FG suspends Obazee’s Code of Corporate Governance

The Federal Government has suspended the implementation of the ‘controversial’ National Code of Corporate Governance released by the Jim Obazee-led Financial Reporting Council of Nigeria (FRCN), which purportedly came into effect 17 October. The FRCN had last month issued the Code, referred to as the “National Code of Corporate Governance for the Private Sector in Nigeria 2016” claiming it became effective from October 17, 2016.

The new Corporate Governance Code would have forced changes in board structure of many companies, with a significant impact on Nigeria’s financial sector. BusinessDay identified a minimum of 13 Insurance CEOs that could have been forced to leave their positions by the implementation of the new code. But following criticisms by some industry stakeholders and shareholders on the implication of the Code to the Nigerian corporate sector, the Federal Government has asked the FRCN to suspend the implementation of the code and also issued a query to the FRCN, seeking a written explanation within seven days (expiring today), how the code helps the government efforts to improve the ease of doing business in the county.

A three-paged query to the FRC, seen by BusinessDay and signed by Okechukwu Enelamah, Minister of Industry, Trade and Investment, the supervisory ministry to the Financial Reporting Council, asked Oabzee to provide among others, the regulatory approach that undergirds the Code; explain the clear conflict between provisions of the Code and the Legislation –Financial Reporting Council of Nigeria Act, 2011.

The FRCN was also asked to provide evidence of the adoption of the Code by the Board of the Council and the minutes of the meeting at which the Board adopted the Code. The Financial Reporting Council is also required to tell the Federal Government whether the committee on Corporate Governance, in Section 51 of the Financial Reporting Council of Nigeria Act, 2011, empowered to issue the Code of Corporate Governance, is in a position to act in the absence of the Board of the Council in the light of provisions of Sections 2 (1) and 10 (d) of the Act.

Government sources told BusinessDay that the Financial Reporting Council was meant to understand that any regulation to be introduced must align with the philosophy underpinning the ease of doing business undertaking; noting that it is therefore entirely possible that the imperatives of the Code can and must be reconciled with the demands of ease of doing business. The Federal Government directed that the implementation of the National Code of Corporate Governance be suspended forthwith, to allow for the effective and proper resolutions of substantive and procedural concerns arising from the reported issuance of the Code.

Also, the Federal Government queried whether the Code can supersede the legislation from where it originates. The FRCN was also asked to provide relevant answers relating to the conflict between provisions of the Code “which is a subsidiary legislation,” and a principal enactment, the Companies and Allied Matters Act (CAMA). Before the FG query, the Independent Shareholders Association of Nigeria (ISAN) and lawyers at Olaniwun Ajayi LP, had also picked holes in the new corporate governance code.

ISAN had criticised the code for its over-regulation of the nation’s corporate sector, particularly the financial industry and the noticeable contradictions and conflict with the subsisting Companies and Allied Matters Act (CAMA), as amended. Also, the law firm, Olaniwun Ajayi LP, in its current newsletter, observed that the Code, by its provisions, “seeks to supersede other corporate governance codes which regulate other sectors, and provide a “one-size-fits all” code.

The law firm had also noted that the new governance code is “clearly inconsistent and seeks to amend the provisions of the Companies and Allied Matters Act (CAMA) and other statutory legislations” while noting that “the FRCN overreached its powers in section 51(c) and 77 of the FRCN Act by issuing a Code which seeks to cover the entire spectrum of corporate governance in Nigeria, without limiting itself to regulating the accounting and financial reporting standards of companies.

“It is unequivocal that as a subsidiary legislation, the Code cannot by its provisions overreach, override, amend or repeal other existing statutes, which have been made by legislative enactment, neither can it amend other subsidiary legislation issued pursuant to already existing Acts of the National Assembly. Such a subsidiary legislation stands the risk of being declared ultra vires and being declared null and void, to the extent of its inconsistencies with existing statutes of the National Assembly,” according to the law firm.