There have been conscious effort to improve the corporate governance culture in most sectors of the economy and there have been interesting developments and trends in recent times. Some of which include;
By its Circular of 22nd November 2022, the National Insurance Commission revised the term for CEO’s and executive directors in the insurance and reinsurance companies in Nigeria to 10 (ten) years commencing from 1st January 2023. This will lead to resignation and appointments of new members in the Board of Companies in the sector.
Similarly, in its Corporate Governance Guidelines of 1st August 2023, the Central Bank of Nigeria (“CBN”) imposed a 12-year (twelve) term limit (“the term”) for executive directors of banks in Nigeria. This will inevitably lead to resignations of executive directors who have stayed passed the term and appointments of new directors to replace them. This will bring fresh ideas and experience into the Board of various Banks.
3. New codes of governance in some sectors
In December 2023, the Nigerian Communication Commission (NCC) issued Guidelines on Corporate Governance for the communication sector. The Guideline provides that members of the Board of companies in the sector are required to possess knowledge and understanding of the company’s business and ensure the integrity of annual reports and all materials submitted to the NCC. Each company shall have a code of conduct and principles to align its core values.
The Financial Reporting Council of Nigeria (FRCN) is developing corporate governance frameworks for the public and not-for-profit sectors. The anticipated adoption of these codes will ensure transparency, accountability and ethical practices within these crucial sectors.
In addition, the introduction of the Small and Medium Enterprises Corporate Governance Guidelines in 2024 will has establish the roadmap and equipped smaller businesses with the framework and guidance they require to build sustainable and responsible businesses and operations.
4. Dissolution of boards of some banks
The CBN’s recent dissolution of the boards of Union Bank, Polaris Bank, and Keystone Bank highlights the consequences of regulatory non-compliance for Nigerian businesses. CBN’s bold action sets a precedent for stricter enforcement, for companies operating in sectors regulated by the Securities and Exchange Commission (SEC), the National Pension Commission (PENCOM), and the National Insurance Commission (NAICOM). More companies and corporations risk dissolutions of the boards as a result of corporate governance issues.
There are some challenges which arise from the legislations to ensure corporate governance. In some instances it solves one problem and give birth to other problems. Key of which are;
The provisions of the Companies and Allied Matters Act, 2020 provides for the powers of members to check the excesses of the Board especially where there is a deadlock. However this power is usually ineffective. This is because it is difficult for members to exercise their powers where there is a deadlock because the extent of deadlock which can make the Court to exercise its jurisdiction under the just and equitable clause may not exist. The Courts are usually reluctant to invoke the doctrine of residual powers of the members even in cases of complete deadlock. In Bamford v Bamford, the Court of Appeal disagreed with the view that members in general meeting have residual power to what directors cannot do. This gives the Board an opportunity to abuse their statutory duties and obligations to the members and even the Company itself.
In public companies, the general meeting can hardly monitor what goes on in the day to day running of the Company. The minority shareholders are denied the opportunity to gather support to make their objection to corporate decisions meaningful. Directors may even fix annual general meetings at locations where the members cannot attend thereby denying them the opportunity to attend general meetings to ascertain the state of the Company. This leads to apathy of members. There is need for legal reform to better protect the members against the excessive powers of the Board.
In order to ensure governance of Incorporated Trustees, the provisions of Section 839 to 850 of the Companies and Allied Matters Act, 2020 provides for suspension of trustees, appointment of interim managers, filing of b-annual statement of affairs, accounting records and statement of affairs and merger and dissolution of associations. The Corporate Affairs Commission is given the powers to suspend trustees where there is any misconduct or mismanagement in the administration of the association, to protect the property of the association and ensure proper application of the property of the association towards achieving the objects of the association, for public interest or where the affairs of the association are being run fraudulently. The Commission is given powers to ascertain the activities of associations on its dormant accounts and if the association does not oblige the Commission with the required information within 15 (fifteen) days, the Commission is given powers to dissolve the association.
This innovation appears to be for the welfare and wellbeing of associations. However, it appears that the above provisions is inconsistent with the provisions of Section 38 of the Constitution of the Federal Republic of Nigeria, 1999 (as amended) (“the Constitution”) which provides for the freedom of thoughts, conscience and religion and Section 40 of the Constitution which provides for freedom of association and peaceful assembly. This is because the freedom of persons to assembly to propagate their thoughts, conscience and religion extends to their rights to remove and appoint their leaders. This is why in the case of Ekpenyong v CAC and 2 Ors., the Court, held that the provisions of the Act on excessive control of association will fetter their liberty and struck down the provisions for being inconsistent with the provisions of the Constitution. Hence, in drafting corporate governance codes, the framers must ensure that it does infringe human rights and the culture of the Nigerian people. This will ensure its efficacy.
