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ICLG – Corporate Governance 2018

ICLG – Corporate Governance 2018


NIGERIA- Corporate Governance 2018.


1.1 What are the main corporate entities to be discussed?

The main corporate entities currently existing in Nigeria are: Companies Limited by Shares (Ltd), Companies Limited by Guarantee (Ltd/Gte), Unlimited Liability Companies (Ultd) and Incorporated Trustees (IT). The above listed entities can operate as either public or private companies. 

However, this chapter deals with corporate governance with focus on Public and Private Companies Limited by Shares.

1.2 What are the main legislative, regulatory and other sources regulating corporate governance practices?

The laws and regulations governing corporate governance in Nigeria are generally as follows:-

  1. The Companies and Allied Matters Act, 1990 (CAMA) establishes the Corporate Affairs Commission (CAA) which is responsible for the supervision, formation, and winding up of companies.
  1. Banks and Other Financial Institutions Act, 1991 governs financial institutions in Nigeria. It equally charges the Central Bank of Nigeria (CBN) with the regulation and supervision of these institutions.


  1. The Investment and Securities Act, 2007 also provides the establishment of the Securities and Exchange Commission (SEC), which is the leading regulatory body on the capital market, securities investments and Mergers & Acquisition.
  1. The Financial Reporting Council Nigeria Act 2011 (FRCN) establishes the Financial Reporting Council. The Council has powers to establish a directorate of Corporate Governance which has the responsibility to both develop principles and practices of corporate governance.

The Codes and Rules which also regulate corporate governance in Nigeria include:

  1. Code of Corporate Governance for Public Companies, 2011 (SEC Code): which applies to all public companies and quoted private companies on the capital market in Nigeria.
  1. Code of Corporate Governance for Banks and Discount Houses in Nigeria and Guidelines for Whistle Blowing in the Nigerian Banking Industry 2012, (CBN Code): which applies to banks and discount houses in Nigeria.
  1. Securities and Exchange Commission Rules 2013
  1. Code of Business Ethics and Principles on Corporate Governance for the Insurance Industry 2009 (NAICOM Code)
  1. Code of Corporate governance for Licensed Pension Operators, 2008 (PENCOM Code)
  1. Listing Rules of the Stock Exchange. 

Other Sources:

The Memorandum and Articles of Association of all companies in Nigeria also regulate companies’ internal administration and the manner which the business of the company may be conducted. 


1.3 What are the current topical issues, developments, trends, and challenges in corporate governance?

The Nigerian banking financial crisis in 2004 and the global financial meltdown of 2008-2009 have precipitated many Laws and enactments like the SEC Code. These laws and codes on corporate governance extensively reviewed practices on board composition, appointment, removal, remuneration, disclosure and reporting. The codes also restated the role, duties and skill of managers/directors of corporations, gender parity, piercing the glass ceiling by women Directors and mandatory Corporate Social Responsibility (CSR).


To create an effective corporate governance framework and to safeguard stakeholder’s interests and assets of public entities, the FRCN issued the National Code of Corporate Governance (NCCG) in 2016. The Code was, however, fraught with overlapping, conflicting and inconsistent provisions which are currently undergoing review.

In February 2017, the CBN released an Exposure Draft of the Code of Corporate Governance for Other financial institutions (OFIs). The Code has introduced novel provisions on appointment and maximum tenure of directors, their remuneration and establishment and functions of committees etc.

Also, the Nigerian Stock Exchange (NSE) and the Convention on Business Integrity (CBI)  introduced the Corporate Governance Rating System (CGRS) for companies listed on NSE. The Rating System for public-listed-companies is based on the companies corporate governance and anti-corruption culture.


The trend of regulating public companies faces a gamut of challenges such as high rate of corruption and weak regulatory framework. Interdependence of the regulated Public regulators on the private sector allows use of private companies for corrupt practices. Other challenges to effective corporate governance include conflicting and overlapping regulatory rules, anachronistic laws, slow judicial enforcement and intervention process, unstable micro-economic indices, frequent changes in government policies and weak local currency which affect corporate performance. 

Despite these challenges Nigeria has been ranked among the top five countries in Africa for compliance with the Organisation for Economic Co-operation and Development Principles of Corporate Governance. The Ranking followed a study jointly published by the Association of Chartered Certified Accountants and KPMG titled ‘Balancing Rules and Flexibility for Growth’.

1.4 What are the current perspectives in this jurisdiction regarding the risks of short-term and the importance of promoting sustainable value creation over the long-term? 

Worldwide, the role of corporations in economic development is not in contention as many corporations are far-richer than national governments. The society demands that profit maximisation can no longer be the sole objective of companies. Nevertheless, many shareholders in Nigeria prefer profit maximisation and quick returns rather than longer-term investments in sustainable capital appreciation. Short termist approaches tend to entrench managements who seek shareholders’ interests rather than broader interests of expansions, research or product development, investments in corporate customers satisfaction etc. 

Characteristically, Short-termism engenders breaches of business ethics, relegation of wider common good considerations, undermines core values which weaken company’s capacity to achieve non-financial goals. Most organisations that rely on short-termism often maintain a system of poor accountability, weak internal control systems, concentration of power in MD/CEO and management entrenchment. 

The main factors responsible for Short-termism in Nigeria include high cost of borrowing, huge cost of doing business, over regulation of the economy, incompetent directors, non-pursuant of value-added and research programs, and general misconception of the application of codes of corporate governance only to large organizations. To curb short-termism in corporate governance, general reengineering of the macro and micro economic environment is needed e.g. political stability, policy reforms, prosecution of alleged corrupt offenders, change of attitude of directors, improvement of infrastructure, power, water and security to reduce cost of doing business in Nigeria.


2.1 What rights and powers do shareholders have in the strategic direction, operation or management of the corporate entity/entities in which they invested?

Shareholders are given concurrent and supervising powers to oversee some management functions through participation in strategy committees etc. to direct the Board on certain investments and projects.

In private companies, there is usually no clear dichotomy between the shareholders and the directors. The shareholders are usually the directors of their business. Some rights of shareholders include:

  1. The right to receive notice of meeting; S. 219; the right to attend any general meeting, S. 227,
  2. The right to speak and vote on any resolution, 
  3. The right to convene an Extraordinary General Meeting where the shareholder holds at least 10% of the total voting rights. S. 215(2),
  4. The right to present a winding-up petition. S. 410 CAMA,
  5. The right to apply to the CAC to direct the calling of the AGM where there is default in holding the AGM. S. 213(2),
  6. The right to seek redress, and enforce their rights. S. 303,
  7. The power to appoint and replace directors and auditors of the company. Ss. 214, 262, 357,
  8. To petition the court for relief from unfairly prejudicial actions, s. 310 & 311 and
  9. The right to appoint representatives to Audit Committees. S. 359.

2.2 What responsibilities, if any, do shareholders have as regards the corporate governance of the corporate entity/entities in which they invested?

Shareholders have the responsibility to appoint and replace director(s) especially non-performing directors. Shareholders can also call for the Annual General Meeting of the company where the directors of the company fail to do so. Shareholders are expected to proactively attend general meetings of the company, pass resolutions at such meetings, settle outstanding amounts on calls.

2.3 What kind of shareholders meetings are commonly held and what rights do shareholders have as regards such meetings?

CAMA mandates companies to hold General Meetings of shareholders. These meetings are the Annual General Meeting (AGM), and Extraordinary General Meeting (EGM).

Shareholders have the right to attend the meetings of the company. They can apply to the Corporate Affairs Commission to direct the calling of the AGM where there is default in holding the AGM within the stipulated period, or where there is deadlock in the Board’s exercise of its powers.

Shareholders holding not less than one-tenth of the paid up capital of the corporation can requisition an EGM which the members of the management body are bound to convene. S. 215(2).

Also, by the provisions of CAMA, public companies are expected to hold a statutory meeting within a period of six months from the date of incorporation. S. 211. There are other meetings provided by law like the meetings of classes of shareholders’ S. 243, and Audit Committees, which involve shareholders, S. 359(4).

2.4 Do Shareholders owe any duties to the corporate entity/entities or to other shareholders in the corporate entity/entities and can shareholders be liable for acts or omissions of the corporate entity/entities?

Shareholders have the right but not the duty to attend the company’s general meetings and to pass resolutions at such meetings. Shareholders may appoint a proxy to vote in their capacity as shareholders. In law, especially in public companies with dispersed shareholding, shareholders do not exercise control over the company management. Their duties are mainly to pay up on shares allotted when due. Their right to appoint and remove directors is their major exercise of corporate power.

Also, shareholders may be liable for the acts or omissions of the company where the shareholders control the companies. In such cases, the veil of incorporation is lifted. In an unlimited company, the shareholders’ liability is unlimited for the acts or omissions of the company. Additionally, parent companies who are controlling shareholders in subsidiaries may be responsible for negligent breaches on the environment, non-compliance with employee protection and safety rules.

2.5 Can shareholders seek enforcement action against the corporate entity/entities and/or members of the management body?

Shareholders can seek enforcement action against the company or members of the management body by bringing either a members direct action or a representative action.

As protection against oppressive conduct in the company, a shareholder can bring a member direct action (derivative action) where the act or omission of the company affects the shareholders. Enforcement actions arise where there is fraud on the minority as in undervalue sale of company assets or securities, (1985) fraudulent trading, misfeasance, illegal businesses like money laundering, ultra vires actions. The shareholders may seek relief through injunction, nullification of the questionable transactions or damages, etc.

2.6 Are there any limitations on or disclosures required in relation to the interest in securities held by shareholders in the corporate entity/entities?

The Articles of a company may impose some restrictions upon the highest number of shares that may be held by each shareholder. In the absence of such, there is no legal provision that places a limit on the number of shares that a shareholder may acquire in a company. However, as CAMA requires at least 2 shareholders before incorporation, one shareholder cannot hold 100% of the shares. BOFIA also limits a persons’s maximum shareholding in any Bank.

2.7 Are there any disclosures required with respect to the intentions, plans or proposals of shareholders with respect to the corporate entity/entities in which they are invested?

Section 94 of CAMA empowers a public company to require disclosure, by notice in writing, by any member of the capacity in which he holds any shares in the company. If he holds shares as beneficial owner, the member should state the particulars of the identity of persons interested in the shares and whether such parties so interested are also parties to any agreements or arrangements relating to exercise of any rights conferred by the holding of the shares.

Under s. 275, every company must keep a register showing each director shares (number, description, amount) in the company or debentures of the company or in any other company subsidiary or holding company held in trust for him or otherwise. 


3.1 Who manages the Corporate Entity and How?

Section  63(3) of CAMA provides that, directors of a company are appointed to direct and manage the affairs of the company. Collectively, the directors are referred to as the Board of Directors.  Subject to the Company’s articles, it is the board’s responsibility to ensure that the company is properly managed.

A company is required by CAMA to have a minimum number of two directors. However, the SEC code requires a public company to have a minimum of 5 directors; which consist of executive directors, non-executive directors and at least 1 independent director. The non-executive directors are to be in the majority.  

The board derives its power from the members of the company, and may in turn, delegate their powers to other officers of the company or a few directors to carry out specific assignments. The board may equally constitute some of its members or officers into committees to undertake tasks like Risks and Loan management (in Banks), Compliance issues, Remuneration and Disciplinary matters etc. s. 64

3.2 How are members of the management body appointed and removed?

There are three ways through which a director of a company may be appointed by the provisions of CAMA:

  1. The first directors of a company are appointed by the subscribers to the memorandum and articles of association of the company at the incorporation of the company.
  2. The members, in a general meeting, appoint subsequent directors of the company by resolutions. Also, a person, not being a member of the company, who is empowered by the Articles of the company may appoint a person as a director e.g. Institutional or regulatory bodies, CBN, NDIC, Government Agencies.
  3. In the unlikely event that all the shareholders and directors die, CAMA empowers their personal representatives to apply to the court to convene a general meeting of all the personal representatives of the shareholders to appoint directors. If the Personal Representatives fail to convene such meeting, the creditors are empowered to do so.  

A director can be removed in any of the following ways:

  1. By the provision of section 262 of CAMA a company may by the members in general meeting by ordinary resolution remove a director at any time, notwithstanding the provisions of its articles or any agreement between the company and the director. 
  2. Certain regulatory laws empower the regulatory body to remove a director. e.g, Section 35 of the Bank and other Financial Institutions Act empowers the Governor of The Central Bank of Nigeria to remove the directors of a bank or financial institution;
  3. Under certain circumstances, the terms of a director’s service contract may stipulate the mode of the director’s removal. Where such stipulation covers the director’s dual status as a servant and director of the company, the director’s removal in line with such terms is valid. 
  4. Where the Articles of Association provide a clearly defined procedure for the removal of any director, a director removed in line with the procedure, stands removed.

3.3 What are the main legislative, regulatory and other sources impacting on contracts and remuneration of members of the management body?

  1. Section 267 of CAMA states that the remuneration of the directors shall, from time to time, be determined by the General Meeting. Directors are also allowed sitting allowances and other costs incurred in carrying out their duties. The executive directors are equally employees of the company and as such their service contracts make provisions for their remuneration. Non-executive Directors are not paid salaries but only remuneration for specific tasks and sitting allowances. 
  2. The SEC Code requires companies to develop a comprehensive policy on remuneration for directors and senior management. The Code also states that the remuneration of each director should be considered individually with particular attention paid to the relevance of the skill and experience to the company. Only non-executive directors should be involved in determining the remuneration of executive-directors. As such, most companies have Remuneration Committees.
  3. The CBN Code specifically provides that banks shall align executive and Board remuneration with the long term interests of the bank and its shareholders. The remuneration shall be sufficient to attract and motivate the directors and also must be balanced against the bank’s interest so as not to pay excessive remuneration. Where the remuneration is linked to performance, the remuneration shall be designed so as not to encourage excessive risk taking etc. 
  4. Some Articles of Association of Companies, especially private companies, do prescribe the quantum of remuneration payable to directors. 

3.4 What are the limitations on, and what disclosure is required in relation to, interests in securities held by members of the management body in the corporate entity/entities?

By CAMA, where the Articles of Association provide for directors share qualifications, a director who fails for a period of two months after his appointment to obtain his qualification shall vacate his office. The company is also mandated to keep a register, at its registered or head office, showing the number, description and amount of shares or debentures each member of the management body owns.

The  SEC Code states that companies should disclose in their annual report, the details of the shares of the company held by directors. Also, persons who are to be appointed directors in a company, shall disclose their shareholding in the company prior to the appointment.

The CBN Code provides a limitation in that where stock options are offered to directors as an option of remuneration, such shall not be exercisable until after one year after the expiration of the tenure of the director.

3.5 What is the process for meetings of members of the management body?

By CAMA, the directors are to be given fourteen (14) days’ notice of meeting in writing, failing which the meeting is invalid.

The directors may elect a chairman for their meetings and determine his/her tenure. If however, he/she is not present at any meeting after 5 minutes, the directors may appoint anyone from their number to be chairman of the meeting. 

Any question arising at any meeting shall be decided by the majority of votes and where there is an equality of votes, the Chairman shall have the casting vote or second vote. Unless otherwise stated in the articles of association of the corporation, the quorum needed for the transaction of the business of the Board is two (2) where the members of the directors are not more than six (6). Where the members of the Board are more than six (6), the quorum is 1/3rd of the number.

By the provisions of the SEC Code, the directors are to meet at least once every quarter to effectively perform their managerial functions and monitor corporate performance. The Code also makes it mandatory for the directors to attend a minimum of two-thirds (2/3) of all meetings in a year, otherwise they may be removed or not be re-elected. 

3.6 What are the principal general legal duties and liabilities of members of the management body?

The directors of a company have certain duties that are expected of them to perform and there are certain liabilities upon failure to perform effectively.  The principal legal duties of directors are basically categorised into three:

  1. Fiduciary duties;
  2. Duties of care and skill, and 
  3. Ancillary duties. 

Section 279 of CAMA lists some of the main duties of directors and states that the directors stand in fiduciary relationship towards the company and are expected to act in utmost good faith towards the company in any transaction with the company or on behalf of the company. Under Section 283 thereof, the Directors are trustees of the assets and powers given to them. Accordingly, the directors have the following duties:-

  • Duty to act at all times in what he/she believes to be the best interest of the company;
  • Duty not to fetter their discretion to vote in a particular way;
  • Duty to exercise their powers for the purpose for which they are specified, and not for a collateral purpose,
  • Duty not to allow their personal interest to conflict with the interest of the corporation,
  • Duty not to abdicate from their responsibility even if they delegate,
  • Duty to consider the interest of employees etc. s. 279(4)

The Act further provides that the directors of a company are expected to exercise the powers and discharge their duties honestly, and to exercise the degree of care, diligence and skill which a reasonable prudent member of the management would exercise in similar situations. It is imperative to note that failure of any of the directors to discharge these duties may render them personally liable either in tort, contract or crime. 

Ancillary duties of directors include; Under section 276, the duty to notify the company of any loan or a guarantee by any third party based on security provided by the company. This applies to directors, officers and any such officers who had been in that position for the proceeding 5 years.

Under section 277, any director who is directly or indirectly, interested in a contract or proposed contract with the company shall declare the nature of his interest at the Board meeting at which the contract is being considered. 

3.7 What are the main specific corporate governance responsibilities/functions of members of the management body and what are perceived to be the key, current challenges for the management body?

The SEC Code provides for the specific corporate governance responsibilities of Directors as follows:

(a) formulation of policies and overseeing the Management and conduct of the business; 

(b) formulation and management of risk management framework; 

(c) succession planning and the appointment, training, remuneration and replacement of board members and senior management; 

(d) overseeing the effectiveness and adequacy of internal control systems; 

(f) performance appraisal and compensation of board members and senior executives; 

(g) ensuring effective communication with shareholders; 

(h) ensuring the integrity of financial reports;
(i) ensuring that ethical standards are maintained; and (j) ensuring compliance with the laws of Nigeria. 

In carrying out their duties, some of the challenges experienced by management are:

  1. General inadequate professional know-how, ethical lapses and compliance failures;
  2. Inadequate digitalisation and innovation of the general business environment,
  3. Increased levels of operational risks, and poor fidelity standards of employees.
  4. Corruption and inadequate infrastructure which increase operational costs. 
  5. Multiplicity of regulatory bodies and rules.
  6. General poverty, illiteracy and obsolescence of machines and skills. 

3.8 Are indemnities, or insurance, permitted in relation to members of management body and others?

Under CAMA, the company is responsible for any liabilities incurred by the directors while working for the company.  This is because the director is seen as an agent of the company.

Also, the directors are personally liable for any loss incurred by the company from breach of any of his duties to the company and no provision, whether contained in the articles or resolutions of a company, or in any contract, shall relieve the director from such liability imposed by law. These liabilities may be insured by the company as Directors liability and fidelity insurance.

3.9 What is the role of the management body with respect to setting and changing the strategy of the corporate entity/entities?

Being the apex decision-making body of the company, the board is saddled with the responsibility of designing and implementing policies that would ensure long term growth and profitability of the company.  Specifically, the SEC Code states that the board should define the company’s strategic goals and ensure that its human and financial resources are effectively deployed towards attaining those goals. 


4.1 What, if any, is the role of employees in Corporate Governance?

The role of employees in Corporate Governance in Nigeria is increasing as the employees make the hierarchical proposals which enable the Boards to take decisions. However, unless employees acquire membership rights through shareholding, they cannot be represented on the boards which is the apex decision making authority. 

To increase employees participation in corporate governance, employees are also given access to vital records of the company for better enlightenment during consultations, salary reviews, negotiation, and collective bargaining. Some enactments employee Protection Act and Safety Laws confer a certain degree of protection of rights and interests on employees, especially in respect of workers exposed to occupational hazards. Many organisations resort to holding routine consultations with representatives of employee unions before taking key decisions that concern their welfare, redundancy schemes and work processes.

Also, CAMA recognises the strategic role of employees in corporate governance by protecting their rights to profit sharing if under their contract of service such right is given as an incentive. Their profits must be paid whether or not dividends have been declared.

4.2 What, if any, is the role of other stakeholders in corporate governance?

Other stakeholders in Corporate Governance include the regulatory bodies like the CBN, NDIC, AMCON, SEC, CAC, debenture holders, creditors contributories, receiver/managers, liquidators, suppliers, local communities. 

The regulatory bodies oversee the performance and operations of Banks and other Financial institutions and ensure that economic and social policies are implemented. In times of deep crises, AMCON, NDIC, CBN may exercise governance functions.

Under Trust Deeds, debenture holders could exercise powers of management over assets of the company and may appoint Receivers/Managers and Liquidators to coordinate company governance especially in times of corporate financial upheavals. 

4.3 What, if any, is the law, regulation and practice concerning corporate social responsibility?

Like many legal jurisdictions, Nigeria has no compulsory provisions on CSR especially as a concise scope of the concept is not universal. However, it is no longer theoretical that companies must address sustainable development issues to maintain profitability within a global sustainable safe environment and enhanced economic development of especially poor countries. To this end, an attempt was made in 2008 to enact a law vide a bill titled: A Bill for an Act to provide the Establishment of the Corporate Social Responsibility Commission.


5.1 Who is responsible for disclosure and transparency?

A company’s board of directors has the responsibility of disclosure, integrity and transparency in preparing, signing and distributing the company’s financial statement.  

The SEC code provides that the chief executive officer and the head of finance should certify in a written statement that the financial statements presented represent the true and fair view of the company’s affairs. Also, the board of every public company must ensure that there is sufficient disclosure on accounting and risk management issues. The Chairman of the board of directors also has a specific obligation to give a summary of the company’s performance for the period under review. 

Under the NSE Listing rules the board is mandated to disclose in its annual report a list of the codes of corporate governance to which it is subject and where the company has not fully complied with the codes it must provide a detailed statement of the non-compliance.

5.2 What are the corporate governance related disclosures required? 

As regards corporate governance disclosures, CAMA mandates that every company must disclose the following:

  1. Financial position of the company at any given period,
  2. Shareholders with substantial interest in a public company,
  3. Shares of company directors,
  4. Directors’ interest in company contracts and 
  5. Accounting policies amongst others.


The SEC Code enjoins all public companies to make the following disclosures in its annual report:

  1. company’s governance structures, policies, and the company’s compliance with the code  
  2. composition of board, responsibilities and names of all directors 
  3. disclosure on code of business conduct and ethics for directors and employees 
  4. disclosure on accounting policies and risk management issues. 
  5. company’s performance for the period under review. 
  6. director’s interests in contracts whether directly or indirectly 
  7. disclosures on property transactions relating to director’s current accounts or loans 

The CBN code mandates financial institutions to make the following disclosures: 

  1. Annual report including remuneration of board and executives,
  2. Details of directors and shareholders who own 5% and above of the bank’s shares,
  3. Board of Director’s performance evaluation and 
  4. The bank’s corporate governance structure and composition of board committees.

The NAICOM code calls for the following corporate governance related disclosures:

  1. Shareholder who owns a minimum of 5% of shares in the company and control the company when acting in concert, 
  2. Show compliance with corporate governance code applicable to the company,
  3. Disclose board meeting and attendance record,
  4. Disclose any major deviation from applicable accounting, auditing and corporate governance standards 

Corporate governance related disclosures by the PENCOM code include:

  1. Report on directors remuneration 
  2. Corporate governance practices 
  3. Members of the board, Meetings and composition of committee members 

5.3 What is the role of audit and auditors in such disclosure?

By section 357 CAMA, every company must appoint an auditor to audit it’s financial statements. In addition, the auditors of public companies are required to make a report to the audit committee of the company. The Audit Committee is a key structure charged with overseeing financial reporting and disclosure. 

The audit report is presented to the company in the general meeting which must expressly attest that in the auditors opinion, and after diligent investigation, the report is in agreement with the accounts, books and returns and that the Audit report represents a fair view of the company’s balance sheet and profit and loss for the year. The auditors must, also, examine the directors report for the year and state whether they are consistent with the company’s accounts. 

5.5 What corporate Governance-related information should be published on website 

The SEC code encourages public companies to have websites and investor-relations portals so that shareholders, stakeholders and the public have access to the communication policy, annual reports and other relevant information.

The CBN code requires all banks to establish and maintain a website which should provide information on the bank’s risk management practices, executive compensation, board and top management appointments amongst others. 

The PENCOM Code on corporate governance requires pension fund administrators to publish on their websites their level of compliance with the Code.

Author:- Dr.Jennifer