The Financial Reporting Council of Nigeria (FRC) has issued National Codes of Corporate Governance (the Code) for the private sector, public sector and not-for-profit organisations in Nigeria. The Code, which is effective from 17 October 2016, was issued by FRC following a Federal High Court ruling that FRC has the powers to issue the Codes.
The Codes are aimed at enhancing management credibility, preserving long-term investments, improving access to new capital and lowering cost of capital. The Codes will also help to drive increased transparency and accountability in financial reporting through enhanced disclosures in financial statements thereby supporting investment decisions and shareholders’ value.
Highlights of the three components of the Codes are:
- The Code of Corporate Governance for the Private Sector – Compliance with this Code is mandatory for:
- all public companies (whether listed or not)
- all private companies that are holding companies or subsidiaries of public companies
- private companies that file returns to any regulatory authority other than the Federal Inland Revenue Service and the Corporate Affairs Commission
Compliance is however not mandatory for companies with eight (8) or less employees, regardless of status of such companies.
2. The Code of Governance for Not-for-Profit Sector – Not-for-profits organizations are encouraged to comply with the provisions of the Code. Where they do not comply, they are required to justify the reason for non-compliance.
3. The Code of Governance for the Public Sector – This Code, though not mandatory at the moment, will be applicable to all public sector entities (government agencies, parastatals, ministries, departments, and state owned entities).
According to FRC, the Code of Governance for the Public Sector will not be effective immediately, until an executive directive is secured from the Federal Government of Nigeria. This is because the enabling laws that set up most government establishments already carry some form of governance structures. Therefore, there may be need for an umbrella legislation which will seek to harmonize the different provisions of those laws and synchronize them with the Code.
Copies of the Code can be viewed and downloaded from the website of FRC and accessible via this link.
It is imperative for all entities to promptly review the Codes and ensure compliance as may be applicable.