New Harmonised Code of Corporate Governance – Legal Alert


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



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.




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.





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.



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