After 30 years of regulating Corporate dealings in Nigeria, the Companies and Allied Matters Act 1990 (CAP C20 LFN 2004)was repealed following the presidential assent of the Bill on August 7, 2020. The emergence of the new Act, Companies and Allied Matters Act 2020 (CAMA 2020), has received a grand reception by all who have eagerly awaited the emergence of the law to reflect the social, economic and environmental changes in Nigeria’s corporate climate since 1990. As the principal legislation for the regulation of companies in Nigeria, the Act regulates the management and control of companies. It prescribes rules and standards for principal officers of a company in ensuring good corporate governance. Therefore, it is important to ascertain the implications of the provisions of the new Act for good corporate governance in Nigeria. Some of the key provisions in the Companies and Allied Matters Act 2020, which relates to good corporate governance are:
1. Independence of the Board
The board plays a major role in the management and control of the company. It is primarily responsible for ensuring good corporate governance. In safeguarding and ensuring the independence of the board, the new Act provides thus:
a. Multiple directorships
The issue of multiple directorships has always been a major concern to the independence of board members as it presents situations of apparent conflict of interest and disclosure issues, especially where the director is on the board of competing companies. To this end, section 307 (2) of the CAMA 2020, restricts persons from taking up multiple directorships in more than five public companies at the same time. Section 307(3) of the new Act further requires a person who is a director of more than five public companies after the expiration of two years from the commencement of the Act, to resign from being a director from all but five of the companies.
b. Prohibition of secret benefits
In furtherance to the duties of directors as contained in the old Act and to strengthen the independence of directors, section 313 (1) ofCAMA 2020 expressly prohibits directors from accepting a bribe, gift or commission either in cash or kind from any person or a share in the profit of that person in respect of any transaction involving the company.
c. Dual-position of Chairman and Chief Executive Officer
In curtailing abuse of power and promoting checks and balances for an effective board, section 265 (6) ofCAMA 2020expressly states that the chairman of a public company shall not act as the chief executive officer of such company.
d. Mandatory requirement of Independent directors for Public companies
Whilst the old Act contained no mandatory provision for independent directors on the board of companies; it has become apparent that the role of independent directors in providing checks and balances and ensuring the independence of the board cannot be overemphasised. Therefore, section 275(1)ofCAMA 2020makes it mandatory for all public companies to have at least three independent directors.
e. Liability of Directors
By section 312 (3)(b) of CAMA 2020, directors are now directly liable to members of the company for any loss or damage suffered, arising from transactions involving the acquisition of properties by the company from directors, or the acquisition of properties by directors from the company.
2. Effective communication and disclosures to stakeholders
A major aim of corporate governance is to promote effective communication between the company and its stakeholders. It requires that the board is transparent and accountable to stakeholders and that relevant information and disclosures relating to the financial position and other affairs of the company are made by the board to the stakeholders as at when due. To this end, the new Act addresses the following issues:
a. Disclosure of managers’ remuneration
In promoting transparency of the board to shareholders, section 257 ofCAMA 2020requires that the compensation of managers of the company is disclosed to members of the company at the annual general meeting.
b. Publication of Audited Accounts on Company website
In ensuring transparency to shareholders and other stakeholders of companies, section 374(6)of CAMA 2020 makes it mandatory for every public company to publish their audited accounts on the company’s website.
c. Virtual meetings
In promoting shareholders’ engagement and access to meetings of the company, section 240 (2)of CAMA 2020 permits private companies to hold their general meetings electronically, provided same is in accordance with the articles of the company.
Without doubt, the aforementioned provisions of the new Act should promote the independence of the board and improve stakeholder relationship, which would, in the long run, improve good corporate culture and good corporate governance in Nigeria. However, a major concern to good corporate governance in Nigeria is the concession given in section 330(1) of CAMA 2020 to small companies to function without company secretaries. Whilst this would promote the ease of doing business in Nigeria by saving costs, it must be stressed that the role of company secretaries is pivotal for good corporate governance.
Authored by Busayo Oladapo, an Associate at Kenna Partners.
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