By Ndubuisi Francis
The Securities and Exchange Commission (SEC) has set January 1, 2021, target for the implementation of the ‘SEC Corporate Governance Guideline’s (SCGG) and revised reporting template for public companies.
SEC in a circular yesterday announcing the commencement date advised public companies not only to comply with the requirements of the Nigerian Code of Corporate Governance (NCCG) 2018, but to also to note that compliance with the SCGG/revised reporting template is mandatory.
The Financial Reporting Council of Nigeria had issued the NCCG in 2018, which replaces all existing sectoral codes of corporate governance in the country, and is applicable to all sectors of the economy.
However, given the peculiarity of the capital market, the commission issued additional recommended practices largely obtained from the 2011 SEC Code of Corporate Governance for Public Companies in Nigeria, as guidelines.
In coming up with the SCGG, SEC believed that it would add to the standards of transparency, accountability and good corporate governance of companies without unduly inhibiting enterprise and innovation.
Some provisions of the SCGG indicate that membership of the board of a public company shall not be less than five, and to safeguard the independence of the board, not more than two members of the same family shall sit on the board of a public company at the same time
The guidelines also stipulate that in appointing a person to the board, shareholders should be provided with information on any real or potential conflict of interest, including whether a proposed appointee is an interlocking director.
It further provides that: “The letters of appointment should cover the following: synopsis of director’s rights; director evaluation programme used by the company, and any other contractual responsibilities.”
On sustainability, the guidelines state that: “Companies shall recognise corruption as a major threat to business and to national development and, therefore, as a sustainability issue for businesses in Nigeria. Companies, boards and individual directors must commit themselves to transparent dealings and to the establishment of a culture of integrity and zero-tolerance to corruption and corrupt practices.
“In order to foster good corporate governance, companies shall engage in increased disclosure beyond the statutory requirements in the CAMA (Companies and Allied Matters Act).”
In a bid to minimise risk in the operations of companies, the guidelines state that: “the annual risk-based internal audit plan shall: address the broad range of risks facing the company, linking this to a risk management framework; identify audit priority areas and areas of greatest threat to the company; indicate how assurance will be provided on the company’s risk management process, and indicate the resources and skills available or required to achieve the plan.”
The Nigerian Code of Corporate Governance (NCCG) of 2018 issued by the Financial Reporting Council (FRC) of Nigeria effectively replaced the Code of Corporate Governance for public companies issued by the Securities and Exchange Commission (SEC).
The FRC had also issued a template for reporting compliance with the NCCG 2018.
By the latest circular issued by the SEC, public companies are required to comply with the provisions of the NCCG and the SCGG.