The Companies and Allied Matters Act (CAMA) is the primary law that regulates the activities

of companies in Nigeria. Because of how obsolete the 1990 law was, there was need to amend it
to meet the current regulation needs of affairs of companies, incorporated trustees, partnership
and business organizations in Nigeria. This lead to the enactment of Companies and Allied
Matters Act on the 7th of August 2020. This new act repealed the CAMA 1990. Following the
repeal of CAMA 1990 by CAMA 2020, significant changes were made to both the Corporate
Affairs Commission’s (“CAC”) and company administration in Nigeria. From the process of
incorporation, to the companies’ post-incorporation affairs to suit the current demand in the
formation and administration of business and non-business organization. Significant changes
were made by the Act in the area of corporate governance. CAMA 2020, has made intentional
efforts to see to the efficient, accountable and transparent management of companies in Nigeria.
This can be seen in the areas of directors, secretaries, audit and auditors, meetings, corporate
finance. The following sections are to be considered.

Pursuant to section 272-273, shareholders in a general meeting have the power to appoint or
remove directors by a resolution passed by a simple majority of votes cast in person or by proxy.
Though the board of directors of a company is empowered to appoint new directors to fill casual
vacancies created by death, resignation, retirement or removal, such appointments are, however,
subject to ratification by the shareholders in a general meeting. 1 Generally, unless the articles of
association provide otherwise, the directors, when acting within the powers conferred upon them
by CAMA or the articles, are not bound to obey the directions or instructions of the shareholders
in general meetings provided the directors act in good faith and with due diligence. This
notwithstanding, the shareholders may make recommendations to the board regarding actions to
be taken by the board and may ratify or confirm any action taken by the board.

Directors of public companies are required to disclose not only their age at appointment, 2 but
also previous directorships in other public companies before taking up new appointments. A
person, cannot be a director of more than five public companies at the same time. 3 Upon
nomination as a director, such persons must disclose their existing positions on the board of other
public companies before taking on new appointment,4 and anybody who before the enactment of
1
CAMA 2020 Section 274
2
CAMA 2020 Section 278
3
CAMA Section 307(2)
4
CAMA Section 307
this act was a director in more than five companies, has two years to comply with this provision. 5
Additionally, CAMA 2020, requires public companies to maintain a minimum of three (3)
independent directors at all times.6 While the foregoing is limited to public companies, small
companies are now permitted to have a minimum of one director. 7 A small company being a
private company that has an annual turnover of N120, 000, 000 and net asset value of not more
than N60, 000, 000, with no foreigner as its member and 51% share capital own by the directors. 8
Also, any person, (shareholder) who nominate candidate for the board who would comprise a
majority of the members of the board shall nominate at least three persons who would be
independent directors.9

Although the shareholders in a general meeting are empowered to appoint and remove directors
of the company,10 determine directors’ remuneration,11 appoint auditors and approve their
remuneration,12 alter the company’s share capital, 13 alter the memorandum and articles of
association of the company,14 approve the conversion of the company from a private to a public
company and vice versa,15 and from a limited company to an unlimited company and vice
versa,16 change the company’s name,17 declare a dividend on the recommendation of the board, 18
CAMA in Section 88(5) provides that, subject to the provisions of the articles of association of a
company, there are certain powers of the board that cannot be restricted by the shareholders in a
general meeting. These include powers over the day-to-day running of the company and the
powers of the directors to institute actions on behalf of the company. Where the board fails to
institute or defend an action on behalf of the company when it ought to do so because the board
is itself in the wrong or there is a deadlock on the board, then the shareholders may apply to
court to bring the action on behalf of the company.

5
CAMA 307(2)
6
CAMA 275
7
CAMA 271(1)
8
CAMA 394
9
CAMA 275(2)
10
CAMA 272 & 273
11
CAMA 293
12
CAMA 401 408
13
CAMA 125
14
CAMA 50
15
CAMA 56 & 63
16
CAMA 68 & 75
17
CAMA Section 30
18
CAMA Section 426
Where the articles of association of a company expressly vest the board with certain powers, it is
not bound to obey the instructions of the shareholders, especially when it acts in good faith and
with diligence. In such situations, the shareholders may only amend the articles of association of
the company such that those powers are now made exercisable by the shareholders in a general
meeting and not by the board of directors.

CAMA expressly prohibits disproportionate voting rights and the limitation of voting rights. The
basic rule is ‘one share, one vote’ and no company may by its articles or otherwise authorize the
issue of shares that carry more than one vote in respect of each share or that do not carry any
rights to vote. There are, however, a few exceptions. Preference shareholders, if the articles of
the company so provide, can have more than one vote per share upon consideration of any
resolution; where a dividend on the preference share remains unpaid after the due date of the
dividend; that seeks to vary the rights attached to the preference shares; to appoint or remove an
auditor; and for winding up the company.

Also, any special resolution of a company increasing the number of any class may validly
resolve that any existing class of preference shares carry the right to such votes, in addition to the
one vote per share necessary to preserve the existing ratio that the votes exercisable by the
holders of such preference shares bear to the total votes exercisable at the meeting. The right of
members to vote upon their share may also be limited by the company’s articles until all calls or
other sums payable to the company by them in respect of the shares have been paid.

All shareholders are entitled to attend and vote at the company’s general meeting. It should be
noted, however, that until the name of a person having shares in a company has been entered as a
member in the register of members, which companies are statutorily required to maintain, such
person will not be deemed a member of the company and may therefore not attend meetings of
the company or be allowed to vote at such meetings. The articles of a company may also provide
that members who have not made payments on all calls on their shares shall not be entitled to
attend meetings.

Shareholders of a private company can act by way of written resolution. CAMA provides that a
resolution of the shareholders of a company would be effective only if it is passed at a general
meeting. However, the shareholders of a private company may act by a written resolution signed
by all the shareholders entitled to attend and vote at the general meeting of the company where
the resolution would have been passed.

The duty to call general meetings of shareholders is one held by the board of directors. However,
a shareholder or shareholders representing at least one-tenth of the shareholding (or voting rights
in a company not having share capital) of the company may requisition a general meeting at any
time. Where the board refuses to convene the requisitioned meeting within 21 days, the
requisitionist are authorized to convene the meeting (within three months of the requisition) after
issuing the required notices and any reasonable expenses incurred in relation to the meeting shall
be repaid by the company.

In keeping with contemporary realities imposed by the outbreak of the global pandemic Covid
19, CAMA 2020, now permits the use of electronic means for meeting purposes so far as such
meetings are conducted in accordance with the articles of the company. This is to facilitate
attendance of members in a meeting at minimal cost. However, this concession is limited to
private companies, as all public companies are still required to hold meetings physically. Also,
statutory and annual general must be held in Nigeria.

When a controlling shareholder infringes on the rights of a minority shareholder or commits a

fraud on either the company or the minority shareholder, which the directors fail to redress
(owing to the wrongdoer being in control of the company or otherwise), the non-controlling
shareholder may apply to court for injunctive relief. 19 A shareholder may also bring an
application to the court for relief on the grounds that the actions of the company are being
conducted in an unfairly prejudicial and oppressive or discriminatory manner. 20 Further, a
shareholder may bring a derivative action on behalf of the company where the wrongdoers are in
effective control of the company, the directors refuse to act, the application is brought in good
faith, and it is in the best interest of the company. 21 Evidence that the majority shareholders have
approved any such wrongdoing will not in itself prevent a shareholder from seeking relief from
the courts.

Shareholders are generally not liable for the acts or omissions or debts of the company as the
liability of shareholders is limited to the amounts paid or yet to be paid on their shares. In the
19
CAMA Section 343
20
CAMA Section 354
21
CAMA Section 354
case of an unlimited company, the liability of members for the debts of the company is
unlimited. The company is a separate legal personality from its members. However, the courts
may ‘lift the corporate veil’ where a company is a mere sham or is being used as a tool to
perpetrate illegality.

To further ensure transparency in corporate governance, CAMA 2020 has extended the
requirement to notify the company in writing of significant control or divestment of shares. 22
Previously, this obligation applied only to public companies. This is no longer the case, as
shareholders with a majority stake in any type of company are now required to make such
23
disclosures. A person with significant control means any person who is— (a) directly or
indirectly holding at least 5% of the shares or interest in a company or limited liability
partnership ; (b) directly or indirectly holding at least 5% of the voting rights in a company or
limited liability partnership ; (c) directly or indirectly holding the right to appoint or remove a
majority of the directors or partners in a company or limited liability partnership ; (d) otherwise
having the right to exercise or actually exercising significant influence or control over a company
or limited liability partnership ; or (e) having the right to exercise, or actually exercising
significant influence or control over the activities of a trust or firm whether or not it is a legal
entity, but would itself satisfy any of the first four conditions if it were an individual ;

This above is critical because both private and public companies are required to disclose
significant controlling interests. The term “significant shareholder” as defined in Section 120 (2)
of CAMA, 2020, applies only to public companies. Regardless, it is reasonable to assume that
the same should apply to private businesses. Additionally, CAMA 2020 redefines a shareholder’s
percentage interest in order to qualify as a substantial shareholder if the shareholder holds at least
5% of total voting rights.

In the case of private companies, the transfer of shares is governed by the company’s articles of
association. CAMA 2020, on the other hand, now places some restrictions on the manner in
which shares may be transferred in relation to existing shareholder rights. Although the term
“pre-emptive right of shareholders” is not unfamiliar in Nigeria’s corporate world, it has
frequently been left to a company’s discretion. Progressively, CAMA 2020 now codifies this
right by clarifying that a company may not sell the shares without first offering them to existing
22
CAMA Section 119
23
CAMA Section 868
members in proportion to their existing holdings. This implies that a when a public company
wants to issue shares through public or private placement, it has to conduct a right issue to the
existing shareholders first.24 As a result of the foregoing, existing shareholders are protected from
undue dilution and are given preference over non-members of the company. This safeguards
shareholders against nefarious acquisitions of the company through third party arrangements.
Additionally, to the foregoing, CAMA in section 22 requires a private company to obtain the
consent of all its members prior to making any sale that exceeds 50% of the total value of the
company’s asset.

To strengthen the protection of a company’s minority shareholders, the CAMA 2020 prohibits
private companies from appointing a director to the position of Chairman and Chief Executive
Officer. Similarly, the same person shall not be appointed as Chairman and Chief Executive
Officer in a public company.

Pursuant to Section 404, auditor shall in the case of a public company, make a report to an audit
committee which shall be established by the public company. The audit committee is to consist
of five members comprising of three members and two non-executive directors, the members of
the audit committee are not entitled to remuneration and are subject to election annually. The
audit committee has the mandate of examining the auditors’ report and make recommendations
thereon to the annual general meeting as it may deem fit. All members of the audit committee are
to be financially literate, and at least one member shall be a member of a professional accounting
body in Nigeria established by an Act of the National Assembly. Any member may nominate
another member of the company to the audit committee by giving written notice of such
nomination to the secretary of the company at least 21 days before the annual general meeting
and any nomination not received prior to the meeting as stipulated is invalid.

Section 404(7) outlines the objectives and functions of the audit committee are to— (a) ascertain
whether the accounting and reporting policies of the company are in accordance with legal
requirements and agreed ethical practices ; (b) review the scope and planning of audit
requirements ; (c) review the findings on management matters in conjunction with the external
auditor and departmental responses thereon ; (d) keep under review the effectiveness of the
company’s system of accounting and internal control ; (e) make recommendations to the board

24
CAMA Section 142
with regard to the appointment, removal and remuneration of the external auditors of the
company ; and (f ) authorize the internal auditor to carry out investigations into any activities of
the company which may be of interest or concern to the committee

Over the years, Nigeria made a lot of efforts in ensuring that its corporate governance
mechanisms are in line with international best governance practices, as it is the laws of the
country that determine whether or not foreign capital would flow since foreign investors are not
willing to invest in a country where the legal framework for the protection of investment is weak.

To achieve the above objective in Nigeria, Investment and Securities Act, 2007 (ISA) is one of
the important legislation enacted. It is expected to promote investment and provide protection of
such investment in the Nigerian capital market. Its provisions are mandatory, particularly on
public companies in Nigeria, because, statutory regulations having a touch of command are
expected to receive high degree of compliance than self-regulation.

ISA is the substantive law that governs and regulates the Nigerian capital market. The need to
ensure sound corporate governance principles in Nigeria necessitated the regulation of market to
ensure that the legal framework is put in place to maintain confidence in the system and to
uphold integrity and guarantee a free, fair and transparent market. Usually dealings in company
securities are ordinary business transactions between individuals involved; but the society as well
as the state are interested in ensuring that they are conducted in a fair and transparent manner.

ISA makes it compulsory on the securities exchange or capital trade point to be registered with
the SEC25. It also requires all capital market operators to be registered by SEC 26. The law
therefore saddled the major responsibility on the securities dealer. The fundamental reason
behind the requirement for registration is to enable SEC to regulate, supervise, monitor and
protect the interest of investors.

ISA further states conditions for registration of securities exchanges, capital trade points and
other self-regulatory organizations and equally provides for their roles and powers of SEC to
issue directives to them27. The law further empowers SEC to regulate the activities of capital
25
Section 28 ISA.
26
Section 38 ISA.
27
Sections 29 and 35 ISA.
market operators, which includes requirement by the capital market operators to maintain
accounts and SEC to appoint an officer for the purpose of supervision of capital market
operators28. SEC is further empowered under the law to make routine examination and report on
capital market operators and also make special examination on capital market operators 29.
Section 36 gives SEC the mandate to prohibit trading in particular securities, where it believes it
is important for the protection of the public. This provision appeared to be an improvement upon
the previous provision30 upon which the case of Owena Bank (Nig) Plc v Nigerian Stock
Exchange31 was decided.

2.2 Regulation of Securities

ISA made elaborate provisions regarding regulation of securities markets when it provides under
section 54 for the compulsory registration of securities and investments of public companies with
SEC under terms and conditions contained in the ISA and as they are supplemented by
regulations prescribed by the SEC from time to time. As part of regulation of company’s
securities, ISA provides for filing of annual report and periodic reports with SEC and requires a
public company to establish a system of internal control over its financial reporting and security
of its assets and it shall be the responsibility of the board of directors of a company to ensure the
integrity of the company’s financial control reporting 32. It further requires the board of directors
of a public company to report on the effectiveness of the company’s internal control system in its
annual report. In order to ensure fair and adequate disclose from the auditor’s report of public
companies, ISA requires auditors to public companies to be registered with SEC by section 63,
an auditor of a public company is mandated to provide in his audit report to the company a
statement as to the existence, adequacy and effectiveness or otherwise of the internal control
system of the public company. A listed public company is equally mandated within 20 working
days prior to the commencement of a quarter to disclose to the securities exchange its quarterly
earnings forecast. Internal control refers to ‘policies, procedures and practices put in place by
management to ensure safety of assets, accuracy of financial records and reports, achievement of
28
Sections 39 and 45 ISA.
29
Section 46 and 47 ISA.
30
Section 24 Securities and Exchange Commission Decree No 29, 1988.
31
(1999) 5 SEC Law Report, 1.
32
Sections 60, 61 and 62 ISA.
corporate objectives and compliance with laws and regulations’ 33. Section 65 prescribed
punishments for contravention of sections 60, 61, 62, 63 and 64 for public company and the
auditors.

Another remarkable provision in ISA is section 67 which controls invitations to the public for
public offer and sale of securities. It provides that no person shall make any invitation to the
public to acquire or dispose of any securities of a body corporate or to deposit money with
anybody corporate for a fixed period or payable at call, whether bearing or not bearing interest
unless the body corporate concerned is- (a) a public company, whether quoted or unquoted, and
the provisions of sections 73 to 87 of this Act are duly complied with; or (b) a statutory body or
bank established by or pursuant to an Act of the National Assembly and is empowered to accept
deposits and savings from the public or issue its own securities (as defined under this Act),
promissory notes, bills of exchange and other instruments. This means that a bank which is a
private company can issue shares to the public.

The requirements for the public offer and sale of securities are contained under sections 68 and
69 of ISA. It intends to protect the general public from any form of fraud and misrepresentation
by companies in their dealings with the public.

2.3 Conduct of Securities Business and Trading in Securities

As part of disclosure requirement which concerned with sound corporate governance principles,
ISA prohibits certain cash transaction under section 97. Section 100 requires disclosure of extent
of interest in securities by securities dealer, investment adviser, under writer or an associated
person of a securities dealer, investment adviser or under writer.

To ensure transparent and accountable transactions in securities dealings, ISA made stringent
provisions in relation to fraud and other securities manipulations. Section 105 prohibits false
trading and market rigging transactions while sections 106 and 107 prohibited securities market
manipulation and false or misleading statements in respect of securities transaction. Section 106
provides as follows;

(1) A person shall not effect, take part in, be concerned with or carry out, either directly or
indirectly, two or more transactions in securities of a body corporate being transactions
33
Section 61(3) ISA.
 which have, or are likely to have the effect of raising or lowering the price of securities of
the body corporate on a securities exchange or capital trade point with intent to induce
other persons to purchase, sell or subscribe for securities of the body corporate or of a
related body corporate.

(2) A person shall not effect, take part in, be concerned with or carry out, either directly or
indirectly, two or more transactions in securities of a body corporate, being transactions
which have or are likely to have the effect of maintaining or stabilizing the price of
securities of the body corporate on a securities exchange or capital trade point with intent
to induce other persons to sell, purchase or subscribed for securities of the body corporate
or of a related body corporate.

Sections 108 and 109 ISA prohibited inducing persons to deal in securities of a company
fraudulently and dissemination of illegal information. The provisions in relation to protection of
outsider against the use of insider information to secure undue advantage over him in the
purchase or sale of corporate securities are specifically stated under section 111 ISA.

insider" means- (a) any person who is or is connected with the company in one or more of the
following capacities- (i) a director of the company or a related company;

(ii) an officer of the company or a related company;

(iii) an employer of the company or a related company;

(iv) an employee of the company, involved in a professional or business relationship to the

company;

(v) any shareholder of the company who owns 5 per cent or more of any class of securities or
any person who is or can be deemed to have any relationship with the company or member;

(vi) members of audit committee of a company; and

(b) any of the persons listed in paragraph (a), who by virtue of having been connected with any
such person or connected with the company in any other way, possesses unpublished price
sensitive information in relation to the securities of the company.
unpublished price sensitive information in relation to any securities of a company is a reference
to information which-

(i) relates to specific matters relating or of concern (directly or indirectly) to that

company, that is, is not of a general nature relating or of concern to that company;
and 145
(ii) (ii) is not generally known to those persons who are accustomed to or would be likely
to deal in those securities but which would, if it were generally known to them be
likely materially to affect the price of those securities; "insider dealing" includes
insider trading and occurs when a person or group of persons who being in possession
of some confidential and price sensitive information not generally available to the
public, utilizes such information to buy or sell securities for the benefit of himself,
itself or any person;

Section 112 of ISA lays down broad parameter for determining an insider of a company. It
further prohibited abuse of information obtained in official capacity and section 113 specifically
mentioned actions that are not within purview of section 111 of ISA. Any person who
contravenes sections 111 or 112 commits an offence and is liable on conviction of fine of
N500,000.00 or amount equivalent to double the amount of profit derived by him or loss averted
by the use of information obtained in contravention of the sections, or to imprisonment for a term
nor exceeding seven years for the body corporate, to a fine not less than N1,000,000.00 or
amount equivalent to twice the amount of profit derived by it or loss averted by the use of the
information obtained in contravention of any part of sections 111 of 112 of ISA.

Part XII of ISA regulates issues mergers, take-overs and acquisitions and Section 118 ISA
required every merger, acquisition on or business combination between or among companies
shall be duly registered with SEC subject to prior review by same. The regulation of mergers,
take-overs and acquisition by ISA is largely to prevent a situation where such arrangements will
directly or by implication the entirety or any part of the assets of another company it is likely to
cause substantial restraints of competition or tend to create a monopoly in any part of business
enterprise.34 Also, to avoid a situation of the use of such shares by of a company by voting or

34
Section 121 ISA.
granting of proxies or otherwise which could cause a substantial restrain of competition on or,
tend to establish a monopoly in any part of business enterprise35.

ISA further regulates collective investment scheme as provided for under section 153 and the
principles for administration of the scheme are stated under section 155 and before any
transaction of the collective investment scheme, section 156 requires disclosure of information to
the investor by the manager about the investment objectives of the scheme, the calculation of the
net asset value and dealing price, charge, risk factor and distribution of income accruals. The
authorization of collective investment scheme, requirements for administration, registration and
revocation of authorization are regulated by SEC. 36 SEC has power to object to publication of or
distributions of misleading, objectionable documents and to request for audit of collective
investment scheme and to also declare certain practices as irregular and undesirable. 37

ISA made provision for the protection of whistle blowers in the activities of companies in
Nigeria when it placed obligation on employees of a capital market operator or public company
to disclose information connected with activities of their work place which tend to show that a
criminal offence has been, is being or is likely to be committed. That a person has failed, is
failing, is likely to fail or otherwise omitted to comply with any legal obligation to which he is
subject.38 The importance of this section is to prevent the whistle blowers from persecution of
their employers and to the law with relevant information to act within reasonable in order to
protect the interest of the investors and public interest as well.

In 2019, the Financial Reporting Council of Nigeria ("FRCN") revolutionized the scenery of
corporate governance in Nigeria with the introduction of the Nigerian Code of Corporate
Governance 2018 ("NCCG 2018") as the single Corporate Governance Code for Nigeria. The
NCCG 2018 replaced all preceding sectoral codes, including the CBN's Code of Corporate
Governance for Banks and Discount Houses, issued in 2014. In view of the pronouncement of
the FRCN permitting sector regulators to issue sector-specific guidelines on corporate
governance for institutions under their regulatory purview, the CBN adapted the principles and
recommended practices of the NCCG 2018, global best practices and previously issued codes,

35
Ibid.
36
Sections 160, 161 and 163 ISA.
37
Sections 175, 176 and 177 ISA.
38
Section 306 ISA.
circulars, and directives of the CBN, pursuant to the provisions of Section 2(d) of the CBN Act
2007, and Sections 56(2) and 67(1) of the Banks and Other Financial Institutions Act (BOFIA
2020 and issued a Circular with respect to the Corporate Governance Guidelines for
Commercial, Merchant, Non-Interest, and Payment Service Banks in Nigeria, as well as
the Corporate Governance Guidelines for Financial Holding Companies in Nigeria ("the
Guidelines"), on the 13th of July, 2023, with an effective date of 1st August 2023.

a. provides additional guidance on the Principles, Recommended Practices and Responsibilities

contained in NCCG 2018;

b. outline industry-specific corporate governance standards for banks; and

c. promote high ethical standards amongst operators, whilst enhancing public confidence.

The Corporate Governance Principles in The New Guidelines

1. Board Structure and Composition1

a. Number of Directors: The Guidelines mandates that the procedure for appointment to the
Board shall be formal, transparent, and documented in the Board Charter. Also, members of the
Board shall be appointed by the shareholders of the bank and approved by the CBN. 39 Under the
new Guidelines, Commercial, Merchant and Non-Interest Banks (CMNIBs) are required to
maintain a minimum of seven (7) Directors and maximum of fifteen (15) Directors, while
Payment Service Banks (PSB) must have a minimum of seven (7) Directors and a maximum of
thirteen (13) Directors.40 This is a complete deviation from the stipulation of the NCCG 2018
which provided for a minimum of five (5) Directors and a maximum of twenty (20) Directors.
With respect to any of the Banks that is a subsidiary of a Financial Holding Company ("FHC"),
the subsidiary's representation on the FHC's board and the FHC's representation on the
subsidiary's board cannot exceed thirty percent. 41 In addition, no director of a bank can serve on
the board of more than two institutions within a FHC or group structure. 42 Prospective and
current directors on the Board of a bank are required to disclose potential and existing board
memberships on boards of other organisations, as applicable, subject to CBN’s approval.43
39
1.2
40
CBN Guidelines Section 1.3
41
1.15
42
1.16
43
1.14
b. Composition of the Board: Similar to the NCCG 2018, the Board is to comprise both
Executive Directors and Non-Executive Directors ("NEDs"), with NEDs being the majority on
the Board and Committees.44 The requirement for Independent Non-Executive Directors (INED)
on the Board of Commercial Banks with international and national authorization, Merchant
Banks and Non-interest Banks with national authorization has been increased from the minimum
of two (2) to three (3) while PSBs, commercial banks with regional authorization and Non-
Interest Banks with regional authorization must have a minimum of two (2) INEDs. 45 At least
two NEDs, one of which must be an INED, should have requisite knowledge and experience in
Innovative Financial Technology, Information Communication Technology ("ICT"), and/or
Cyber Security.46

Pursuant to Section 1.6, for publicly listed banks, the provisions of Companies and Allied
Matters Act (CAMA) 2020, on the number of INEDs shall apply. Thus, the requirement for two
or three INEDs does not apply to Banks that are publicly listed companies, as the Companies and
Allied Matters Act 2020 (as amended by the Business Facilitation Act 2023) requires public
companies to have INEDs that constitute at least one-third of the total number of directors. 47

c. Gender Diversity/Inclusion: In achieving gender diversity and promoting gender inclusion on

the Board, Banks are required to adopt a practical approach towards women empowerment in
accordance with Principle 4 of the Nigerian Sustainable Banking Principles.48

d. Limitation on Participation of Extended Family: A Bank can appoint a maximum of two

members of the same extended family on its Board. 49 This is a complete departure from the
NCCG 2018, which states that an INED shall not be a close family member of the company's
directors. In addition, only one member from an extended family can occupy the positions of
Managing Director/Chief Executive Officer (MD/CEO), Chairman, or Executive Director at any
given time.50

44
1.4
45
1.5
46
1.7
47
CAMA 2020 Section 275 as amended by BFA 2022 Section 9
48
1.9
49
1.12
50
1.13
e. Separation of Roles: The Guidelines state that the position of an Executive Chairman or Vice
Chairman will not be recognized in the board structure of Banks.51 This provision aims to ensure
separation of responsibilities and oversight. The same applies to the position of Vice Chairman
or Deputy Managing Director in the case of FHCs. Also, a member of a NIB's advisory
committee of experts or the financial regulation advisory council of experts shall not be a
member of the Board, senior management and/or staff of any Non-Interest Financial Institutions
under the regulatory purview of the CBN52

f. Notice upon Resignation: In Section 1.1.8, Directors resigning from the Board must submit a
written notice of resignation to the Board Chairman at least ninety (90) days before the effective
date of resignation. In the event that the resigning Director is an INED, and such resignation will
result in non-compliance with the requirement on minimum number of INEDs on the Board, the
Board shall ensure that a replacement is appointed within the ninety (90) days' notice period.
Also, where the resignation of a NED would result in majority of the Board being Executive
Directors, the Board shall ensure a replacement is appointed within the ninety (90) days' notice
period.

A Director resigning from the Board due to unresolved concerns pertaining to the operations of
the Bank is expected to submit a written statement to the Board Chairman for circulation to the
Directors of the Bank and a copy of the written statement must be forwarded to the CBN within
seven days (7) of the notice of resignation.53 In the case of the Board Chairman's resignation, a
written notice must be submitted to the Chairman, Board Nomination and Governance
Committee (BNGC), who shall circulate the notice to the Board members and the CBN within
seven days of receipt of the notice.54

2. BOARD ROLES AND RESPONSIBILITES55

The new Guidelines provide for additional roles and responsibilities of the Board. First, the
Board and Board Committees are mandated to draft a Charter, and such document must be
submitted to CBN for approval. These Charters are to be reviewed at least once every 3 (three)

51
1.17
52
1.23
53
Section 1.20
54
1.22
55
Section 2
years, following which the Board-approved copies must be submitted to the CBN for its "No
Objection" within 30 (thirty) days of the Board's approval of same and prior to its
implementation. Secondly, the Board shall ensure a review of the investment policies and
strategies of the bank at least once every three years and submit a copy to the Director of the
Banking Supervision Department of the CBN. Thirdly, the Board shall supervise the bank's
policies and procedures related to Anti-Money Laundering/Combating the Financing of
Terrorism and Countering Proliferation Financing and approve an Enterprise Risk Management
(ERM) Framework and Information Technology Framework for the bank including a Business
Continuity plan.

The Guidelines now requires the Board to designate one of its Executive Directors as the
Executive Compliance Officer (ECO) and CBN must be notified of such appointment.

3. OFFICERS OF THE BOARD

a. Chairman:56 The Guidelines require the Chairman to hold a formal meeting with the NEDs
once a year. If the Bank is a member of a FHC, the Chairman of the Bank cannot serve on the
FHC's Board and the Chairman of the FHC's Board cannot also serve on the Bank's Board.

b. Tenure of Directors: The MD/CEO and Deputy Managing Director/Executive Director's

tenure shall be governed by the terms of engagement with the bank; however, their tenure shall
be subject to a maximum period of 12 (twelve) years. 57 NEDs shall serve for a maximum period
of 12 (twelve) years, comprising 3 (three) terms of 4 (four) years each. 58 The tenure of INEDs
shall be a maximum of 2 (two) terms of 4 (four) years each. It is important to note that the
previous code was silent on the tenure for INEDs.59

The new Guidelines also provides for a cumulative tenure of 12 (twelve) years for ED's and
prohibits the extension of such tenure where an ED becomes a DMD. However, where a
DMD/ED becomes an MD/CEO of the same bank, the new Guidelines permit a cumulative
period of 24 (twenty-four) years from the date of first appointment to the bank's board.60

56
Section 3.1
57
Section 3.2
58
Section 3.3
59
Section 3.4
60
Section 3.3.3
c. Company Secretary:61 The new Guidelines prohibit outsourcing of the Company Secretarial.
It further makes it mandatory for CMNIBs to obtain CBN's approval where the role of the
Company Secretary is to be combined with that of the Head Legal/Legal Adviser. However, for
PSBs, the role of Company Secretary can be combined with Head Legal/Legal Adviser. In
addition, the Company Secretary shall report directly to the Board and have an indirect reporting
line to the MD/CEO.

4. BOARD AND COMMITTEE MEETINGS

The new Guidelines provide that the Board and its Committees must meet at least once every
quarter.62 However, where the Remuneration Committee is a stand-alone committee, meetings
should be on a need basis, but at least once a year. 63 In the case of an NIB, the Board is mandated
to meet with the Advisory Committee of Experts (ACE) at least once every quarter. 64

The new Guidelines also introduced the option to convene virtual Board & Committee meetings
if physical meetings cannot be held, and quorum for meetings shall be two-thirds of members,
majority of whom shall be NEDS.

5. BOARD COMMITTEES9

The new Guidelines provide that the membership of Board committees shall be reviewed and
refreshed at least once every three years and that all Board committees shall be chaired by
INEDs except the Board Audit Committee (BAC), Board Nomination & Governance Committee
(BNGC) and the Board Remuneration Committee (BRC) which must be chaired by Independent
Non-Executive Directors.

The Chairman of the BNGC in NIBs must be knowledgeable and experienced in Islamic Finance
or Islamic Commercial Jurisprudence. It is also mandatory for the Board of any CMNIB to
establish a Board Credit Committee (BCC) to oversee its credit matters. For the PSBs, it is
mandatory for its Board to establish a Board Committee responsible for Information &
Communication Technology (ICT) and Cybersecurity. The Guidelines prohibit the establishment
of sub-committees of Board Committees.

61
Section 3.6
62
Section 5.1
63
Section 5.2
64
Section 5.3
The BAC shall consist of NEDs only while the Board Risk Management Committee shall be
chaired by a NED and its composition shall include at least two NEDs and the ED in charge of
risk management.

6. COOL-OFF PERIOD

Any Executive Director who leaves a Bank's Board shall serve out a cooling period of two years
before being considered for a NED role in the same bank. 65 A NED that leaves office must also
wait for two years before being considered for an executive role in the same bank. 66 A cooling-
off period of two years applies when an Executive Director is appointed to the Board of the
Bank's FHC.67 Any member of the Financial Regulation Advisory Council of Experts (FRACE)
that leaves office must wait for three years before becoming eligible for appointment as a
director or member of an ACE in any NIFI supervised by the CBN.

A bank's auditors can serve up to ten consecutive years, subject to the rotation of audit
engagement partners once every five years. A cooling-off period of ten years is required before
an audit firm is eligible to be reappointed by the same bank. Lastly, the Governor and Deputy
Governors of the CBN, the MD/CEO and Executive Directors of the Nigeria Deposit Insurance
Corporation ("NDIC") and the departmental directors of the CBN and the NDIC must observe a
cooling-off period prescribed by their respective governing board before being eligible for any
appointment in a bank.68

8. COMPLIANCE FUNCTION

In line with the CBN's desire to ensure strict compliance with laws and regulations, the
Guidelines require Banks to have an Executive Compliance Officer ("ECO") who cannot
combine his/her duties of communicating regulatory requirements to the appropriate parties and
reporting any violations to the Board with any income-generating activity. 69 The ECO shall
primarily be responsible for: cascading regulatory requirements and expectations (including
accountability and responsibility) along control and operational functions such as audit, risk

65
Section 7.1
66
Section 7.2
67
Section 7.2
68
Section 7.1.2
69
Section 15.1
management finance, foreign exchange transactions, AML/CFT/CPF, IT and cyber-security etc.
The ECO is also responsible for presenting to the Board all regulatory infractions and concerns. 70

Furthermore, all Banks are required to have a Chief Compliance Officer ("CCO") who holds a
position not less than that of a General Manager (for Commercial and NIBs with national and
international authorization) or an Assistant General Manager (for Merchant Banks, Commercial
and NIBs with regional authorization).71 The CCO is responsible for monitoring and coordinating
the implementation of regulatory requirements and reports to the Board through the ECO. 72

9. TREATMENT OF SHAREHOLDERS14

The Guidelines also regulate the ownership and acquisition of shares in Banks. No individual,
group, proxy, or corporate entity can own a controlling interest in more than one bank without
the prior approval of the CBN.73 Before acquiring shares in a bank that will result in a five
percent or higher equity holding, investors must obtain CBN's prior approval and No Objection. 74
If the CBN objects to the acquisition, the bank must notify the investor(s) within forty-eight
hours of receiving the objection.75 Any government's equity holding in a Bank, whether direct or
indirect, must not exceed ten per cent and should be divested to private investors within a
maximum of five years from the date of investment. Existing investments beyond five years
must comply with this requirement within two years from the Effective Date of the Guidelines. 76

70
Section 15.2
71
Section 15.3
72
Section 15.4
73
Section 20(2)
74
Ibid.
75
Ibid.
76
Ibid.