New Harmonised Code of Corporate Governance – Legal Alert

Proshare

Monday, 25 March 2019    03:13PM / By Oserogho & Associates

 

Introduction


Recent efforts to institute and promote a more modern, updated and harmonised Code of Corporate Governance best practice has usually ended in controversy. This is despite the recognition that too many Corporations have failed attributably to, among other factors, poor, inchoate and or non-adherence to the minimum basis tenets of a good Corporate Governance culture.

 

The Minister for Industry, Trade and Investment has issued a Public Notice announcing the commencement of the adoption and compliance with the Code of Corporate Governance 2018 (“the Code”) with the affected entities now required to report their compliance with the provisions of the Code in their Annual Reports from the financial year ending 1st January 2020 and onward.

 

All business entities, whether or not the Code applies to them, will do well to review and start the cultural adoption and implementation of the provisions of the Code, which will enhance their efficiency, profitability, future sustainable development and continuance in existence.

 

 

Objectives of the Code

 

The Code is intended to institutionalise and enhance good Corporate Governance best practices in both the public and private sectors of the economy. According to the Code, the application of these best Corporate Governance Practices will rebuild public trust and confidence in these businesses, which in turn will increase trade, local and foreign investments.

The Code adopts a flexible principle based approach such that any Company, irrespective of its size, complexity or industry can adopt and apply the recommendations of the Code easily.

 

Board of Directors

 

Every Company must have a Board of Directors (“the Board”) to provide entrepreneurial, strategic and ethical leadership which serves the best interest of the Company’s Shareholders, its employees and other stakeholders.

 

The Code recommends that every Board should hold at least one Board Meeting once every quarter.

 

Every Director should receive a Letter of Appointment or Contract specifying the terms and conditions of his or her appointment as a Director of the Company. A formal Induction, familiarisation programme, is also recommended by the Code for every new Director of a Company. And afterwards, regular, periodic, continuing training programmes are also to be organised by the Company to assist all the Directors receive updated business and financial information and training which will enable the Directors to effectively discharge their duties.

 

its duties, the Code also recommends that every Company should have a written Charter which sets out expressly the roles and responsibilities of the Board.

 

Every Charter should in order to fulfil the above objective make provisions for the Board’s structure and composition, the roles and responsibilities of the Board’s Chairman, Managing Director/Chief Executive Officer (“MD/CEO”), Executive (“ED”), Non-Executive (“NED”) and Independent Directors (“ID”), Company Secretary, Auditor, Succession Planning for the Company, etc.

 

In the composition of the Board, without compromising on competence and integrity, the Board should strive to achieve an appropriate mix and balance of knowledge, skills, experience, diversity and independence; such that its NEDs and IDs are in the majority to the Directors involved in the day-to-day management of the Company. Neither should any one person transit from one position – for example an executive position - to another position – for example a non-executive position - in the same Company without a cooling off period.

 

To minimise and avoid conflicts of interest issues, Directors are enjoined not to be members of the Boards of competing companies.

 

To ensure efficiency and effectiveness, the Code recommends that some of the practical roles of the Board should be delegated to well-structured committees. The Chairman of the Board of every Company is enjoined not be a member of any of the Committees of the Company; and the MD/CEO is not to chair most of the Committees especially the Remuneration, Audit, Nomination and Governance Committees. The latter Committees are recommended to be chaired by Independent Non-Executive Directors.

 

The Code also recommends that the roles of the Chairman and the MD/CEO should not be merged and occupied by one and the same person; neither should either transit or succeed the other without a cooling off period.

 

 

The Code and Shareholders


The Code highlights the important complimentary role that the Shareholders of a Company must play with the Directors and other senior management members of the Company in achieving the objectives of the Company. Shareholders Meetings, as a valuable medium to achieving this complimentary role, must be conducted in an open, free and engaging environment where deliberations regarding the performance of the Company are freely aired.

 

The Code also seeks for fair, equal and equitable treatment of all the Company’s Shareholders, including the minority Shareholders.

 

The Shareholders of a Company are required to approve Board related appointments, with the remuneration, fees and allowances attached to such appointments. The latter information are required by the Code to be disclosed in every Company’s Audited Annual Financial Report.


 

Whistle-blowing

 

The Whistle-blowing framework should encourage the Company’s stakeholders to report any unethical conduct with any violation of any Law or Regulation brought to the attention of the Company and any external authority or regulator, for investigation and appropriate sanctions or remedial action to correct any harm done.

 

The Whistle-blowing framework should also ensure the anonymity of the Whistle-blower with the disclosures made treated in the strictest confidence with no discrimination or detriment envisaged during or afterwards. A Whistle-blower who suffers any discrimination or detriment by virtue of his or her disclosures is entitled to claim for compensation if he or her losses his or her position, or suffers any discrimination or adverse detriment.

 

Engaging an independent outside Firm to administer a Company’s Whistle-blowing framework is becoming more of the norm globally.

 

 

Code of Business Conduct and Ethics


The Code recommends that every Company must establish a Whistle-blowing reporting framework to manage unethical and illegal practices which impact on, expose or escalate a Company’s risk tolerance levels.

 

Top-down commitment to professional business and ethical standards is strongly recommended and highlighted in the Code. In addition to the fiduciary responsibilities of the Directors and Management team of a Company, Insider Trading, Related Party Transactions, other Conflict of Interest and Corrupt Practices are required to be monitored and barred by every Company.

 

Persons who were Directors in regulatory bodies are enjoined to exercise a three (3) years cooling-off period before they can be appointed as the Directors of any Company in which their Regulatory functions overlapped in the past.

 

 

Annual Corporate Governance Report

 

The Code requires every Company to disclose in its Annual Financial Report a Corporate Governance Compliance Report (“CGC Report”) which Report must provide clear, concise and sufficient information on a Company’s Corporate Governance Structure, Policies and Practices, with environmental, social risks and opportunities also disclosed.

 

The CGC Report is also required to be published in every Company’s website, Investors’ portals and on other publications of the Company.

 

An annual Corporate Governance Evaluation is also recommended with at least one of such evaluation to be conducted by an Independent External Consultant once every three (3) years.

 

 

Conclusion

 

The implementation of the provisions of the Code is to be monitored by the Financial Reporting Council using sectoral reviews from other Regulatory Bodies and Registered Exchanges who are statutorily empowered to impose appropriate sanctions for any infringement of the Code.

 

As laudable as the provisions of the Code may be, the very high rate of business failures will continue to persist until businesses actually pay more attention to new, more marketable, innovative products and services, which are complemented by efficient leadership and business management skills.

 

The various Regulatory bodies must also publicly become good examples of the adaptation and the implementation of the provisions of the Code.

 

 

Proshare Nigeria Pvt. Ltd.

 

Disclaimer:

This is a free educational material. It does not serve as a source of solicitation, advertisement or the offering of legal services or advice of any kind. No Client/Attorney relationship is therefore created. Readers are strongly advised to always seek from qualified Legal Practitioners, competent legal counseling to their specific factual situation.

 

Intellectual Property Protected!

This material is protected by International Intellectual Property Laws and Regulations. This material can therefore only be reproduced or re-distributed for non-profit educational purposes under the strict condition that our Authorship of this material is explicitly acknowledged, and our above Disclaimer Notice is prominently displayed. [ contactus@oseroghoassociates.com ]

 


Proshare Nigeria Pvt. Ltd. 

 

Previous Post – Corporate Governance

1.       The FRCN Nigerian Code of Corporate Governance 2018 – Jan 18, 2019

2.      Executive Summary of Changes to CAMA – May 16, 2018

3.      The Un-Enforceability of the Nigerian FRC’s Code of Corporate Governance – Nov 08, 2016

4.      CBN Requests for Inputs on National Code of Corporate Governance Issued by FRCN – Mar 21, 2016

5.      S. 306 of ISA 2007 and Whistleblowers in Nigeria – Jan 21, 2014

6.      How to run a Whistleblower Program - US SEC Awards More Than $5 M to Whistleblower  - May 18, 2016

7.      Reps Pass Companies and Allied Matters Act Re-enactment Bill

8.     New Transfer Pricing Regulations, Guidelines and Circular - Legal Alert

9.      Copyright Collective Societies'' Regulations Revisited - Legal Alert

10.  Shares Pump and Dump Schemes - Legality - Proshare Jul 18, 2018

11.   Sales Tax versus VAT: Supremacy - Case Law Review

12.  Fire Safety Compliances and Regulations

13.  Admissibility Of Evidence As It Relates To Electronic Devises, Social Media And Forensic Science

14.  New Requirements For Registration Of Charges (Form CAC8) Takes Effect April 3, 2018

15.   FIRS issues Public notice on Implementation of the Revised 2018 Transfer Pricing Regulations  Oct 22, 2018

16.  Senate Passes Resolution Mandating CBN To Suspend Bank ATM Charges

17.   NASSBER Bills – A Status Update On Market Related Legislation

18.  Stakeholders explore the Role of IST in Nigerian Capital Market Dispute Resolution

19.  Regulatory Conversations – A Public-Private Dialogue Holds On Sept 18, 2018

20. Buhari Signs Law Separating NFIU from EFCC

21.  Unconstitutional, Null And Void - Legal Opinion On Preservation Of Suspicious Assets Order

22. The Draft Nigerian Code of Corporate Governance 2018 For Your Input

23. 2018 Nigerian Code of Corporate Governance: Sectorial Codes to Serve as Guidelines - FRC

24. Landmark FHC Judgment On The Information Rights of Investors In The Nigerian Capital Market

25.  Executive Summary of Changes to CAMA

26. Senate Passes New CAMA Bill into Law; Lists Seven Benefits

27.  Finance and Accounting Outsourcing

28. Judgment Delivered Against Plaintiff In First Nigerian Case on ATM Dispense Error

29. Communique of the 58th Annual General Conference of the NBA

30. IFRS Reporting – Matters Arising On Derivatives

31.  Corporate Governance As A Strategy For Investment Drive – August 2018

32. Nigerian Patient’s Bill of Rights: 5 Things to Note

33. IFRS 15 Implementation Efforts of 2018 Interim Reporters in the Oil and Gas Industry 

 

Proshare Nigeria Pvt. Ltd.

 

Related Legal Alerts

1.       European General Data Protection Regulations - Highlights – Feb 26, 2019

2.      Implementation of Code of Corporate Governance Will Minimize Wastage, Corruption – Osinbajo

3.      FBNQuest Proposed Transfer of FBNQuest Trustees Limited to FBN Holdings Plc

4.      Income Tax Country-by-Country Reporting Regulations, 2018 - Legal Alert

5.      UUBO Hosts Groundbreaking Thought Leadership Forum on ICE, December 6, 2018, in Lagos

6.      The Finance Function Of The Future: Using IFRS 17 To Build A Competitive Advantage

7.      IFRS 16 to Fuel Use of JVs to Avoid Lease Capitalisation

8.     How Government And Its Agencies Can Be More Efficiently Run – The BOI Example

9.      New Transfer Pricing Regulations, Guidelines and Circular - Legal Alert

10.  #NES24: Executive and Legislature must Work Together For Nigeria’s Progress-Saraki

11.   Senate Passes Resolution Mandating CBN To Suspend Bank ATM Charges

12.  ADR - Alternate Dispute Resolution Multi-Door Court House – Legal Alert

13.  Stakeholders explore the Role of IST in Nigerian Capital Market Dispute Resolution

14.  The Finance Function Of The Future: Using IFRS 17 To Build A Competitive Advantage

15.   IFRS 16 to Fuel Use of JVs to Avoid Lease Capitalisation

16.  How Government And Its Agencies Can Be More Efficiently Run – The BOI Example

17.   Court Approves Website Seizure and Anton Piller Order Against Online Copyright Piracy Platform

18.  Hotels and Restaurants Consumption (Fiscalisation) Regulations

19.  Court Grants Injunction Restraining Lagos State From Enforcing New Consumption Tax Law

20. The New Land Use Charge Law of Lagos State - Proshare

21.  Police Powers of Arrest and Civil Contracts

22. Stakeholders harp on robust PPP, at 2017 BusinessDay Education Summit

23. Corporate Governance and Directors' Remuneration - Proshare

24. S. 306 of ISA 2007 and Whistleblowers in Nigeria - Proshare

25.  Stamp Duties on Bank Deposits and Transfers: Are There Unresolved Issues?

26. IFRS 9 Standard Implementation: Building Organisational Capacity for Implementation Success

27.  Bank Charges: Role, Responsibilities and Rights

28.  Bank Charges & Recent Regulatory Guidelines

29. Legal Update On The Implementation Of The Stamp Duties Act And The Rights Of Bank Customers

30. How Recent Environmental, Waste and Effluent Law & Regulations Affect You

31.  Indonesia Issues New Regulation Regarding PLCs' Shareholding Reporting Obligations

32. Contracts - Time Is Of The Essence 

33. Nigeria's new Immigration Regulations 2017 

34. The Law, The Environment And Permissible Noise Levels  

35.  Advancing the Role and Effectiveness of Audit Committees 

36. House Passes Federal Competition Commission Bill  

37.  Registering a Business in Nigeria: Preliminary Considerations 

38. PEBEC approves 60-day action plan on Doing Business in Nigeria 

39.  Annual Minimum Corporate Compliances  

40. You've Registered Your Trademark, What Now? Tips on Maintaining Trademark Protection 

41.  Why FGs Ban of Vehicle Imports Through Land Borders Makes Sense

42.  While Nigeria Dithers, 3 in 4 African Countries Improve Business Environment 

43. The Un-Enforceability of the Nigerian FRC’s Code of Corporate Governance

 

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

 


 

READ MORE:
Related News
SCROLL TO TOP