Corporate governance has become increasingly important in Nigeria's evolving business landscape. Whether you're running a small enterprise or managing a large corporation, understanding the principles of corporate governance is essential for sustainable business success.
What is Corporate Governance?
Titilade Adelekun Ilesanmi defines Corporate Governance (CG) as how a company is directed and managed in achieving its objectives subject to relevant rules and regulations.
Key Components of Corporate Governance in Nigeria
1. Board of Directors
The board of directors plays a crucial role in corporate governance. In Nigeria, the Companies and Allied Matters Act (CAMA) 2020 provides guidelines for board composition and responsibilities:
- Companies must have a minimum number of directors based on their type – For example, a small company is allowed to have just one director – S.271(1) CAMA. Whereas, the minimum requirement for a public company is two.
- Directors owe fiduciary duties to the company – This is a clear requirement under S.305 CAMA (2020).
- The board is responsible for strategic direction and oversight – By virtue of Sections 303 – 305 of the Companies and Allied Matters Act 2020, a director who has personal interests in a particular contract of a company has a duty under the law to inform the other directors of the company. A clear example that comes to mind is a situation like this – a director called X works in XYZ Ltd and has a cousin who has entered a contract bid at XYZ Ltd. The intent of Section 303 of CAMA 2020 is that in circumstances like this the said director has to disclose this information to other directors of XYZ. If you look carefully at the wordings of the statute in the said section you'd see that it provides amongst other things "… to immediately notify the directors of such company in writing."
Emphasis there is IN WRITING. Therefore, a mere oral disclosure is not full compliance with the law. Such a director must make such disclosure in writing. You may be wondering why the law mandates a director to make such disclosure. It is pertinent therefore to state that a director of a company stands in a fiduciary relationship towards the company. This requirement of law is supported by Section 305 of CAMA 2020. This is why it is always emphasized in organizational circles that a director must not make secret profits. Such act would amount to breach of organizational ethics and would amount to a violation of the law. You don't need a soothsayer to tell you that director X may be tempted to influence the contract procurement and bidding process in favour of his cousin, hence the provisions of the law to curtail acts of this nature and encourage a system of meritocracy.
Furthermore, the Investment and Securities Act 2007 is apposite here. A director must comply with the ISA 2007 and SEC Code of Corporate Governance 2018 regulating shares, stocks and the likes. For instance, insider trading is heavily frowned upon under the law. Section 111(1) of the ISA 2007 provides thus:
"Subject to section 104 of this Act, a person who is an insider of a company shall not buy or sell, or otherwise deal in the securities of a company which are offered to the public for sale or subscription if he has information which he knows is unpublished price sensitive information in relation to those securities."
2. Shareholder Rights
Shareholders have fundamental rights that must be protected:
- Right to participate in major decisions
- Right to receive dividends when declared
- Right to access company information
- Right to attend and vote at general meetings
3. Transparency and Disclosure
Nigerian companies are required to maintain transparency in their operations:
- Annual financial statements must be prepared and audited
- Material information must be disclosed to shareholders – Public companies are more affected by this requirement of the law. Under the SEC Code of Corporate Governance 2018 not more than two persons from the same family shall be allowed to sit on the board of a public company at the same time.
- Related party transactions must be properly documented
Benefits of Good Corporate Governance
Implementing strong corporate governance practices offers numerous benefits:
- Enhanced Reputation: Companies with good governance attract more investors and customers
- Risk Management: Proper governance structures help identify and mitigate risks
- Operational Efficiency: Clear policies and procedures improve decision-making
- Access to Capital: Well-governed companies find it easier to raise funds
How Brimany Attorneys Can Help
At Brimany Attorneys, we provide comprehensive corporate governance advisory services:
- Board training and development
- Policy development and review
- Compliance audits
- Shareholder agreement drafting
- Corporate restructuring
- Specialized Company Secretarial Services – If you work in a corporate setting you may be aware that the role of a company secretary under the CAMA 2020 has evolved.
- CAC Compliance & Statutory Filings – We help you with administrative legal tasks such as this so you can focus on other aspects of your business and keep winning unafraid of any regulatory bottlenecks that may want to rear its head. Thus, we assist with filing Annual Returns, allotment of shares, and so on.
Our team has extensive experience helping Nigerian businesses establish and maintain robust governance frameworks that comply with local regulations while meeting international best practices.
Conclusion
Good corporate governance is not just a regulatory requirement—it's a competitive advantage. As Nigeria's business environment continues to evolve, companies that prioritize governance will be better positioned for long-term success.
If you need assistance with corporate governance matters, contact our team for a consultation.