The Nigerian Code of Corporate Governance 2018

Welcome to another edition of our Governance and Compliance Digest.

In the previous edition, we began a discussion on the regime of Corporate Governance in Nigeria highlighting its legal and regulatory framework, and its impact on the long-term growth and sustainability of any business organization. (Please see the link to previous editions of the digest HERE).

Our focus this edition is on the Nigerian Code of Corporate Governance 2018 (the NCCG Code or the Code) issued by the Financial Reporting Council of Nigeria (FRCN).

The FRCN, pursuant to its objectives and functions under Sections 50 and 51(1) of the Financial Reporting Council of Nigeria Act (the Act), issued the Nigerian Code of Corporate Governance 2018 (the NCCG Code or the Code), which was the first national code of corporate governance to cut across all sectors of the Nigerian economy.

The Code specifies minimum standards of practice that companies should adopt through an ‘apply and explain’ principles approach. This approach requires companies to take responsibility for adopting recommended best practices outlined in the Code, which suit the company’s type, size, and can aid a it’s growth.

The FRCN is charged with the responsibility to monitor the implementation of the Code through the sectoral regulators and registered exchanges who are empowered to impose appropriate sanctions.

The categories of entities mandated to comply with Code, the FRCN’s prescribed mode of reporting compliance and the reporting timelines are detailed below.

1. Entities required to Comply with the Implementation of the Code

The Code is aimed at companies of varying sizes and complexities across the different sectors of the Nigerian economy.

The Regulation on the Adoption and Compliance with the Nigerian Code of Corporate Governance 2018 (the Regulation) directs four categories of entities to adopt and comply with the Code. These are:

1. Public companies (whether listed on an exchange or not).
2. Private companies that are holding companies of public companies or other regulated entities.
3. Concessioned or privatised companies.
4. Regulated private companies that file returns to any regulatory authority other than the Federal Inland Revenue Service (FIRS) and the Corporate Affairs Commission (CAC).

Further to (d) above, it is important to note that the submission of certain documentation or payment of specified registration fees by private companies to industry regulators does not translate to “filing of returns” as contemplated by the Code. This distinction was established in the Federal High Court’s decision in the case of Eko Hotels Limited v. Financial Reporting Council of Nigeria (Unreported decision of the Federal High Court, Lagos Division, Lagos, delivered on March 21, 2014, by the Honourable Justice Abang).

Likewise, the mere fact that a company is famous to the public due to the nature of its services does not automatically make it a “public interest entity”, as envisaged by the definition under the Financial Reporting Act, 2004.

2. Guidelines for Reporting on Compliance with the Code

In addition to adopting and complying with the principles of the Code, the Regulation directs companies that fall within the above listed categories of entities are required to report on their application of the Code.

The mode for reporting on compliance is split into two:

• Reporting Template Online:

In June 2020, the FRCN disclosed in a public statement that a Web Portal Committee, comprised of stakeholders, had been set up for the development of an online portal for electronic submissions of reports on compliance with the Code. Reporting companies would access, complete, and submit the reporting template online.

The online portal is, however, still at the stage of development as of date. Pending the completion of the development of the portal, companies are to download the reporting template from the FRCN’s website (click here 1), complete it and submit a copy of the completed report to their sector regulators, the FRCN (click here 2) and the respective stock exchanges for listed companies.

Additionally, a completed copy of the reporting template is required to be hosted on the investors’ portal on the company’s website for a minimum of five (5) years, alongside the following:

1. The company’s communication policy.
2. Annual reports.

• Other relevant information as indicated in Section 27.4 of the Code (which recommends the establishment of an investors’ portal on the Company’s website, by its Board of Directors, where the communication policy as well as the Company’s annual reports for a minimum of five immediately preceding years and other relevant information about the Company should be published and made accessible to the public in downloadable format).

• Reporting the Application in Annual Reports

Paragraph 1 (2) of the Regulation specifically directs reporting of the application in the annual reports of the companies for financial years ending after January 1, 2020, in the form and manner prescribed by the FRCN (the completion and submission of the reporting template described in (1) above is deemed by the FRCN to satisfy this requirement for reporting on the application of the Code).

The FRCN directs reporting entities to include a summary of the processes used in relation to all Board appointments, report of the annual corporate governance evaluation and the extent of the application of the Code, etc., (hereinafter “the Compliance Matters”) in their annual reports.

3. Compliance Reporting Timelines

Further to the reporting mode guidelines, the FRCN also released timelines for companies to report their compliance with the Code for financial years ended or to end in 2020 and 2021, respectively.

The timelines are tabularized below:

In the next edition of this digest, the Compliance Matters required to be summarily reported in the annual reports will be treated alongside the penalties for non-compliance and our recommendations for companies that are not mandated to adopt and comply with the principles of the Code.

Thank you for reading.