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Code of Best Practices for Corporate Governance - International Law Office

International Law Office

Company & Commercial - Nigeria

Code of Best Practices for Corporate Governance

November 28 2005

Code of Best Practices


Due to the increasing need for close monitoring of companies' affairs and the popular opinion that the manner in which these affairs are run is closely linked to the nation's growth, the Securities and Exchange Commission and the Corporate Affairs Commission have geared their efforts towards producing a code of corporate governance. The Code of Best Practices for Corporate Governance has been adopted by the boards of the Securities and Exchange Commission (the regulatory authority for the capital market) and the Corporate Affairs Commission (the regulatory authority for companies), and is recommended for use by all private and public companies. The code is directed mainly at boards of directors, but also assigns responsibilities to other stakeholders (eg, shareholders). The code's purpose is to enhance corporate discipline, transparency and accountability within Nigerian companies.

Code of Best Practices

Board of directors
The board is responsible for running the affairs of the company in a lawful and efficient manner, while striving to improve the company's value creation. The value created is expected to be shared by all shareholders and employees of the company. The board's functions include the following:

  • strategic planning;

  • selection, performance appraisal and compensation of senior executives;

  • succession planning;

  • communication with shareholders;

  • ensuring the integrity of financial controls and reports; and

  • ensuring that ethical standards are maintained and that the company complies with the laws of Nigeria.

The composition of the board must guarantee diversity of experience, while taking into consideration the compatibility, integrity, availability and independence of the board's members.

The code also recommends the creation of a remuneration committee. The committee must be composed wholly or mainly of non-executive directors. The remuneration of executive directors must be fixed by the committee.

To ensure effective control over the affairs of the company, the board of directors should meet regularly and allow the company to take independent professional advice where necessary. Annual general meetings should be conducted in a manner that enables discussions with and contributions from shareholders.

Non-executive directors must be appointed for periods not exceeding three years, except with the approval of the company's shareholders. Their reappointment should be based exclusively on performance. The total emoluments of executive directors should be fully disclosed to ensure transparency within the company.

Directors must ensure that the shareholders' statutory and general rights are protected at all times. A separate resolution must be proposed for each substantial issue raised at general meetings so that voting can take place. Where possible, shareholders holding more than 20% of the company's issued capital must be represented on the board. At least one director on the company's board must represent minority shareholders.

Audit committee
The requirement to create an audit committee aims to raise the standards of company governance. The committee must consist of independent persons who will not be influenced by any member of the board of directors. Members of the committee should be free from any business or relationship that may affect their independence of judgement.


The code seeks to address the weaknesses of Nigeria's corporate governance practices. By outlining the responsibilities of company directors, it has clarified their role and the limit to their powers.

The provisions on disclosure of emoluments aim to ensure that the company's interests are put before private interests. The code also protects the interests of minority shareholders by guaranteeing that all shareholders be treated equally. If the Securities and Exchange Commission and the Corporate Affairs Commission ensure that companies comply with the code, it is hoped that companies in Nigeria will be better run - for the good of all their stakeholders.

For further information on this topic please contact Osayaba Giwa-Osagie at Giwa-Osagie & Company by telephone (+234 1 269 4725) or by fax (+234 1 269 3447) or by email (giwa-osagie@hyperia.com).

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