“The Super Code”–A Post mortem?



MON, JUNE 19 2017-The Financial Reporting Council (‘FRC’) in purported exercise of its powers under Section 50 of the Financial Reporting Council of Nigeria Act, 2011, had on the 17th of October 2016 issued the now suspended National Code of Corporate Governance which took effect on the same date. The much touted ‘Super Code’ which aimed to address the sectoral divergences and peculiarities, is in the form of a 3-in-one Code with variations to suit the peculiarities of the Public Sector, Private Sector and Not-For-Profit Organizations (NPFOs). The segmentation of the Codes on sectoral basis was an attempt to answer the question of the workability of a code for all sectors.

Following criticism from a cross section of stakeholders, the Federal Government suspended the implementation of the Code on the 7th of November, 2016 “pending a detailed review, extensive consultation with stakeholders and reconstitution of the Board”.  Contending that the Code was overreaching and inconsistent with the provisions of existing legislation – notably the Companies and Allied Matters Act (CAMA), the Minster of Trade and Investment also called to question the authority of the FRC to issue the Code in the absence of a substantive Board. Following the appointment of a new Executive Secretary and a Board Chairman, it remains to be seen whether the Code has died a natural death.

However, before we throw away the baby with the bath water, a review of some of the controversial provisions of the private sector Code is presented hereunder.

The Private Sector Code has as its focal thrust the harmonization and unification of all the existing sectoral corporate governance codes applicable in Nigeria (CBN, SEC, NAICOM, PENCOM & the NCC Codes) and was to have been applicable to:

  • All public companies (whether listed or not);
  • All private companies that are holding companies or subsidiaries of public companies; and
  • Regulated private companies as defined in Section 40.1.14 of the Code (“regulated private companies” means those private companies that file returns to any regulatory authority other than the Federal Inland Revenue Service and the Corporate Affairs Commission, except such companies with not more than eight (8) employees”).

Board Structure & Composition: “No person, having retired from the Board or Executive management of a company, shall continue to exercise any surreptitious influence or dominance over any of these two governance structures. Such continued dominance or influence may vitiate the validity of the disengagement cool-off period as provided for by this Code” . It has been alleged that this provision was targeted at specific individuals and as with a few other provisions of the Code, is reactionary. It is also not clear how this provision would be enforced as “surreptitious influence or dominance” may be difficult to prove.

Board Size: The Code prescribes a minimum Board membership of eight (8) for all Private Sector companies. However, Section 5.7 of the Code makes an exception for regulated private companies that are not holding companies or subsidiaries of public companies, to the effect that such companies shall have a board membership of not less than five (5) out of which three (3) shall be Non-Executive Directors (of which a majority shall be Independent Non-Executive Directors). This provision runs counter to Section 246 of CAMA which provides that “Every company registered on or after the commencement of this Act shall have at least two directors”.

Chairman: In apparent reaction to the return of some MD/CEOs to the Boards of their respective companies as Chairmen, the Code provides that “the MD/CEO shall not go on to be the Chairman of the same company. If in very exceptional circumstances the board decides that a former MD/CEO shall become Chairman, the cool off period shall be 7 years and the Board shall consult both majority and minority shareholders in advance and also inform the regulator of the appointment, setting out its reasons for such appointment. This shall also be stated in the next annual report”.

Independent Directors: Not less than half of the Non-Executive Directors shall be Independent Directors.  The reclassification of an existing Non-Executive Director into an Independent Non-Executive Director on the same Board is not allowed. This provision was to have substantially changed the composition of many Boards, requiring the appointment of more Independent Directors.

Lead Independent Director (“LID”): The Code introduced the position of a Lead Independent Director (known in some jurisdictions as a Senior Independent Director) who is expected to ‘provide a sounding board for the Chairman’ and to serve as an intermediary for the other directors when necessary. It is submitted that this provision would provide some balance on the Board in the case of a “Super Chairman”.

Executive Directors: The MD/CEO should not be the only Executive Director on the Board of Company. This provision does not take into cognizance the size and nature of the company’s operations and assumes a “one-size-fits-all” posture.


A             Managing Director /Chief Executive Officer: 5 years x 2 terms

B             Non-Executive and Executive Directors: 4 years x 3 terms

C             Independent Directors: Maximum of nine years.

Board Meetings: Where a majority of Independent Non-Executive Directors dissent on an issue before the Board, such decision can only be valid where at least 75% of the full Board (without reference to quorum) vote in favor of such decision. One of the most controversial provisions of the suspended Code which is in disregard of the provisions of CAMA to the effect that each Director shall have one vote. It may also create undue tension on the Board and the emphasis on the role of the Independent Directors takes away from the expectation that all Directors are to approach their responsibilities with a degree of independence.

External Auditors:

Joint Auditors: Section 19.3 of the Code provides that listed and Significant Public Interest Entities shall engage Joint External Auditors to undertake statutory audit. These entities are those whose market capitalization is not less than =N=1 billion and/or whose annual turnover is not less than =N=10 billion. In addition, Section 19.2.2 provides that for every first statutory Auditor that is an international firm (i.e. one with at least one non-Nigerian partner), the subsequent statutory auditor shall be a National firm (i.e. one that has no foreigner as a partner).

Internal Audit: A Public Interest Entity shall not outsource its internal audit functions.

There is no gainsaying that the implications of the suspended Code are far reaching. However, it is also apparent that a convergence of the numerous industry specific Codes of Corporate Governance will engender best practice across sectors. Thus it is suggested that the “Super Code” should be reviewed as promised with a view to harmonizing all the Codes in close consultation with relevant stakeholders.

ADEYEMI, Bisi is the Managing Director DCSL Corporate Services Limited. Email:badeyemi@dcsl.com.ng|www.dcsl.com.ng |Columist @theG&BJournal

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