Corporate Governance reform is vital in securing an attractive environment to both domestic and foreign investors. The Financial Reporting Council of Nigeria (“FRC”) on 18 October 2016 launched a new National Code of Corporate Governance for Nigeria (“the National Code”). The National Code comprises the Code of Corporate Governance for the Private Sector; the Code of Governance for the Not-For-Profit entities and the Code of Governance for the Public Sector.
The Code of Corporate Governance for the Private Sector, (“the Code”) appears to be more focused on transparency and accountability than its predecessors. It provides for a more unified corporate governance code with governance safeguards that match the Nigerian environment whilst equally conforming to acceptable governance standards in other climes. Its advantages are set our below.
Wider Application: The Code has a wider scope of application than the previous Codes of Corporate Governance. The Code does not only apply to public companies and regulated private companies but also to private companies which are either holding companies or subsidiaries of public companies.
Adequate Disclosures Requirement and transparency: The Code sets out a wide range of items to be disclosed by the Companies in their annual reports before they are submitted to their regulators.
Company Investors’ Portal: Companies are required to set up a portal through which they communicate and disseminate information regarding their operations and management to shareholders, stakeholders and the general public. These disclosures are meant to be timely, accurate and continuous to give a fair and balanced view of the company. This will assist investors in their investment decision as to the financial status of the company and as to sustainability of its business.
Higher Institutional Investors’ Participation: The Code provides for a higher participation of institutional investors in the Corporate Governance of the companies. For instance, the Code sets out extensive provisions on institutional investors’ duties as well as their rights. Institutional investors can now demand compliance with the provisions of the Code from the management of the company and where there is non-compliance, they can report directly to the regulators of such companies.
Code of Business Conduct and Ethics: The Code requires all companies to have Code of Business Conduct and Ethics which shall form part of the Corporate Governance practices of the company. The companies are also required to establish a culture of integrity and zero tolerance for corrupt practices. They are required to report on this and the extent of their compliance in the company’s Code of Business Conduct and Ethics.
The Code also requires the Companies to promote globally responsible business conduct with emphasis not only on meeting investors’ expectations but also the needs of all relevant stakeholders and suitability of the local operating environment for businesses to thrive and prosper
Enforcement: Compliance with the provisions of the Code is mandatory. Violations of the Code attract personal sanctions against officers directly involved and the companies concerned.
The birth of the Code is a welcome development in Nigeria. The concern of many corporate analysts is whether this unified structure will fit in all circumstances especially where novel situations may arise in the different industries to which the Code applies. Be that as it may, it cannot be gainsaid that the Code has more good to offer the Nigerian investment environment than any latent damage the Code might be said to bear.
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