establish a Statutory Audit Committee
(SAC) S359 (3) of CAMA
Functions are as set out in S359 (6) and the Memorandum of
Association and Articles of Association of the Company
Every public company required to have a board audit committee (BAC),
in addition to a SAC
Members required to have financial literacy and be able to read and
interpret financial statements
Persons serving on any Audit Committee, whether SAC or BAC, have
coextensive responsibilities and must have relevant experience,
competence and knowledge that would enable them serve on either or
both of the two committees
The recommendations made in the SAC report to shareholders or the
BAC report must be predicated on and evidenced by the work done by
the Committee, verifiable where necessary, by regulatory action
29. Board Audit Committee
29
Additional responsibilities of the BAC are articulated in Clause
8.14.9 of the code including but not limited to:
Oversight over the integrity of the company’s financial statements,
compliance with legal and other regulatory requirements, assessment of
qualifications and independence of external auditor, and performance of
the company’s internal audit function as well as that of external auditors;
Identification of key risks and oversight to ensure effective controls are
in place to mitigate those risks
Ensure there are other means of obtaining sufficient assurance of regular
review or appraisal of the system of internal controls
Ensure that adequate whistle-blowing procedures are in place
Invoke its authority to investigate any matter within its Charter for
which purpose the company must make available the resources,
including access to external advice where necessary
BAC is required to have an in camera session with the Internal
Auditor annually
30. Board Audit Committee (contd)
30
Private companies also required to have BACs
At least 1 member of the committee shall be an expert and have
current knowledge in accounting and financial management
BAC composed of at least 3 members, all NEDs, a majority being
INEDs
Chaired by a INED
Committee required to meet at least once every quarter
31. Risk Management Committee
31
Composed of a majority of NEDs; at least 1 should be an INED
Chaired by an INED and meet at least quarterly
Duties include but are not limited to:
Assist the board in its oversight of the risk profile, risk management
framework and the risk strategy of the Company
Review the adequacy and effectiveness of risk management and controls
in the company
review of the company’s compliance level with applicable laws and
regulatory requirements
Ensure that Information Technology assets are managed effectively
Annually review the company’s Information Technology governance
framework
A member of senior management responsible for performing the risk
function must attend meetings of the committee
32. Appointment to the Board
32
The board is required to develop a formal, clearly defined and
transparent procedure for board appointments
Criteria for appointment should take cognisance of the strengths
and weaknesses of the existing board, required skills, and
experience as well as current age range and gender diversity
Appointments shall be a matter for the board as a whole
The nomination committee shall recommend names of
prospective candidates for consideration for directorship
positions
Regulatory consent must be obtained where required
Shareholders shall be provided with biographical information of
proposed directors
33. Induction and Continuing Education
33
Formal induction programme for new directors of the company
Mandatory for all directors to participate in periodic, relevant,
professional continuing education programmes in order to
update their knowledge and skills
The company is required to disclose in the annual report (AR)
the courses attended by each director
34. Terms and Conditions of Service
34
Letters of appointment to articulate the following issues:
Duration or term of appointment
Remuneration package and method of remuneration
Explanation of the duties of care, skill, diligence and loyalty
and other responsibilities of the director
Requirement to disclose any material interests in the company
and other entities related to the company as well as interests
Periodic disclosure of material interests in contracts in which
the company is interested or involved
board meeting attendance
Synopsis of directors’ rights
Formal orientation programme or training
Copy of Board Charter, Code of Business Conduct and Ethics
Directors’ evaluation programme and
Any other contractual responsibilities
35. Access to Independent Advice/Information
35
The board shall ensure that directors, especially non-executive
directors, have access to independent professional advice at the
company’s expense where they consider it necessary to discharge
their responsibilities
The Board must be provided in a timely manner; with
information in a form and of a quality appropriate to enable it to
discharge its duties
This is without prejudice to the right of the Board to have access
to all documents and information relating to the management of
the company at all times
36. Tenure and Re-election of Directors
36
Reaffirms retirement by rotation as provided in S 259 of CAMA
Maximum tenure of the MD/CEO not to exceed two terms of 5 years
each
Maximum tenure of the EDs other than the MD/CEO not to exceed
three terms of 4 years each
Where an ED is appointed MD/CEO, his tenure in the new role starts
from the date he assumed the position of MD/CEO and he is entitled to
two terms of five years each PROVIDED that no person shall serve as
an ED of a company for a combined period of more than 15 years in
total
Tenure of NEDs shall not exceed three terms of 4 years each
37. Performance Evaluation
37
Formal and rigorous annual evaluation of board performance, that of
its committees, the chairman and individual directors.
Evaluation system shall include the criteria and key performance
indicators and targets
The result of the board performance evaluation must be communicated
and discussed by the board as a whole, while those of individual
directors should be communicated and discussed with them
individually by the chairman
Directors with unsatisfactory results are required to undergo
appropriate training
Where further training is not feasible, the director may be removed or
requested to retire
An external consultant may be engaged to perform the evaluation and
the name of the consultant must be disclosed in the AR
The evaluation results must be disclosed in the AR on a named
basis
38. Part D – Risk Management and Audit
38
The Board is responsible for:
The oversight of enterprise-wide risk management
Ensuring that the risk management framework is integrated into the
day-to-day operations of the business
Undertaking an annual thorough risk assessment covering all aspects
of the company’s business
Obtaining and reviewing periodically relevant reports to ensure the
ongoing effectiveness of the company’s risk management framework
Ensuring that the company’s risk management policies and practices
are disclosed in the AR
The directors are required to report on the going concern status of
the company in annual and half-yearly financial statements with
supporting assumptions and qualifications as necessary
39. Internal Audit Function
39
All companies are required to have an effective risk–based internal
audit function
Where the board decides not to establish such a function, the reason for
the decision must be disclosed in the AR
The Internal Audit Unit must be headed by a professional with relevant
qualification who has registered with the regulator
The Head of Internal Audit Unit reports directly to both the BAC and
the SAC (where both co-exist) while having a line of communication
with the MD/CEO
The Head of Internal Auditor is required to give quarterly reports to the
AC on the adequacy and effectiveness of management, governance, risk
and control environment, deficiencies observed and management
mitigation plans
The internal audit function is required to develop an annual risk-based
internal audit plan in line with the risk-based internal audit process
and to be approved by the AC
40. Internal Audit Function (contd)
40
An external assessment of the effectiveness of the internal audit
function must be conducted at least once every 3 years by a qualified
independent reviewer, as defined by the Institute of Internal Auditors,
or by an external review team
The head of the internal audit function to be a member of senior
management and can only be removed by the board on the
recommendation of the SAC/BAC
Public Interest Entities are prohibited from outsourcing their internal
audit functions.
41. Whistleblowing
41
Defines whistle-blowers as any person(s) including the employees,
management, directors, customers, service providers, creditors and
other stakeholder(s) of a company who reports any form of unethical
behaviour or dishonesty to the appropriate internal authority or
external regulators
Extensive provisions set out in Section 18.1 – 18.15
Companies are required to develop whistle blowing policies and
mechanism that are known to its stakeholders
The identity of the whistleblower must be kept confidential
No whistleblower should be subjected to any detriment
Any whistleblower who suffers any detriment may present a complaint
to the regulator without prejudice to his right to take legal action
Such whistleblower is entitled to compensation/and or restatement
42. External Auditors
42
Companies required to appoint external auditors as required by
The code mandates Listed and Significant Public Interest Entities to
engage Joint External Auditors for their statutory audit. These entities
are those whose market capitalisation is not less than =N=1 billion
and/or whose annual turnover is not less than =N=10 billion
Where the existing or first statutory auditor is an international firm, the
second auditor (which must be a national firm) must be appointed by
show of hands rather than by poll
Tenure of External audit firms is ten years continuously and may be
considered for reappointment seven years after their disengagement
Audit partners to rotate every 5 years
No audit partner can be appointed to the Board of a company that his
firm is auditing or has audited until 5 years after conclusion of audit or
disengagement of the partner
No partner or employee of an audit firm can be employed by the
company which the audit firm has audited until after a period of not
less than 3 years after the exit of the partner or employee
43. External Auditors (contd)
43
List of non audit services include:
accounting and book keeping services
internal audit services
design and implementation of any financial information system;
actuarial services
investment advisory services
investment banking services
rendering of outsourced financial services
management services
taxation services
performance evaluation of the board and its committees; and
any other kind of services as may be proscribed by the regulators
44. External Auditors (contd)
44
Where the FRC is satisfied that an external auditor of a company has
abused his office or acted in a fraudulent manner or colluded in any fraud
in the company, it may by regulatory order direct the company to approach
its members to consider and resolve whether on the basis of any facts
revealed, the company in general meeting shall change its auditors
No direct reciprocal change of the same firms of auditors taking the form of
two audit firms succeeding each other as opposites in audits from which
they have just mandatorily retired
AC decision for the appointment, re-appointment or removal of an
external auditor can only be overridden by a 75% vote of the
board’s full membership
Where External Auditors discover or acquire information during an audit
that leads them to believe that the company or anyone associated with it
has committed an indictable offence under CAMA or any other
Statute, they must report this to the Regulator, whether or not such
matter is or will be included in the Management Letter.
45. Part E: Relationship with Shareholders
45
Interaction with Shareholders
• The Board is required to establish a system of constant dialogue with
shareholders, majority and minority, based on mutual understanding of the
objectives of the company
• The lead independent non-executive director (where appointed) may
attend sufficient meetings with a range of shareholders to listen to their
views in order to help develop a balanced understanding of their issues and
concerns
• The Board must disclose in the AR the steps it has taken to ensure that the
members of the board, and in particular the INEDs, develop an
understanding of the views of all shareholders
46. Constructive Use of the Annual General Meeting (AGM)
46
Should be the primary but not the only avenue for engaging
shareholders
Shareholders must be treated fairly and given equal and simultaneous
access to information about the company
GMs must be conducted in an open manner allowing for free
discussions on all issues on the agenda
Sufficient time to be allocated to shareholders, particularly minorities,
to participate fully and contribute effectively at the meetings
Chairmen of all board committees and of the SAC must be present at
general meetings of the company to respond to shareholders’ queries
and questions
47. Protection of Shareholder Rights
47
The Board must ensure that:
Shareholders’ statutory and general rights are protected at all
times. In particular, their powers to appoint and remove
directors of the company
All shareholders are treated fairly and equally. No shareholder,
however large his shareholding or whether institutional or
otherwise, shall be given preferential treatment or superior
access to information or other materials
Minority shareholders are treated fairly at all times and are
adequately protected from abusive actions by controlling
shareholders
The company promptly renders to shareholders documentary
evidence of ownership interest in the company such as share
certificates, dividend warrants and related instruments.
48. Venue/Notice of Meetings/Resolutions
48
The venue of a general meeting shall be accessible to shareholders
Notices of general meetings shall be at least 21 days from the date on
which the meeting will be held.
Allow at least seven days for service of notice if sent out by post from
the day the letter containing the same is posted
The notices shall include copies of such documents, including annual
reports and audited financial statements and other information as will
enable members prepare adequately for the meeting
Unrelated issues for consideration should not be lumped together at
GMs.
Statutory business shall be clearly and separately set out. Separate
resolutions must be proposed for each matter fro discussion
The board is required to ensure that decisions taken at GMs are duly
implemented
49. Role of Shareholders’ Associations
49
The board of every public company is required to ensure that
dealings of the company with shareholder associations are
always transparent
In any interaction or dialogue with shareholders, invitations
are also sent on a random or purposive selection basis to
minority shareholders in their individual capacities to act as a
sounding board for the personal views of the minority
shareholders of the company.
This is without prejudice to the role of shareholders’
associations
50. Institutional Investors
50
Institutional investors are required to:
publicly disclose their policy on how they discharge their
stewardship responsibilities
have a robust policy on managing conflicts of interest in relation
to stewardship which shall be publicly disclosed
monitor their investee companies
establish clear guidelines on when and how they will escalate
their stewardship activities
be willing to act collectively with other investors where
appropriate
have a clear policy on voting and disclosure of voting activity;
and
report periodically on their stewardship and voting activities.
51. Part F: Minority Shareholder Protection
51
To protect minority shareholders and other stakeholders,
insiders are precluded from engaging in transfers of assets and
profits out of companies for their personal benefits or for the
benefit of those who control the company
A shareholder or group of shareholders, holding in aggregate not
less than one per cent of the share capital or shares of a
company, is entitled to submit items for inclusion in the agenda
Controlling shareholders have a fiduciary responsibility to
minority shareholders and are entitled to call a GM to discuss
major or extraordinary transactions
Insiders are precluded from buying and selling any security in
breach of their fiduciary duty and other relationship of trust and
confidence while in possession of material, privileged, non-
public, and price-sensitive information about the security
52. Related Party Transactions/ Conflict of Interests (CoI)
52
All transactions between related parties must be disclosed
The board must put in place a distinct policy on conflict of
interest situations
Directors shall promptly disclose any real or potential conflict of
interest that they may have by virtue of their membership of the
board
A director must not be present during the time any matter on
which he has an interest is being decided
CoI disclosures must be recorded in the minutes
No member of executive management (director level and above)
leaving the services of a relevant regulatory institution, for any
reason, shall be appointed as a director or top management staff
of an institution that has been directly supervised or regulated by
the said regulatory institution until after 3 years of
disengagement from that regulatory institution
53. Part G: Relations with other Stakeholders
53
Sustainability Issues:
Companies are to pay adequate attention to the interests of their
stakeholders
Boards and individual directors must commit themselves to transparent
dealings and to the establishment of a culture of integrity and zero
tolerance of corruption and corrupt practices
The board shall report annually on the nature and extent of its social,
ethical, safety, health and environmental policies and practices. Issues to be
reported on are detailed clause 32.3 including but not limited to:
The company’s business principles and codes of practice and efforts
towards implementation
Description of workplace accidents, fatalities and occupational and
safety incidents against objectives and targets
Disclosure of the company’s policies, plans and strategy for addressing
and managing the impact of HIV/AIDS, malaria and other serious
diseases on the company’s employees and their families
54. Relations with other Stakeholders (contd)/Company
Investors’ Portal
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Nature and extent of employment equity and gender policies and
practices
Adoption, in the company’s operations, of options with the most benefit
or least damage to the environment, particularly for companies
operating in disadvantaged regions or in regions with delicate ecology
The company’s policies on corruption and related issues
The conditions and opportunities created for physically-challenged
persons or disadvantaged individuals
The nature and extent of the company’s social investment policy
Company reports and other communications to shareholders and other
stakeholders must be in plain language, readable and understandable
and consistent with previous reports
Company must establish web sites and investors’ portals where the
communication policy other relevant information about the company
are published and made accessible in downloadable format to the
public
55. Part H: Transparency
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Companies are required to strive to achieve international best practices
and engage in full disclosure of all the matters set out in the Code
The CEO and CFO must provide a joint attestation to the board that the
company’s financial statements present a true and fair view, in all
material respects, of the company’s financial condition and operational
results and are in accordance with relevant accounting standards
The company’s AR must include:
A corporate governance report
Make sufficient disclosure on accounting and risk management issues
A statement by the board with regards to the company’s degree of
compliance with the provisions of the Code
Details of any director’s interest in contracts either directly or indirectly
with the company or its subsidiaries and holding companies
Details of any service contracts and other contracts with controlling
shareholder(s), their group networks and associates
56. Part H: Transparency (Contd)
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Separate related party transactions must be made for each related
entity
The Chairman’s statement in the annual report must provide a
balanced and readable summary of the company’s performance for the
period under review and future prospects, and must expressly state
whether the board’s expectations (financial and non-financial) for the
reporting period have been met
The board is required to use its best judgment to disclose any matter
even though not specifically required by the Code if in the opinion of
the board such matter is capable of affecting the financial condition of
the company or its status as a going concern
The onus of proof of such possible negative effect is on the board.
The Regulator is entitled to demand for further documents or reports
from the company to enable it validate the disclosures made
57. Corporate Governance Evaluation
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An annual corporate governance evaluation must be carried out
and facilitated by a registered independent external consultant
The corporate governance evaluation cannot be carried out by
the company’s external auditor or a firm related to the external
auditor
The evaluation report is presented at the AGM, a copy sent to the
regulator and also put on the investors’ portal
58. Part I: Code of Business Conduct and Ethics
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Companies are required to Code of Business Conduct and Ethics which
will be regarded as part of the corporate governance practices of the
company
Globally Responsible Business Conduct
Enterprises operating within a global context must take into account
the established processes in the countries in which they operate,
while considering the views of all relevant stakeholders
Refrain from seeking or accepting exemptions not contemplated in
the statutory or regulatory framework related to human rights,
environmental, health, safety, labour, taxation, financial incentives,
or other issues
59. Part J: Enforcement/ Part K: Miscellaneous
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Violations of the provisions of the Code will occasion both personal
sanctions against the persons directly involved in the violation, and
sanctions against the companies or firms involved
No commencement date
On commencement the code supercedes corporate governance code in
force in Nigeria before that date
Sections 8 – Functions of the Council
Section 11 – Objects of the Council
Section 23
Sections 24 – 29 Set out functions of the various Directorates
Sections 49 & 50 set out the functions of the Directorate of Corporate Governance
Section 50 of the FRC Act
Section 51
This code provides the minimum standard for corporate governance in Nigeria.
Regulated private companies - means those private companies that file returns to any regulatory authority other than the Federal Inland Revenue Service and the Corporate Affairs Commission
Sufficient board size relative to the scale and complexity of the company’s operations
Diversity of experience and gender without compromising competence, independence, integrity and availability of members to attend meetings
The lead independent non-executive director shall be available to shareholders if they have concerns which contact through the normal channels of chairman, chief executive or other executive directors has failed to resolve or for which such contact is inappropriate.
1. The chairman shall not be involved in the day-to-day operations of the Company – that is the role of the CEO and the Management team
The CS is responsible for ensuring good information flows within the board and its committees and between senior management and non-executive directors
The main purpose of independent non-executive directors is to bring a desired degree of objectivity that sustains investors’
trust and confidence by representing a strong independent voice on the board.
Substantial shareholder in a public company – Defined in S92 (2) of CAMA -A person is a substantial shareholder in a public company if he holds himself or
by his nominee, shares in the company which entitle him to exercise at least 10 per
cent of the unrestricted voting rights at any general meeting of the company.
Companies may apply to any of the relevant regulators or the Institute of Directors, Nigeria for a list of potential independent non-executive directors
Name, age, qualification and country of primary residence. If not resident in Nigeria, the ownership interest represented;
(b) Whether the appointment is executive, non-executive or independent and any proposed specific area of responsibility;
(c) Work experience and occupation in the preceding ten years;
(d) Current directorships and appointments in the preceding five years;
(e) Shareholding in the company and its subsidiaries; and
(f) Any real or potential conflict of interest, including whether he is an interlocking director
The matters to be addressed in the Audit plan are articulated in the code
Where an auditor has exceeded 10 years at the commencement of the Code, they must immediately cease to hold office
The board shall ensure that shareholders are not disenfranchised on account of the choice of venue
Companies shall recognize corruption as a major threat to business and to national development and therefore as a sustainability issue for businesses in Nigeria.