This
area of corporate practice deals generally with the way and manner a company is
controlled and directed so as to achieve its objectives. The persons in the
affairs of management are expected to be accountable, responsible and more
sensitive to the interest of shareholders, interest of creditors, and members
of society at large.
.N.B: The effect of incorporation
confers on a company legal personality. As a legal entity without a physical
body, its affairs are carried out by human. This is the foundation of corporate
governance.
The regulatory
laws we need to take note of are;
1.
Companies
and Allied Matters Act
2.
Investment
and Securities Act
3.
Banks
and Other Financial Institutions Act
4.
Insurance
Act
5.
National
Insurance Commission Act
6.
SEC
Code of Corporate Governance 2011
7.
Code
of Corporate Governance for Bank and Discount House and Guidelines for Whistle
Blowing in the Nigerian Banking Industry 2014
8.
Code
of Corporate Governance for Insurance Industry in Nigeria 2009
9.
Code
of Corporate Governance for Operators (PENSION FUNDS)
10. Codes of Corporate Governance for
Telecommunication 2014.
THE
LEGAL REGIME AND CORPORATE GOVERNANCE
COMPANY AND ALLIED
MATTERS ACT
N.B: This is the major and mandatory
legal document that we would first refer to in relation to company in Nigeria. It
major provisions in relation to corporate governance;
1. The duties and functions of
directors. See S. 283, 270, 279 CAMA
2. The powers of shareholders
3. The mandates for an audit committee
(which is made up of equal number of directors and shareholders not exceeding
six. See S. 359(4) CAMA. ETC
N.B: That the mandatory provision
for audit committee applies only to a public company.
INVESTMENT AND SECURITIES ACT
N.B: This is the leading regulatory
body on the capital market and securities investment in Nigeria
1.
SEC
ensures protection of investors in Nigeria against fraudulent dealings by the
maintaining fair, efficient and transparent market and reduction of systematic
risk.
2.
Shares
and other securities must be registered with SEC before they are offered to the
public.
3.
No
shares should be offered to the public without a prospectus to that effect
being registered and approved by SEC.
4.
The offering of shares without registration
with SEC or without a prospectus, are offences under the Act.
5.
The
Act places the responsibility for ensuring the integrity of financing controls
and reporting on the Board of Directors.
6.
Prosecution
for contravention of the provisions of the Act is done through the Investment
and Securities Tribunal (IST), and this makes for quick resolution of disputes.
Therefore, we can
conclude that CAMA deals with the incorporation, running (including the issue
and types of shares and other company securities) and winding up of companies,
ISA deals with the offer of shares to the public and the regulation of the
capital market.
THE
CODES OF GOVERNANCE
We shall
focus on;
1.
SEC
code of Governance
2.
Code
of Corporate Governance for Bank and Discount House and Guidelines for Whistle
Blowing in the Nigerian Banking Industry 2014
SEC
CODE OF GOVERNANCE
1. It applies to all public companies whose
securities are listed on a recognized securities in Nigeria, All companies
seeking to raise funds from the capital market through the issuance of
securities or seeking listing by introduction, and All Public Companies. See
Article 1.1 of the code.
N.B: Where there is a conflict between the
provisions of the SEC code and the provisions of any other code in relation to
a company covered by the two codes, the SEC code provides that the code with
the stricter provision shall apply.
SALIENT PROVISIONS ON THE SEC CODE
(a) Chairman/CEO: the code provides that for all
companies with listed securities, the positions of the Chairman of the Board
and Chief Executive Officer shall be separate and held by different
individuals. This is to avoid over-concentration of powers in one individual
which may rob the board of desired checks and balances in the discharge of its
duties.
(b) Tenure of
directors:
Subject to the provisions of CAMA and satisfactory performance, all directors
should be subject to re-election at regular intervals of at least once every 3
years. Also, biographical details of the directors nominated for re-election
will be accompanied by the performance evaluation results and other information
that can guide the decision of the shareholders.
(c) Directors’
remuneration:
There should be a comprehensive policy on directors’ remuneration. The Board
should approve the remuneration of each executive director, including the CEO
individually, taking into consideration the relevance of skill and experience
to the company. Only non-executive directors should be involved in the
decisions regarding executive directors. Remuneration for non-executive
directors should be fixed by the Board and approved by members in a general
meeting.
(d) Internal audit: All companies should have an
effective risk-based internal audit function. Where the Board decides not to
establish such a function, sufficient reasons should be disclosed in the
company’s annual report, explaining how assurances of effective internal
processes and systems such as risk management, internal control and the like
will be obtained.
(e) Rotation of
external auditors:
In order to safeguard the integrity of the external audit procees, companies
should rotate both the external audit firms and audit partners. The audit
partners should be rotated by the audit firm while the company should not
retain the services of an audit firm continuously for more than 10years. Firms
disengaged after continuous service for a period of 10 years can be reappointed
after the expiration of 7 years after disengagement.
(f) Risk management: The Board is responsible for
the process of risk management. It should accordingly form its own opinion on
the effectiveness of the process. Management is accountable to the Board for
implementing and monitoring the process of risk management and integrating it
into the day-to-day activities of the company.
(g) Meetings: General meetings should be
conducted in an open manner, allowing for free discussion on all issues on the
agenda. The chairmen of all board committees and of the statutory audit
committee should be present at general meetings to respond to shareholders
questions. The venue of a general meeting should be accessible to shareholders.
The Board should ensure that shareholders are not disenfranchised on account of
choice of venue.
(h) Board of
directors: The
primary responsibility for ensuring good corporate governance in the company
lies with the Board. The Board shall define a framework for the delegation of
its authority or duties to Management specifying matters that may be delegated
and matters that are reserved for the Board. The delegation of any duty to
Management does not in any way diminish the overall responsibility of the Board
and the directors for being accountable and responsible for the affairs and
performance of the company.
THE SEC CODE V CBN CODE
1.
Family members on the board: The SEC code provides that not
more than two members of the same family should be on the board of a public
company at the same time. While the CBN code’s provision is to the effect that
no two members of the same family should be Chairman and CEO or Executive
Director.
2.
Board composition: The SEC code provides that the
membership of the Board should not be less than 5 or more than 15. The CBN code
provides for a maximum of 20 members on the Board.
3.
Independent directors: SEC code provides that there
should be on the board at least one independent director while the CBN code
prescribes 2 as the minimum number or 20%.
4.
Board committees: According to the SEC code, the
Board is to determine the duties of its committees. The provision of the CBN
code is same as SEC here.
5.
Remuneration
of non-executive directors: By the provisions of the SEC code, the
remuneration of the non-executive directors are recommended by the board and
approved by members in general meeting. The CBN code limits remuneration to
sitting allowances and expenses.
6.
Remuneration of executive
directors: By
the SEC code, the remuneration of executive directors is fixed by committees
composed solely of non-executive directors. The CBN code is the same with SEC
code on this issue.
7.
External auditors: Under the SEC code, the maximum
number of years an external auditor can be continuously retained by a public
company is 10. The external audit firm can be re-appointed after the expiration
of 7 years from the discontinuance. The CBN code provides that the appointment
of external auditors is subject to approval by the CBN and the maximum number
of years of continuous engagement is still 10.
8.
Internal audit: The SEC code provides that
there should be a risk-based internal audit to be headed by a senior management
employee and to report to the audit committee. The CBN code provides that the
internal audit should headed by at least an employee on AGM grade, and to
report to the audit committee.
t
TO BE CONTINUED!!!!!!!
E READ HARD
EAT HARD
REST HARD
PRAY HARD........................................
0 comments:
Post a Comment