2016 icsan mcpe understanding the financial reporting council (frc)

I N S T I T U T E O F C H A R T E R E D S E C R E T A R I E S A N D A D M I N I S T R A T O R S O F N I G E R I A ( I C S A N )

M A N D A T O R Y C O N T I N U I N G P R O F E S S I O N A L E D U C A T I O N ( M C P E )

P R E S E N T E D B Y U T O U K P A N A H F C I S

A U G U S T 3 , 2 0 1 6

Understanding the Financial Reporting Council (FRC) National Code of Corporate Governance

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Financial Reporting Council

• Established pursuant to the Financial Reporting Council (FRC) Act 2011

Vision:

To be the conscience of regulatory assurance in financial reporting and corporate governance in Nigeria

Mission:

To bring utmost confidence to investors, reputation to oversight and ensure quality in accounting, auditing, actuarial, valuation and corporate governance standards and non-financial reporting issues.

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Objects of the Council

The Council’s main objects, as defined in the FRC Act, are to:

protect investors and other stakeholders interest give guidance on issues relating to financial reporting and corporate

governance to professional, institutional and regulatory bodies in Nigeria ensure good corporate governance practices in the public and private

sectors of the Nigerian economy ensure accuracy and reliability of financial reports and corporate

disclosures, pursuant to the various laws and regulations currently inexistence in Nigeria

harmonise activities of relevant professional and regulatory bodies asrelating to corporate governance and financial reporting.

promote the highest standards among auditors and other professionalsengaged in the financial reporting process.

enhance the credibility of financial reporting; and improve the quality of accountancy and audit services, actuarial,

valuation and corporate governance standards.

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Directorates of the Council

Directorate of Accounting Standards – Private Sector

Directorate of Accounting Standards – Public Sector

Directorate of Auditing Practices Standards

Directorate of Actuarial Standards

Directorate of Inspection and Monitoring

Directorate of Valuation Standards

Directorate of Corporate Governance

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Directorate of Corporate Governance

Develop principles and practices of corporate governance

Promote the highest standards of corporate governance andpublic awareness of corporate governance principles andpractices

On behalf of the Council, act as the national coordinating bodyresponsible for all matters pertaining to corporate governance

Promote sound financial reporting and accountability based ontrue and fair financial statements duly audited by competentindependent auditors

Encourage sound systems of internal control to safeguardstakeholders’ investments and assets of Public Interest Entities

Ensure that the Audit Committees of PIEs keep under review thescope of the audit, its cost effectiveness, the independence andobjectivity of the Auditors

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Committee on Corporate Governance

The Committee is responsible for:

• Assessing the need for corporate governance in the public andprivate sectors

• Organising and promote workshops, seminars and trainings incorporate governance issues

• Issuing the code of corporate governance and guidelines anddevelop a mechanism for periodic assessment of the code andguidelines

• Providing assistance and guidance in respect of the adoption orinstitution of the code in order to fulfil its objectives

• Establishing links with regional and international institutionsengaged in promoting corporate governance

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FRC Codes of Corporate Governance

Steering Committee chaired by Mr. Victor Odiase inaugurated inJanuary 2013

The Terms of Reference of the Committee mirror those of theDirectorate of Corporate Governance

The Committee developed drafts of the Codes of Corporate Governancefor the Public, Private and Not for Profit Sector

Respective draft codes reviewed and approved by the FRC Board andexposure drafts issued thereafter

Subsequently public hearings and engagements organized by the FRC

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National Code of Corporate Governance for the Private Sector

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Consists of 11 Parts:

Part A – Preliminary Matters

Part B – Application of the Code

Part C – Board of Directors

Part D – Risk Management and Audit

Part E – Relations with Shareholders

Part F – Minority Shareholder Protection

Part G –Relations with other Stakeholders

Part H –Transparency

Part I – Code of Business Conduct and Ethics

Part J – Enforcement

Part K – Miscellaneous

Part A – Preliminary Matters

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Provides background to the Committee’s work

Sets out the Committee’s Terms of Reference

Harmonization of identifiable sectoral codes:

Code of Corporate Governance for Banks in Nigeria Post-Consolidation2006

Code of Corporate Governance for Licensed Pensions Operators 2008

Code of Corporate Governance for Insurance Industry in Nigeria 2009

SEC Code of Corporate Governance in Nigeria 2011 (acknowledged the2003 SEC Code)

Exposure Draft of the Revised Code of Corporate Governance for Banksin Nigeria 2012 CBN Code of Corporate Governance for Banks andDiscount Houses 2014

Part A - Preliminary Matters (contd.)

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The Nigerian corporate governance system is predicated on widedispersal having adopted unitary board structure in which thedominant conflicts are between the shareholders and managers.

The Nigeria investment environment is however replete withownership concentration, in which the dominant conflicts areusually between the controlling shareholders and minorities,

This has created a mismatch between the country’s ownershipstructure and its governance system.

The Code has governance safeguards that are more country-specific, contextual and environmentally congruent, while at thesame time conforming to international best practices

Part B – Application of the Code

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The Code of Corporate Governance for the private sector shall be applicable to the following:

All public companies (whether listed or not)

All private companies that are holding companies or subsidiaries of public companies

All regulated private companies (RPCs)

Compliance with the code is mandatory

Part C - Board of Directors

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The main purpose of the board is to provide entrepreneurial,strategic and ethical leadership to a company. The board shall:

Exercise leadership, enterprise, integrity and judgment indirecting the company so as to achieve continuing survivaland prosperity of the company

Every board shall have a Charter setting out its responsibilities

Ensure the establishment of a succession plan, appointment, training and remuneration for both the board and senior management of the company

Set the company's values and standards (including ethical standards)

be responsible for Information Technology governance.

Part C - Board of Directors (contd.)

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Board Structure and Composition

• Sufficient board size as well as diversity of experience and gender

• Minimum board size of 8 members (except for RPCs that are not holding companies or subsidiaries of public companies which can have 5 Directors of which 3 must be NEDs and majority INEDs)

• Independent Non Executive Directors (INEDs) to appoint a lead INED

• Separation of the role of CEO and Chairman

• Discourages cross-memberships on the boards of two or more companies (unless within a group). The board should disallow it where this will lead to a conflict of interest situation among competing companies

Part C - Board of Directors (contd.)14

Concurrent directorships are permitted so long as it does not

interfere with the individual’s ability to discharge his responsibilities.

In assessing their suitability for appointment as a director, the board and shareholders are required to carefully consider each director’s other obligations and commitments

Disclosures required regarding other board appointments

Not more than two members of the same or extended family shall sit on the board of the same company at the same time

Companies required to establish a policy on diversity and disclose the policy or a summary of that policy

Officers of the Board (contd.)15

The Chairman:• Responsible for ensuring effective operation of the board, cohesion

towards achieving the company’s strategic objectives• A former MD/CEO shall not go on to be the chairman of the same

company. If in very exceptional circumstances the board decides that a former MD/CEO shall become chairman, the cool off period shall be 7 years

• Both majority and minority shareholders must be consulted in advance• The regulator must be informed of the appointment and the reasons for

the appointment• Chairman to meet with NEDs without Executives present• INEDs may meet without the Chairman present at least annually• Chairman’s role articulated in 6.1.6 - 6.1.8• Chairman should not sit on any board Committee except for RPCs

where the Chairman can sit on the nomination & governance committee and remuneration committee but cannot be chair them


The Lead Independent Non Executive Director (LINED):

• Appointed by INEDs

• Presides at the exclusive meetings of non-executive directors and separate meetings of independent non-executive director

• To serve as intermediary for shareholders if they have concerns which contact through the normal channels has failed to resolve or for which such contact is inappropriate

Officers of the Board (contd.)

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Managing Director/Chief Executive Officer

• Leads the Management team and reports to the Board

• Responsible for the day to day running of the company

• A person knowledgeable in relevant areas of the company’s activities; demonstrate industry, credibility and integrity

• Has the confidence of the board and management

• Shall not be the only ED on the board

• The authority of the MD/CEO and the relationship with the board must be clearly and adequately described in a letter of appointment

• The board may delegate its powers to the MD/CEO as it deems appropriate

• The CEO’s remuneration is determined by the remuneration committee and may include long term performance incentives, stock options and bonuses


Company Secretary (CS):

• A person with relevant qualification and competence necessary to effectively discharge the duties of the office as articulated in S 298 of CAMA

• Appointed through a rigorous selection process similar to that of new directors

• Has the primary duty of assisting the board and management in implementing the code and developing good corporate governance practices and culture

• CS must be properly empowered by the board to discharge duties and responsibilities

• Functional reporting line is through the Chairman to the Board

• Reports administratively to the MD/CEO

• Appointment and termination of the CS are matters for the board


In addition to statutory functions, CS’s duties include:

Provide the board and directors individually, with detailed guidance on how to properly discharged their responsibilities in the best interest of the company

Coordinate the orientation and training of new directors Assist the chairman and MD/CEO in coordinating activities regarding

the annual board plan and with the administration of other strategic issues at the board level

Compilation of board papers and ensuring that the board’s discussions and decisions are clearly and properly recorded and communicated to the relevant persons

Notify board members of matters that warrant their attention Provide a central source of guidance and advice to the board and the

company, on matters of ethics, conflict of interest and good corporate governance


Executive Directors

• Persons knowledgeable in relevant areas of the company’s activities especially those relating to their specific functions

• Involved in the day-to-day operations and management

• Answerable to the board through the MD/CEO

• Not to be involved in the determination of their remuneration

• Level of remuneration should attract, retain and motivate directors of the quality required to run the company successfully

• No sitting allowance or directors fees should be paid to EDs

• Permitted to take up NED role in other companies

• Prohibited from more than 1 NED role or chairmanship in a company unless those companies are part of a group in which he is ED

• Excluded from membership of nomination and governance committee, remuneration committee or audit committee (statutory or board)


Non Executive Directors (NEDs)

• Appointed on the basis of their wide experience, specialist knowledge and personal qualities

• Responsible for the performance evaluation of the MD/CEO and Chairman (led by an INED)

Have unfettered access to EDs, CS and the Internal Auditor, while access to other senior management is through the MD/CEO

Entitled to sitting allowances, directors’ fees and reimbursable travel and hotel expenses. All payments to be disclosed in the Annual Report

Should be provided with appropriate facilities and administrative support for the effective discharge of their duties

Entitled to adequate and comprehensive information on all board matters in a timely manner


Independent Non-Executive Directors • Required to be independent in character and judgment; free from such

relationships or circumstances that will impair his ability to make independent judgment

• Is not a substantial shareholder i.e. directly or indirectly holdings does not exceed 0.1% of the company’s paid up capital

• Must not be the nominee of a substantial shareholder • Is not a representative of a shareholder that has the ability to control or

significantly influence Management • Has not been an employee of the company or group within the last five

years• Does not render any professional, consultancy, or other advisory services to

the company or the group, other than in a capacity of a director• Has not served on the board for more than nine years from the date of his

first election• Annual meeting of only independent non-executive directors • INEDs are required to annually declare their continuing independence


Independent Non-Executive Directors (contd)

• Is not an extended family member of any of the company’s advisers,directors, senior employees, consultants, auditors, creditors, suppliers,customers or substantial shareholder

Does not have, and has not had within the last five years, a materialbusiness relationship with the company either directly, or as a partner,shareholder, director or senior employee of a body that has, or has had,such a relationship with the company

Does not hold cross-directorships or significant links with other directorsthrough involvement in other companies or bodies

An INED may seek and obtain request the company to provide them withexternal professional advice

The reclassification of an existing non-executive director into anindependent non-executive director is not permitted

An INED who resigns before the expiration of his term, must disclose to theappropriate regulator(s) the reasons for such resignation

Meetings of the Board 24

The board shall meet at least once every quarter

Each director required to attend at least two-thirds of all board meetings.

Attendance record shall be among the criteria for the re-nomination of a director by the board except where there are cogent reasons which the board must notify the shareholders of, at the AGM

Where a majority of independent non-executive directors dissent on an issue decided by the board, such decision can only be valid where at least 75% of the full board (without

reference to quorum) vote in favour of such decision.

Board Committees25

The number and composition of committees to be determined by the Board

Membership to be reviewed and reconstituted every 3 years

A Charter should be approved for each committee setting out the terms of reference and composition

Boards of regulated private companies may merge any of the committees subject to adequate board oversight and regulatory concurrence

Where there is a combined audit and risk management committee, the officer overseeing risk should only be present when the committee is discussing risk issues and not when audit matters are being considered

The CS, or any other officer in the office of the CS, shall be the secretary of all board committees

Minutes should be prepared and circulated on a timely basis and must not be written for meetings not actually held.

Nomination and Governance Committee 26

Composed of at least 3 members, all NEDs, a majority being INEDs

Chaired by INED appointed by the Board duties include:

Annually review the structure, size and composition of the board at least annually and make recommendations on any proposed changes

Establish the criteria for board and board committee membership, review prospective candidates’ qualifications and any potential conflict of interest, assess the contribution of current directors against their re-nomination suitability for re-nomination and make appropriate recommendations to the board.

Identify suitably qualified persons for nomination and appointment as directors

Ensure that the board undertakes an annual performance evaluation

Undertake the annual assessment of the independent status of INEDs

Remuneration Committee 27

Composed of at least 3 members, all NEDs, a majority being INEDs Chaired by INED appointed by the Board Duties include:

Development of a formal, clear and transparent procedure for developing the company’s remuneration policy

Recommendation to the board on the: Company’s Remuneration policy and structure for all executive

directors and senior management employees Remuneration of non-executive directors Compensation payable to executive directors and senior management

employees for any loss of office or termination of appointment to ensure that it is consistent with contractual terms, fair and not excessive.

• The remuneration committee may engage an independent remuneration consultant (name to be disclosed in AR) at the expense of the company for the purpose of carrying out its responsibilities.

Audit Committee28

Every public company must establish a Statutory Audit Committee (SAC) S359 (3) of CAMA

Functions are as set out in S359 (6) and the Memorandum of Association and Articles of Association of the Company

Every public company required to have a board audit committee (BAC), in addition to a SAC

Members required to have financial literacy and be able to read and interpret financial statements

Persons serving on any Audit Committee, whether SAC or BAC, have coextensive responsibilities and must have relevant experience, competence and knowledge that would enable them serve on either or both of the two committees

The recommendations made in the SAC report to shareholders or the BAC report must be predicated on and evidenced by the work done by the Committee, verifiable where necessary, by regulatory action

Board Audit Committee29

Additional responsibilities of the BAC are articulated in Clause 8.14.9 of the code including but not limited to: Oversight over the integrity of the company’s financial statements,

compliance with legal and other regulatory requirements, assessment of qualifications and independence of external auditor, and performance of the company’s internal audit function as well as that of external auditors;

Identification of key risks and oversight to ensure effective controls are in place to mitigate those risks

Ensure there are other means of obtaining sufficient assurance of regular review or appraisal of the system of internal controls

Ensure that adequate whistle-blowing procedures are in place

Invoke its authority to investigate any matter within its Charter for which purpose the company must make available the resources, including access to external advice where necessary

BAC is required to have an in camera session with the Internal Auditor annually

Board Audit Committee (contd)30

Private companies also required to have BACs

At least 1 member of the committee shall be an expert and have current knowledge in accounting and financial management

BAC composed of at least 3 members, all NEDs, a majority being INEDs

Chaired by a INED

Committee required to meet at least once every quarter

Risk Management Committee 31

Composed of a majority of NEDs; at least 1 should be an INED

Chaired by an INED and meet at least quarterly

Duties include but are not limited to:

Assist the board in its oversight of the risk profile, risk management framework and the risk strategy of the Company

Review the adequacy and effectiveness of risk management and controls in the company

review of the company’s compliance level with applicable laws and regulatory requirements

Ensure that Information Technology assets are managed effectively

Annually review the company’s Information Technology governance framework

A member of senior management responsible for performing the risk function must attend meetings of the committee

Appointment to the Board 32

The board is required to develop a formal, clearly defined and transparent procedure for board appointments

Criteria for appointment should take cognisance of the strengths and weaknesses of the existing board, required skills, and experience as well as current age range and gender diversity

Appointments shall be a matter for the board as a whole

The nomination committee shall recommend names of prospective candidates for consideration for directorship positions

Regulatory consent must be obtained where required

Shareholders shall be provided with biographical information of proposed directors

Induction and Continuing Education 33

Formal induction programme for new directors of the company

Mandatory for all directors to participate in periodic, relevant, professional continuing education programmes in order to update their knowledge and skills

The company is required to disclose in the annual report (AR) the courses attended by each director

Terms and Conditions of Service 34

Letters of appointment to articulate the following issues: Duration or term of appointment Remuneration package and method of remuneration Explanation of the duties of care, skill, diligence and loyalty

and other responsibilities of the director Requirement to disclose any material interests in the company

and other entities related to the company as well as interests Periodic disclosure of material interests in contracts in which

the company is interested or involved board meeting attendance Synopsis of directors’ rights Formal orientation programme or training Copy of Board Charter, Code of Business Conduct and Ethics Directors’ evaluation programme and Any other contractual responsibilities

Access to Independent Advice/Information35

The board shall ensure that directors, especially non-executive directors, have access to independent professional advice at the company’s expense where they consider it necessary to discharge their responsibilities

The Board must be provided in a timely manner; with information in a form and of a quality appropriate to enable it to discharge its duties

This is without prejudice to the right of the Board to have access to all documents and information relating to the management of the company at all times

Tenure and Re-election of Directors 36

Reaffirms retirement by rotation as provided in S 259 of CAMA

Maximum tenure of the MD/CEO not to exceed two terms of 5 years each

Maximum tenure of the EDs other than the MD/CEO not to exceed three terms of 4 years each

Where an ED is appointed MD/CEO, his tenure in the new role starts from the date he assumed the position of MD/CEO and he is entitled to two terms of five years each PROVIDED that no person shall serve as an ED of a company for a combined period of more than 15 years in total

Tenure of NEDs shall not exceed three terms of 4 years each

Performance Evaluation37

Formal and rigorous annual evaluation of board performance, that of its committees, the chairman and individual directors.

Evaluation system shall include the criteria and key performance indicators and targets

The result of the board performance evaluation must be communicated and discussed by the board as a whole, while those of individual directors should be communicated and discussed with them individually by the chairman

Directors with unsatisfactory results are required to undergo appropriate training

Where further training is not feasible, the director may be removed or requested to retire

An external consultant may be engaged to perform the evaluation and the name of the consultant must be disclosed in the AR

The evaluation results must be disclosed in the AR on a named

basis

Part D – Risk Management and Audit38

The Board is responsible for:

The oversight of enterprise-wide risk management

Ensuring that the risk management framework is integrated into the day-to-day operations of the business

Undertaking an annual thorough risk assessment covering all aspects of the company’s business

Obtaining and reviewing periodically relevant reports to ensure the ongoing effectiveness of the company’s risk management framework

Ensuring that the company’s risk management policies and practices are disclosed in the AR

The directors are required to report on the going concern status of the company in annual and half-yearly financial statements with supporting assumptions and qualifications as necessary

Internal Audit Function39

All companies are required to have an effective risk–based internal audit function

Where the board decides not to establish such a function, the reason for the decision must be disclosed in the AR

The Internal Audit Unit must be headed by a professional with relevant qualification who has registered with the regulator

The Head of Internal Audit Unit reports directly to both the BAC and the SAC (where both co-exist) while having a line of communication with the MD/CEO

The Head of Internal Auditor is required to give quarterly reports to the AC on the adequacy and effectiveness of management, governance, risk and control environment, deficiencies observed and management mitigation plans

The internal audit function is required to develop an annual risk-based internal audit plan in line with the risk-based internal audit process and to be approved by the AC

Internal Audit Function (contd)40

An external assessment of the effectiveness of the internal audit function must be conducted at least once every 3 years by a qualified independent reviewer, as defined by the Institute of Internal Auditors, or by an external review team

The head of the internal audit function to be a member of senior management and can only be removed by the board on the recommendation of the SAC/BAC

Public Interest Entities are prohibited from outsourcing their internal audit functions.

Whistleblowing 41

Defines whistle-blowers as any person(s) including the employees, management, directors, customers, service providers, creditors and other stakeholder(s) of a company who reports any form of unethical behaviour or dishonesty to the appropriate internal authority or external regulators

Extensive provisions set out in Section 18.1 – 18.15

Companies are required to develop whistle blowing policies and mechanism that are known to its stakeholders

The identity of the whistleblower must be kept confidential

No whistleblower should be subjected to any detriment

Any whistleblower who suffers any detriment may present a complaint to the regulator without prejudice to his right to take legal action

Such whistleblower is entitled to compensation/and or restatement

External Auditors42

Companies required to appoint external auditors as required by

The code mandates Listed and Significant Public Interest Entities to engage Joint External Auditors for their statutory audit. These entities are those whose market capitalisation is not less than =N=1 billion and/or whose annual turnover is not less than =N=10 billion

Where the existing or first statutory auditor is an international firm, the second auditor (which must be a national firm) must be appointed by show of hands rather than by poll

Tenure of External audit firms is ten years continuously and may be considered for reappointment seven years after their disengagement

Audit partners to rotate every 5 years

No audit partner can be appointed to the Board of a company that his firm is auditing or has audited until 5 years after conclusion of audit or disengagement of the partner

No partner or employee of an audit firm can be employed by the company which the audit firm has audited until after a period of not less than 3 years after the exit of the partner or employee

External Auditors (contd)43

List of non audit services include:

accounting and book keeping services

internal audit services

design and implementation of any financial information system;

actuarial services

investment advisory services

investment banking services

rendering of outsourced financial services

management services

taxation services

performance evaluation of the board and its committees; and

any other kind of services as may be proscribed by the regulators

External Auditors (contd)44

Where the FRC is satisfied that an external auditor of a company has abused his office or acted in a fraudulent manner or colluded in any fraud in the company, it may by regulatory order direct the company to approach its members to consider and resolve whether on the basis of any facts revealed, the company in general meeting shall change its auditors

No direct reciprocal change of the same firms of auditors taking the form of two audit firms succeeding each other as opposites in audits from which they have just mandatorily retired

AC decision for the appointment, re-appointment or removal of an external auditor can only be overridden by a 75% vote of the board’s full membership

Where External Auditors discover or acquire information during an audit that leads them to believe that the company or anyone associated with it has committed an indictable offence under CAMA or any other Statute, they must report this to the Regulator, whether or not such matter is or will be included in the Management Letter.

Part E: Relationship with Shareholders45

Interaction with Shareholders

• The Board is required to establish a system of constant dialogue with shareholders, majority and minority, based on mutual understanding of the objectives of the company

• The lead independent non-executive director (where appointed) may attend sufficient meetings with a range of shareholders to listen to their views in order to help develop a balanced understanding of their issues and concerns

• The Board must disclose in the AR the steps it has taken to ensure that the members of the board, and in particular the INEDs, develop an understanding of the views of all shareholders

Constructive Use of the Annual General Meeting (AGM)

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Should be the primary but not the only avenue for engaging shareholders

Shareholders must be treated fairly and given equal and simultaneous access to information about the company

GMs must be conducted in an open manner allowing for free discussions on all issues on the agenda

Sufficient time to be allocated to shareholders, particularly minorities, to participate fully and contribute effectively at the meetings

Chairmen of all board committees and of the SAC must be present at general meetings of the company to respond to shareholders’ queries and questions

Protection of Shareholder Rights47

The Board must ensure that: Shareholders’ statutory and general rights are protected at all

times. In particular, their powers to appoint and remove directors of the company

All shareholders are treated fairly and equally. No shareholder, however large his shareholding or whether institutional or otherwise, shall be given preferential treatment or superior access to information or other materials

Minority shareholders are treated fairly at all times and are adequately protected from abusive actions by controlling shareholders

The company promptly renders to shareholders documentary evidence of ownership interest in the company such as share certificates, dividend warrants and related instruments.

Venue/Notice of Meetings/Resolutions48

The venue of a general meeting shall be accessible to shareholders

Notices of general meetings shall be at least 21 days from the date on which the meeting will be held.

Allow at least seven days for service of notice if sent out by post from the day the letter containing the same is posted

The notices shall include copies of such documents, including annual reports and audited financial statements and other information as will enable members prepare adequately for the meeting

Unrelated issues for consideration should not be lumped together at GMs.

Statutory business shall be clearly and separately set out. Separate resolutions must be proposed for each matter fro discussion

The board is required to ensure that decisions taken at GMs are duly implemented

Role of Shareholders’ Associations 49

The board of every public company is required to ensure that

dealings of the company with shareholder associations are always transparent

In any interaction or dialogue with shareholders, invitations are also sent on a random or purposive selection basis to minority shareholders in their individual capacities to act as a sounding board for the personal views of the minority shareholders of the company.

This is without prejudice to the role of shareholders’ associations

Institutional Investors 50

Institutional investors are required to:

publicly disclose their policy on how they discharge their stewardship responsibilities

have a robust policy on managing conflicts of interest in relation to stewardship which shall be publicly disclosed

monitor their investee companies

establish clear guidelines on when and how they will escalate their stewardship activities

be willing to act collectively with other investors where appropriate

have a clear policy on voting and disclosure of voting activity; and

report periodically on their stewardship and voting activities.

Part F: Minority Shareholder Protection 51

To protect minority shareholders and other stakeholders, insiders are precluded from engaging in transfers of assets and profits out of companies for their personal benefits or for the benefit of those who control the company

A shareholder or group of shareholders, holding in aggregate not less than one per cent of the share capital or shares of a company, is entitled to submit items for inclusion in the agenda

Controlling shareholders have a fiduciary responsibility to minority shareholders and are entitled to call a GM to discuss major or extraordinary transactions

Insiders are precluded from buying and selling any security in breach of their fiduciary duty and other relationship of trust and confidence while in possession of material, privileged, non-public, and price-sensitive information about the security

Related Party Transactions/ Conflict of Interests (CoI)

52

All transactions between related parties must be disclosed The board must put in place a distinct policy on conflict of

interest situations Directors shall promptly disclose any real or potential conflict of

interest that they may have by virtue of their membership of the board

A director must not be present during the time any matter on which he has an interest is being decided

CoI disclosures must be recorded in the minutes No member of executive management (director level and above)

leaving the services of a relevant regulatory institution, for any reason, shall be appointed as a director or top management staff of an institution that has been directly supervised or regulated by the said regulatory institution until after 3 years of disengagement from that regulatory institution

Part G: Relations with other Stakeholders

53

Sustainability Issues:

Companies are to pay adequate attention to the interests of their stakeholders

Boards and individual directors must commit themselves to transparent dealings and to the establishment of a culture of integrity and zero tolerance of corruption and corrupt practices

The board shall report annually on the nature and extent of its social, ethical, safety, health and environmental policies and practices. Issues to be reported on are detailed clause 32.3 including but not limited to:

The company’s business principles and codes of practice and efforts towards implementation

Description of workplace accidents, fatalities and occupational and safety incidents against objectives and targets

Disclosure of the company’s policies, plans and strategy for addressing and managing the impact of HIV/AIDS, malaria and other serious diseases on the company’s employees and their families

Relations with other Stakeholders (contd)/Company Investors’ Portal

54

Nature and extent of employment equity and gender policies and practices

Adoption, in the company’s operations, of options with the most benefit or least damage to the environment, particularly for companies operating in disadvantaged regions or in regions with delicate ecology

The company’s policies on corruption and related issues

The conditions and opportunities created for physically-challenged persons or disadvantaged individuals

The nature and extent of the company’s social investment policy

Company reports and other communications to shareholders and other stakeholders must be in plain language, readable and understandable and consistent with previous reports

Company must establish web sites and investors’ portals where the communication policy other relevant information about the company are published and made accessible in downloadable format to the public

Part H: Transparency

55

Companies are required to strive to achieve international best practices and engage in full disclosure of all the matters set out in the Code

The CEO and CFO must provide a joint attestation to the board that the company’s financial statements present a true and fair view, in all material respects, of the company’s financial condition and operational results and are in accordance with relevant accounting standards

The company’s AR must include:

A corporate governance report

Make sufficient disclosure on accounting and risk management issues

A statement by the board with regards to the company’s degree of compliance with the provisions of the Code

Details of any director’s interest in contracts either directly or indirectly with the company or its subsidiaries and holding companies

Details of any service contracts and other contracts with controlling shareholder(s), their group networks and associates

Part H: Transparency (Contd)

56

Separate related party transactions must be made for each related entity

The Chairman’s statement in the annual report must provide a balanced and readable summary of the company’s performance for the period under review and future prospects, and must expressly state whether the board’s expectations (financial and non-financial) for the reporting period have been met

The board is required to use its best judgment to disclose any matter even though not specifically required by the Code if in the opinion of the board such matter is capable of affecting the financial condition of the company or its status as a going concern

The onus of proof of such possible negative effect is on the board.

The Regulator is entitled to demand for further documents or reports from the company to enable it validate the disclosures made

Corporate Governance Evaluation

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An annual corporate governance evaluation must be carried out and facilitated by a registered independent external consultant

The corporate governance evaluation cannot be carried out by the company’s external auditor or a firm related to the external auditor

The evaluation report is presented at the AGM, a copy sent to the regulator and also put on the investors’ portal

Part I: Code of Business Conduct and Ethics

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Companies are required to Code of Business Conduct and Ethics which will be regarded as part of the corporate governance practices of the company

Globally Responsible Business Conduct

Enterprises operating within a global context must take into account the established processes in the countries in which they operate, while considering the views of all relevant stakeholders

Refrain from seeking or accepting exemptions not contemplated in the statutory or regulatory framework related to human rights, environmental, health, safety, labour, taxation, financial incentives, or other issues

Part J: Enforcement/ Part K: Miscellaneous

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Violations of the provisions of the Code will occasion both personal sanctions against the persons directly involved in the violation, and sanctions against the companies or firms involved

No commencement date

On commencement the code supercedes corporate governance code in force in Nigeria before that date

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Thank you for your attention

2016 icsan mcpe understanding the financial reporting council (frc)

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