The Federal Government has suspended forthwith the implementation of ‘controversial’ National Code of Corporate Governance which was solely championed by Jim Osayande Obazee, the Executive Secretary/Chief Executive of Financial Reporting Council of Nigeria (FRC), BusinessDay can disclose.
It was also learnt that following series of criticisms by industry stakeholders and shareholders on the implication of the Code of Corporate Governance to the Nigerian business community, the Federal Government swiftly issued a query to the Financial Reporting Council, seeking written responses and relevant documents within seven days.
In the three-paged query to the FRC seen by BusinessDay and signed by Okechukwu Enelamah, Minister of Industry, Trade and Investment, the supervisory ministry to the Financial Reporting Council, it was asked to provide among others the regulatory approach that undergirds the Code; the clear conflict between provisions of the Code and the Legislation –Financial Reporting Council of Nigeria Act, 2011.
As a strategic document, FRC was also asked to provide evidence of the adoption of the Code by the Board of the Council and the Minutes of the meeting at which the Code was adopted by the Board.
Among other questioned raised, Financial Reporting Council is to tell the Federal Government whether the committee on Corporate Governance, in Section 51 of the Financial Reporting Council of Nigeria Act, 2011, empowered to issue the Code of Corporate Governance, in a position to act in the absence of the Board of the Council in the light of provisions of Sections 2 (1) and 10 (d) of the Act.
The Federal Government recognizes that an enabling environment for business is critical to the rejuvenation and sustainable growth of Africa’s biggest economy. The environment will demand careful, deliberate, strategic and informed actions at addressing the impediments to doing business in Nigeria.
Our informed source told BusinessDay that Financial Reporting Council was meant to understand that any regulation to be introduced must align with the philosophy underpinning the ease of doing business undertaking; noting that it is therefore entirely possible that the imperatives of the Code can and must be reconciled with the demands of ease of doing business.
Base on the foregoing, Federal Government directed that the implementation of the National Code of Corporate Governance be suspended forthwith to allow for the effective and proper resolutions of substantive and procedural concerns arising from the reported issuance of the Code, our source further disclosed.
Also, the Federal Government queried whether the Code can supersede the Legislation from where it originates. Financial Reporting Council was also asked to provide relevant answers relating to the conflict between provisions of the Code –which is a subsidiary legislation, and a principal enactment – the Companies and Allied Matters Act (CAMA).
The now controversial executive secretary of the Financial Reporting Council had last month issued the Code it referred to as the “National Code of Corporate Governance for the Private Sector in Nigeria 2016” claiming it became effective from October 17, 2016.
The new Corporate Governance Code would have forced changes in board structure of so many companies –particularly in the financial sector of the Nigerian economy.
The Independent Shareholders Association of Nigeria (ISAN) and lawyers at Olaniwun Ajayi LP had picked holes in the new corporate governance code introduced by the Financial Reporting Council of Nigeria.
ISAN’s position on the code mostly stemmed from perceived negative implications of over-regulation of the nation’s corporate sector, particularly the financial industry and the noticeable contradictions and conflict with the subsisting Companies and Allied Matters Act (CAMA), as amended.
The law firm, Olaniwun Ajayi LP, in its current newsletter, observed that the Code, by its provisions, “seeks to supersede other corporate governance codes which regulate other sectors, provides a “one-size-fits all” code, is mandatory in its application.
“Further, some of the provisions of the Code, whilst being unusual, are clearly inconsistent and seek to amend the provisions of the Companies and Allied Matters Act (CAMA) and other statutory legislations.”
They further said that the action of the FRCN, which is beyond its bounds, “reveals an internal disharmony and inconsistencies within the FRCN Act, and more importantly, the FRCN overreached its powers in section 51(c) and 77 of the FRCN Act by issuing a Code which seeks to cover the entire spectrum of corporate governance in Nigeria, without limiting itself to regulating the accounting and financial reporting standards of companies.
“It is unequivocal that as a subsidiary legislation, the Code cannot by its provisions overreach, override, amend or repeal other existing statutes, which have been made by legislative enactment, neither can it amend other subsidiary legislation issued pursuant to already existing Acts of the National Assembly. Such a subsidiary legislation stands the risk of being declared ultra vires and being declared null and void, to the extent of its inconsistencies with existing statutes of the National Assembly,” according to the Law Firm.
Recall that the Federal Government commits to addressing the constraints that make Nigeria unfriendly to business and creating an enabling environment for business. This commitment led to the constitution of a Presidential Council under the leadership of the Vice President, Yemi Osinbajo.