Promoters of a business in Nigeria have a number of structures to choose from, the principals of which include the following.

Private company limited by shares – this is the most common type of company in Nigeria. It is a legal entity that is separate and distinct from its shareholders. This means that in the event the company is wound up, the extent of the shareholders’ liability is limited to the remaining unpaid amounts for their shares. Private companies must issue a minimum share capital of NGN100,000, cannot have more than 50 shareholders, and cannot offer shares to the public at large.

Public company limited by shares – companies that wish to offer securities to the public can do so by way of a public company. These companies have a minimum issued share capital of NGN2 million and may be listed on the stock exchange subject to listing and reporting requirements. There is no limitation to the number of shareholders under this structure.

Less frequently used forms of business organisations include the following.

Companies limited by guarantee – this type of company is typically used to pursue charitable objects. The liability of the shareholders of these companies is limited to the amount they have undertaken to contribute to the assets of the company in the event of the company being wound up. The company has no share capital, and its income/profit cannot be paid to its shareholders. 

Business name – businesses established by sole proprietors or partnerships may be carried out through a registered business name. A business name cannot sue or be sued in its name, and cannot hold assets in its name, as it has no corporate personality.

Partnerships – other corporate organisations available to partnerships include a limited liability partnership (LLP) where all partners have limited liability, and a limited partnership where one or more partners have unlimited liability and one or more partners have limited liability. 

Principal Sources of Corporate Governance Requirements

The principal legislation that governs corporate governance for companies in Nigeria includes the following.

• The Companies and Allied Matters Act 2020 (Companies Act) – this is the primary legislation that regulates the formation, operation, and management of all companies in Nigeria.
• The Investment and Securities Act 2007 – this act established the Securities and Exchange Commission. It regulates the operations of capital market operators to ensure the protection of investors, fair, efficient, and transparent markets, and to reduce systemic risk.

In addition to the above, some key sector-specific governance codes and regulations include the following.

• The Nigerian Code of Corporate Governance (“the Governance Code”) – the Governance Code was formulated by the Financial Reporting Council of Nigeria (FRCN) to consolidate the codes of private regulated and public companies. The Governance Code provides a framework to ensure good corporate governance in the public and private sector. Some regulators have imposed the following additional guidelines on companies operating within their sectors:
1. the Nigerian Communications Commission Code of Corporate Governance for Telecommunication Companies;
2. the Guidelines on Corporate Governance for Pension Fund Operators;
3. the National Insurance Commission Corporate Governance Guidelines for Insurance and Reinsurance Companies;
4. the Securities and Exchange Commission Rules and Regulations (“the SEC Rules”) – these rules and regulations provide participants (regulated entities) in the capital market with more precise notice of the expectations, and code of conduct required to promote fairness and equality (see 1.3 Corporate Governance Requirements for Companies with Publicly Traded Shares for further details);
5. the Securities and Exchange Commission Guidelines – these guidelines were issued as a replacement to the SEC Code of Corporate Governance for Public Companies 2011, and are additional guidelines to the Governance Code which all public companies are required to comply with;
6. the Rulebook of the Nigerian Stock Exchange 2015 (the Listing Rules) – the Rulebook is a compilation of all the Rules, Regulations and Guidelines of the Nigerian Stock Exchange;
7. the articles of association of a company are also one of the sources of corporate governance requirements in Nigeria – the articles of association specify the regulations for the company’s operations and define the company’s purpose.

Companies listed on the Nigerian Exchange Group (NGX) are required to comply with the legislation set out in 1.2Sources of Corporate Governance Requirements. More particularly, the following corporate governance requirements must be considered by listed companies.

All listed companies must adopt and apply the Governance Code which covers issues relating to the board of directors, risk management, shareholder engagement, business ethics, sustainability, and transparency. However, the Code is based on “apply and explain” principles, and companies have the flexibility to demonstrate how they have tailored and applied the principles of the Code taking into consideration their size, industry, and growth phase. Non-compliance may attract penalties by the FRCN and sector regulators.

The FRCN requires companies to report on the application of the Governance Code using its reporting template. The report is to be submitted to the FRCN, any relevant sectoral regulator, and any stock exchange the company is listed on. In addition, the FRCN requires the report to be hosted on the investors’ portal of the company’s website for a minimum of five years.

The Securities and Exchange Commission (SEC) requires annual reporting on a company’s level of compliance with the Governance Code, and in any issued prospectus. In addition, the SEC requires mandatory compliance with the SEC Corporate Governance Guidelines, which are additional recommended practices that add to transparency and accountability standards relevant to listed companies. The penalty for non-compliance is a fine of NGN500,000, and NGN5,000 for every day that the violation persists, or any sanction the SEC may deem fit. The SEC also requires public companies to file half-yearly returns that include corporate governance issues.

Under the Rulebook of The Nigerian Stock Exchange (the Listing Rules), the eligibility criteria for admission includes an evaluation under the Stock Exchange’s Corporate Governance Rating System (CGRS) and a minimum rating of 70%. All companies listed on the premium board must comply with the SEC’s corporate governance requirements, and disclose in their annual report a list of the codes of corporate governance to which they are subject to, whether the company is fully compliant with the provisions of the code and, if not, provide a detailed statement of the facts of non-compliance and an explanation. Members must also undertake to adhere to any corporate governance disclosure policy requirements issued by the Stock Exchange.

Corporate Governance and Sustainable Development

The link between Corporate Governance and sustainable development continues to gain momentum, along with the growing interest in sustainability and ESG in Nigeria, as the country seeks to balance economic growth with environmental protection and social responsibility.

Business leaders are becoming increasingly aware that sustainable development practices can have a significant impact on business performance, including improved financial results, enhanced brand reputation, and increased employee and customer satisfaction. Nigerian companies that prioritise sustainable development are seeing that they can gain a competitive advantage by differentiating themselves in the market and attracting investors who prioritise sustainability.

Sustainability cannot be effectively managed or successfully integrated with a company’s business strategy without a robust governance framework. While ensuring overall accountability, sustainability governance will ensure that organisations develop a sustainability strategy, set and manage ESG goals, implement the sustainability strategy, track ESG performance and manage the sustainability reporting processes. It also strengthens stakeholders' engagement.

The board and senior management play a crucial role in promoting sustainable development practices in Nigerian companies by setting the tone for the company's culture, ethics, and values, and ensuring that there is a sound sustainability governance and management framework in place. This allows the business leaders to prioritise sustainable development in decision-making, risk management, and stakeholder engagement.

ESG Reporting and Disclosure Requirements

The regulatory landscape for sustainable development in Nigeria and how it is shaping corporate governance practices is still developing. It is important to note that there are specific disclosure requirements for listed companies, as well as various regulations and rules that mandate sustainability reporting. In this context, the Global Reporting Initiative (GRI) standards are commonly recommended, and companies are also expected to report their performance against the Task Force on Climate-related Financial Disclosures (TCFD) framework and the Sustainable Development Goals (SDGs).

Nigeria is also following global trends towards mandatory sustainability disclosures: principally, the Financial Reporting Council of Nigeria’s announcement that the IFRS Sustainability Disclosure Standards will be adopted in Nigeria when they are issued by the International Sustainability Standards Board’s (ISSB) later this year. In addition, the Nigerian Climate Change Act has set a net-zero emissions target, and has mandated sustainability reporting for businesses with more than 50 employees. Insofar as the laws are enforced, they will have a significant impact on ESG reporting in Nigeria, and are expected to act as a catalyst for sustainability disclosures in Nigeria.

Globally, companies are under increasing pressure from both internal and external stakeholders to demonstrate their capacity to contribute to solving environmental, social, and governance (ESG) problems in Africa, particularly as they relate to climate challenges.

The Nigerian government has taken bold steps to implement valuable climate change actions, such as the enactment of the Climate Change Act 2021. At the United Nations Climate Change Conference (COP26) the Nigerian government committed to achieving net-zero emissions by 2060. In line with this commitment, the Climate Change Act will serve as a basis for identifying the activities aimed at ensuring that the national emissions profile is consistent with the carbon budget goals, and establishing national goals, objectives, and priorities on climate adoption. The Nigerian government has also undertaken the establishment of the National Council on climate change, membership in the African Carbon Markets Initiative, and the launch of Nigeria's Energy Transition Plan 2022, with the goal of achieving carbon neutrality and net-zero emissions in terms of the country's energy consumption.

Nigerian companies have also started to take action on climate and social risk issues, such as investing in renewable energy, reducing emissions, and implementing sustainable business practices, empowerment of corporate boards with oversight of sustainability strategy and progress. Furthermore, there has been a growing trend among Nigerian businesses to adopt responsible sourcing and supply chain management practices, which help to ensure that their products are produced in an ethical and sustainable manner. Some companies have also established corporate social responsibility programmes to support local communities and address societal challenges, such as poverty and inequality.

Despite these valuable efforts, it is clear that more needs to be done to address Nigeria’s growing climate and societal challenges. There is an increasing expectation among stakeholders that companies should demonstrate a clear commitment towards achieving important Environmental, Social, and Governance goals, and utilise their influence within society to make meaningful contributions. Companies that prioritise a purpose-driven approach, focusing on people, planet, and profit, are positioned for long-term success that is both sustainable and socially responsible.

Private corporations in Nigeria have the capacity to contribute towards the mitigation of climate and social challenges and possess the requisite competencies and expertise to generate value for stakeholders and communities beyond their financial performance, while improving the sustainability of their businesses.

Moreover, the increased focus on the role of sustainability creates a developing atmosphere of accountability and trust between companies and stakeholders. In this context, Nigerian companies are challenged to include robust ESG-related information in their annual sustainability or integrated report. These companies must build internal capacity to gather, analyse and authenticate ESG-related data across all the business functions, and ensure that their boards are ESG-Fluent, and that an effective sustainability governance and management framework is established. By adopting a more comprehensive and inclusive approach to ESG considerations and improving their communication and reporting practices, companies can foster greater transparency for stakeholders, create impact-withstanding strategies, while enhancing trust and loyalty from their customers and stakeholder.

Nigeria has taken the lead, by announcing its intention to adopt the International Sustainability Standards Board (ISSB) disclosure standards once it is issued in 2023. This decision is a significant move towards adopting a unified method and process on reporting on sustainability across the board. The ISSB disclosure standards demand that companies disclose sustainability-related information and report on climate-related issues that may have a direct impact on business continuity, whilst providing information on the financial records of the company in its audited accounts. The unification of the overall reporting standards will help to place more demands on the board and management of various companies, to prioritise incorporating concepts like greenhouse gas emission procedure in their annual financial statements.

Whilst we await the release and implementation of these standards, the collaborative efforts among stakeholders, including the government, civil society, the private sector, and communities, are equally crucial to ensure that the standards and policies are effective, implemented properly, and responsive to the needs of all communities. Therefore, investing in sustainable technologies and practices, building adequate skill and capacity to measure and report sustainability-related information is key. Ultimately, policy and regulation must be accompanied by collaboration and partnerships to achieve sustainable development in Nigeria.

The decision-making of a company is generally delegated to the board of directors in the company’s articles of association, although there are certain decisions that are reserved for the shareholders of the company. The principal bodies and functions involved in the governance and management of a company at each level are as follows.

• Board of directors – the board is responsible for overseeing the affairs of the company. Directors may regulate their meetings as they deem fit and may exercise all such powers as are within the articles of association. Boards will consist of a combination of executive directors, non-executive directors and independent directors depending on the activities and size of the business.
• Shareholders– the shareholders are the owners of the company, and the board of directors reports to the shareholders on the affairs of the company. The articles of association and the Companies Act provide for particular decisions reserved for the shareholders which are passed by a shareholders’ resolution.
• Executive management – the executive management team is responsible for managing the day-to-day operations of the company, and the board may delegate its powers to management to implement certain decisions and policies.

Decisions made by these particular bodies are as follows.

Board of directors– the board is typically authorised to make all decisions required to manage and direct the affairs of the company, secure the company’s assets, define the company’s strategic goals, and ensure the company carries out its business in accordance with the memorandum and articles of association, and the relevant laws.

Shareholders– there are certain significant decisions reserved for approval by shareholders. These include amending the memorandum and articles of association of the company, appointing or removing directors, altering the corporate structure, approving the audited accounts, and voluntarily winding up the company. Decisions of shareholders are taken in the form of shareholder resolutions at general meetings or in writing.

Executive management– the executive management team is responsible for overseeing the day-to-day running and control of the affairs of the company. Management acts through delegated authorities from the board.

The shareholders, board of directors, and executive management make decisions in the following ways:

Shareholders– the decisions of shareholders are usually taken by way of a resolution passed at a properly convened general meeting (or in the case of private companies only, by written resolution). Most decisions are taken by ordinary resolution unless the articles of association or the Companies Act require the decision to be taken by a special resolution. A special resolution is a decision passed by at least 75% of the votes cast, and can be used to change the company name, alter any provision in the memorandum and articles of association of a company, and effect the voluntary winding up of a company. All companies other than a small company or those with a single shareholder must hold an annual general meeting in each year.

Board of directors– the decisions of the board are taken in the form of a board resolution passed at its meeting or by a written resolution signed by all directors. The voting requirements for a board meeting are set out in the company’s articles of association, which may provide for a chairman’s casting vote, and the resolutions are passed by a simple majority. 

Executive management – the executive management acts within the authority delegated by the board of directors and is responsible for making decisions relating to the day-to-day management of the company. Accordingly, all decisions must be made within the terms of the delegation.

The Companies Act requires that the company ensure that minutes of proceedings of board, shareholder, and executive management meetings are kept.

Companies operate a single-board structure where both executive and non-executive directors sit on the same board in the discharge of their functions. Under the Companies Act, all companies are required to have at least two directors, except for companies categorised as small companies. Boards may elect a chairman to preside over their meetings, who may be granted a casting vote by the articles of association. In addition, public companies are legally required to have at least one third of the board as independent directors.

The board may constitute committees and may exercise power through the committees, or delegate responsibility for specific aspects of the governance of the company to them. Whilst there are no specific requirements on the type of committees that private unregulated companies should have, regulated entities and public companies are required to have at least an audit committee, a governance or remuneration committee, and a risk management committee under the Governance Code.

The members of the board are collectively responsible for overseeing the affairs of a company by providing entrepreneurial and strategic leadership. The board is typically comprised of executive and non-executive directors with the following roles.

• The chairman – the chairman provides overall leadership to the board at its meetings and ensures that the board works together towards achieving the company’s strategic objectives. The Governance Code recommends that the roles of chairman and chief executive officer are held by two separate individuals.
• Non-executive directors (NEDs) – NEDs provide an independent and impartial view on the running of the company’s business, the governance structure, and the practice in the boardroom. NEDs are not involved in the day-to-day management of the company.
• Independent non-executive directors (INEDs) – INEDs must not have an interest or relationship that could reasonably be perceived to influence the director’s ability to be impartial and objective in the boardroom. The Companies Act, as amended by the Business Facilitation (Miscellaneous Provisions) Act 2023, requires that one third of the board of public companies should be independent non-executive directors on the board, and the Governance Code recommends that most of the non-executive directors are independent.
• Executive directors – executive directors are responsible for the day-to-day management of the affairs of the company and reporting directly to the board on the overall performance of the company as relates to strategy implementation, risk management, organisational management, financial performance, amongst others. Executive directors include the managing director. The managing director/CEO is the head of the management team delegated by the board to administer the affairs of the company.

A company may by its articles of association determine the maximum number of directors to be appointed to the board. A public company is required by law to have at least one third of its board as independent directors. Also, a person is precluded from serving as a director on more than five public companies at the same time.

The Governance Code recommends that the board be composed of individuals with an appropriate mix of knowledge, skills, experience, diversity (including experience and gender), and independence to objectively and effectively discharge its roles and responsibilities. The Code also recommends that the board be composed of a proper mix of executive and non-executive directors with the majority of the members being non-executive directors.

The first set of directors of a company is determined in writing by the subscribers to the memorandum of association of the company or named in its articles. Directors must provide their consent to their appointment. Subsequent appointment of directors may be by a re-election at an annual general meeting or the appointment of new directors. The board of directors may also appoint new directors to fill any vacancy arising out of death, resignation, retirement, or removal of an existing director. However, such appointment is subject to the ratification of the members at the next annual general meeting, without which the director ceases to be in office.

Independence of Directors

Under the Companies Act, a director has a duty not to fetter his discretion to vote in a particular way, and to always act in the best interest of the company. Also, a public company is required to have at least one third of the total number of its directors as independent directors. The Companies Act provides that an independent director is one that:

• does not own (directly or indirectly) more than 30% of the shares of the company; or
• has not been previously employed by the company; or
• has not acted as an auditor of the company; or
• has not been paid or received from the company sums exceeding NGN20 million, or acted as a partner, director or officer of an entity that received or made a NGN20 million payment to the company.

In addition, the Governance Code recommends that most of a company’s non-executive directors should be independent and provides the criteria for establishing the independent status of a non-executive director. It precludes the chairman of a board from serving as the chairman of a committee simultaneously and recommends that boards should carry out annual assessments on the independence of their directors.

Conflict of Interest

The Companies Act provides that a director has a duty to avoid conflict-of-interest situations, and to ensure that his/her personal interest does not interfere with the performance of his/her roles and responsibilities on the board. There are various circumstances where a conflict-of-interest situation may arise, which include the use of property, opportunity or confidential information while performing their role as director of the company; receiving a personal benefit or secret profit from the business; or acting as a director on the board of a competing company.

Directors have a duty to give a written notice of disclosure to the board of their interest in any transaction or proposed transaction with the company as soon as they become aware of it. The board may authorise transactions in which conflict-of-interest issues have been raised by following an established process set out in a policy document. In the absence of such approval, the offending director is liable to account to the company for benefits derived that are contrary to the law.

Directors have a fiduciary relationship with the company, and the Companies Act sets out the statutory duties they must observe. Directors must:

• discharge their duties honestly and observe good faith in any transaction in relation to the company;
• act in what they believe to be the best interest of the company to promote its objectives, while having regard to the impact of the company's operations on the environment, its employees, and its shareholders;
• exercise a degree of care, diligence, and skill which a reasonably prudent director would exercise in similar circumstances – directors must meet the minimum standard of skill and care expected of someone in their position and utilise their skills and experience;
• declare the nature and extent of any interest in proposed transactions or arrangements with the company before the secret profits are made; and
• exercise their power for the specific purpose it was given and not for any collateral purpose.

Directors must not:

• restrict their discretion to vote in any way;
• put themselves in a position where there is, or could be, a conflict between their personal interests and their duty to the company;
• make any secret profit or achieve any unnecessary benefit;
• misuse the company's information; or
• accept bribes, gifts or commissions from any person in respect of any transaction involving their company in order to induce their company to deal with such a person.

Directors are also legally required to comply with reporting and disclosure requirements including annual returns, financial statements, and other corporate information. They must also ensure the company’s compliance with other legal obligations including regulations relating to data protection, health and safety, environmental matters and employment issues.

Directors are appointed to direct and manage a company’s business and they owe their statutory duties to the company itself. However, in making decisions in the best interest of the company, directors have a legal duty to consider the interest of its employees, the shareholders, its stakeholders and the environment in the community where the company operates.

Directors do not owe a duty to creditors directly. However, where a company is insolvent or nearing insolvency, directors may be able to avoid liability for fraudulent or wrongful trading if they can demonstrate that they took every necessary step to minimise potential loss to creditors.

Generally, only a company can enforce the breach of a director’s duties or ratify an irregular act since the duties are owed to the company itself. This poses some difficulty as an individual shareholder who wishes to sue a director may not be able to obtain a board approval required to commence an action in the name of the company. The Companies Act therefore contains provisions which allow shareholders to bring a derivative action on behalf of the company under certain circumstances.

The consequences for breach of a director’s duties to the company may include payment of compensation or damages for any loss suffered on account of the breach of their duties, recovery of misapplied property, accounting for profit, restitution, rescission of a contract, being restrained by injunction or held criminally liable, where the breach amounts to a crime.

A director also risks being disqualified by the court from acting as a director or from taking part in the promotion, formation, or management of a company if the director is convicted of a criminal offence relating to the running of a company, or fraudulent or wrongful trading.       

In addition to a director’s liability relating to the breach of their duties, directors who receive more money than they are entitled to as remuneration are guilty of misfeasance and accountable to the company for such money. Where a payment declared to be illegal by the Companies Act is made to a director, the amount received is deemed to have been received by them in trust for the company. In addition, if a director has breached the tax obligations of a company, the director may be held personally liable for tax penalties payable by a company.

Under various legislation including the Economic and Financial Crimes Commission Act and Money Laundering (Prohibition) Act, a director can be held criminally responsible if the director participated in the commission of the crime related to the company’s activities.

The liability of directors can be limited under certain circumstances. A company cannot indemnify a director from liability arising from legal breach in respect of the company, including negligence, default, or breach of trust. However, directors can be indemnified by way of an advance against legal costs incurred by them in successfully defending legal proceedings. However, if the director is not successful, the advance must be repaid to the company.

A company may pay for directors’ and officers’ (D&O) insurance for its directors. This generally covers individual directors against claims made against them in their capacity as director (including defence costs). Shareholders may ratify or confirm negligent actions taken by directors, or conduct which breaches a director’s duty, insofar as the breach is not illegal or fraudulent. However, this does not absolve a director from any liability to a third party.

The remuneration of directors is determined by the shareholders in a general meeting, and where remuneration is fixed by the articles of association it can only be changed by a special resolution of the shareholders. Directors cannot be paid remuneration free of income tax or varying with the standard rate of income tax under the Companies Act. The members of the audit committee of a public company are also not entitled to remuneration.

The managing director’s remuneration is determined by the board of directors. The Governance Code recommends that the managing director/CEO and other executive directors should not receive sitting allowances for attending meetings of the board or its committees, and directors’ fees from the company, its holding company or subsidiary. The Governance Code also requires companies to implement a claw-back policy to recover excess or undeserved rewards, such as bonuses, incentives, share of profits, stock options, or any performance-based rewards from directors and senior executives. The Companies Act also requires that the remuneration of managers of the company be disclosed to the shareholders at general meetings.

Where the directors, officers or the company fail to comply with these approval requirements, any member of the company may seek a court injunction or declaration restraining the erring persons from proceeding with the unauthorised act. Also, where the non-compliance of the erring directors or officers leads to a personal injury against a member or members of the company, they may bring a personal action against the erring directors and the members would be entitled to damages, or a declaration or injunction to restrain the company or the erring directors.

Companies are required by the Companies Act to file annual returns to the Corporate Affairs Commission, accompanied by audited financial statements which are required to disclose all payments and remuneration from the company to its directors and its officers for the year. Also, the disclosure of the remuneration of officers who are senior managers of the company is required to made at the annual general meeting of the company, as part of the ordinary business transacted at an AGM.

The Governance Code also recommends that the company’s remuneration policy as well as the remuneration of all the directors should be disclosed in the annual reports of the company.

A company has a separate legal personality from its shareholders and the shareholders’ liability to the company is generally limited to any amount unpaid on their shares. The relationship between the company and its shareholders is a binding contractual one governed by the articles of association of the company, whereby they agree to observe the provisions of the memorandum and articles of the company.

The shareholders are given a right of participation in the company rather than a direct interest in the assets of the company, and are entitled to dividends from the distributable profit of the company in the proportion of their shareholding. Upon winding up, the shareholders are also entitled to the surplus assets of the company after the company’s creditors have been fully paid.

Sometimes, shareholders may enter into shareholder agreements with themselves and the company, outside the articles of association. A shareholder’s agreement confers privacy as the articles of association are required to be filed at the Corporate Affairs Commission.

Unless otherwise provided in the company’s articles of association, the business of the company is directed and managed by the board of directors who exercise all the powers of the company that are not legally reserved to the shareholders. 

Certain powers that are exercisable only by shareholders in a general meeting include the adoption of audited accounts, the ratification of the appointment of directors and the approval of a major asset transaction valued at 50% or more of the value of the company.

Shareholders have a right to attend general meetings and to require directors to call a general meeting to direct the board or management to take certain decisions if they hold more than one tenth of the paid-up capital of the company or total voting rights, stating the purpose of the meeting.

Save for small companies or companies having a single shareholder, the board is required to hold a general meeting annually in addition to any other meeting in that year. Not more than 15 months shall elapse between one annual general meeting and the next.

Written notice of the meeting must be given to each shareholder, director and auditor at least 21 days before the meeting, unless a majority shareholder holding not less than 95% in nominal value of the shares with a right to attend and vote agrees to a shorter notice. No business may be transacted at any general meeting unless notice of it has been given. Such notice must contain the place, date and time of the meeting as well as the general nature of the business to be transacted to enable the recipients to decide whether their attendance is necessary. Where any special resolution is to be submitted to the meeting, the text of that resolution must be included in the notice.

Shareholder meetings other than an annual general meeting are extraordinary general meetings, and they can be convened with 21 days’ notice whenever the company sees fit.

The default method for voting on a resolution is by a show of hands and shareholders’ votes for or against each resolution are counted. Alternatively, a poll may be required to be conducted by the chairman – at least three shareholders, or shareholders together holding 10% of the votes, in which case votes must be counted according to the number of votes attached to the shares held by the relevant shareholders.

Before the passage of the Companies Act 2020, all general meetings were held physically in Nigeria. Now, companies are allowed to convene shareholders’ meetings electronically. Companies have also taken the opportunity to amend their articles of association to incorporate provisions on electronic meetings.

Shareholders may institute legal proceedings in the name and on behalf of the company based on a director’s action (or inaction) involving negligence, default, or breach of duty, if it is in the best interests of the company.

Proceedings may also be brought against the company or directors on the grounds that the affairs of the company are being run in an illegal, oppressive, unfairly prejudicial, or unfairly discriminatory manner, or with disregard to the interest of a shareholder or shareholders.

By virtue of the Companies Act, a shareholder who possesses, either directly or through a nominee, shares in a public company that entitles the shareholder to exercise 5% of the unrestricted voting rights at any general meeting is considered a substantial shareholder and must notify the company of his or her interest within 14 days after that person becomes aware that he is a substantial shareholder.

Within 14 days of receipt of the notice or of becoming aware that a person is a substantial shareholder, the company must give notice in writing to the Corporate Affairs Commission. The duty also arises where the person ceases to be a substantial shareholder.

The Rules of the Securities and Exchange Commission require registrars to file information on beneficial owners of 5% or more of a public company’s shares with the Securities and Exchange Commission, the company and a securities exchange annually. Any changes to this information are required to be filed within five days. 

Under the Companies Act, companies are required to publish their financial statements, including the directors’ report and auditor’s report, and deliver them to the Corporate Affairs Commission annually, except where the requirement is dispensed with by law. For companies that qualify as small under the Companies Act, the directors may deliver modified financial statements instead.

The Companies Act sets out the matters the annual report should deal with. They include any significant change in the assets of the company, directors’ interests, important events affecting the company, likely future developments of the business, charitable gifts, employee engagement and training.

The Listing Rules require listed companies to announce their financial statements for the full financial year immediately after the figures are available and not later than 90 days after the relevant financial period. The annual financial report must also be available to the public for at least five years. They must also announce the financial statements for each of the first three quarters of their financial year immediately after the figures are available, and not later than 30 days after the relevant financial period.

Under the SEC Rules, all listed companies must also release their earnings forecast 20 days prior to the commencement of a quarter. The chief executive officer and the chief financial officer must swear to an affidavit of correctness of the information disclosed in the annual report, accounts, and periodic financial reports released to the public.

Public companies are required by the SEC Rules to publish their quarterly financial statements in at least one newspaper and on the company’s website. In addition, the Governance Code recommends a full and comprehensive disclosure of all matters that are material to investors and stakeholders as good corporate governance practice.

See 4.11 Disclosure of Payments to Directors/Officers for disclosure requirements relating to directors’ remuneration, and 6.2 Disclosure of Corporate Governance Arrangements for disclosure requirements on corporate governance.

The FRCN requires all public companies, their holding companies (private or public) and regulated entities to comply with the Governance Code and to report annually on how they have applied its principles. Companies are required to apply all principles of the Governance Code and also explain how the principles were applied.

The FRCN’s reporting template sets out the information required to be provided in the corporate governance report, which includes matters relating to the board of directors, risk management, shareholder engagement, business ethics, sustainability, and transparency. The SEC Rules also require the board of a public company to comply with the Governance Code, and to ensure that the company’s annual report includes a corporate governance report that conveys clear information on the strength of the company’s governance structures, policies and practices to stakeholders. The report should include information relating to the composition and responsibilities of the board and committees, the company’s code of business conduct and its sustainability policies. See 1.3Corporate Governance Requirements for Companies with Publicly Traded Shares for corporate governance disclosure requirements for listed companies.

A company is required to notify the Companies Affairs Commission when there are any key changes to its particulars, such as change in the registered office, shareholding and directorship. It must also file annual returns along with audited financial statements and file all special resolutions within 15 days of passing them. All documents filed at the Commission are available to the public. Apart from the penalties that may be prescribed by the Commission for failure to make the necessary filings as and when due, failure to file annual returns for a consecutive period of ten years is a ground for striking the name of a company off the companies’ register at the Commission.

Every company is required to appoint an external auditor to audit the financial statements of the company. However, companies that have not carried on any business since incorporation, and small companies, are exempt from this requirement. A private company qualifies as a small company in a financial year if:

• its turnover is not more than NGN25 million;
• its net assets value is not more than half the value of the prescribed turnover;
• one of its members is an alien;
• none of its members is a government, government corporation or agency or its nominee; and
• the directors hold between themselves at least 51% of its equity share capital of the company.

Directors of a company are statutorily required to lay the audited financial statements before the shareholders at the general meeting and certify the accuracy of the financial statements. The auditors are also expected to confirm whether proper books of accounts were kept by the company and report on the correctness of the information provided in the directors’ report.

The additional requirements that govern the relationship between the company and the auditor under the Governance Code include:

• mandatory rotation of external auditors after a period of ten years for regulated companies;
• the requirement to appoint persons who are qualified under the Companies Act as auditors, eg, an employee of the company may not be appointed as an external auditor – the qualifications are generally structured to avoid conflict of interests;
• the right of an external auditor to receive notices of general meetings and attend such meetings; and
• an auditor is precluded from providing non-audit services except where any other services offered by the auditor have been approved by the board in accordance with international auditing standards.

The Governance Code requires boards of regulated companies to establish a sound framework for managing risk and ensuring an effective internal control system for their companies. It recommends setting up a risk management committee where non-executive directors constitute the majority of the committee. It also recommends the appointment of an independent reviewer to assess the effectiveness of the internal audit function at least once every three years.

The Companies Act mandates the chief executive officer and the chief financial officer of a company to certify that the company has internal controls that have been established, maintained and effected as of the date the financial statements were signed off. It is also mandatory for the statutory audit committee of a public company to constantly monitor and review the effectiveness of the company’s system of accounting and internal control, and to authorise the internal auditor to conduct any necessary investigations.

All public companies are required by the SEC Rules to establish a risk management committee to assist in their oversight of the risk profile, risk management framework and risk reward strategy as determined by the board.