Article Summary
- Companies must have proper nomination guidelines in place to ensure strict adherence to the Companies and Allied Matters Act (CAMA) 2020 laws.
- Section 275 of the CAMA 2020 law states that every public company must now have a minimum of three independent directors.
- Enhancing the independence of some directors would substantially improve the protection of public investors.
The Chief Executive Officer, of NGX Regulation Limited, a subsidiary of Nigerian Exchange Group Plc, Tinuade Awe, has stated that companies must have proper nomination guidelines in place to ensure strict adherence to the Companies and Allied Matters Act (CAMA) 2020 laws.
Awe stated this during a programme on the Institute of Nigeria (IoD) Nigeria Podcast recently.
Section 275 of the CAMA 2020 law states that every public company must now have a minimum of three independent directors. Notwithstanding, research has also shown that the selection and nomination process of independent directors significantly undermines the ability of independent directors to effectively perform their oversight role.
While pointing out that CAMA had thrown a curve as regards corporate governance in Nigeria, Awe said that companies need to have a proper nomination process as this would put an end to the conflicting issues about laws in the capital market.
- “Looking at CAMA and Nigerian code of corporate governance, SEC guidelines on corporate governance, CBN guidelines on independent directors, you will see that each guidelines have a bit of difference, but the bottom line is they are all geared to figure out how to assess the independence of the directors, issues of materiality and non-peculiar interest. However, CAMA 2020 says that every company shall have 3 independent directors while the code says to have a majority of directors. The problem is that CAMA clearly states that we should have three independent directors.
- We are met with the company laws which we are supposed to obey but fortunately or unfortunately, CAMA is the law because it has gone through that National Assembly process.
- But to avoid all these conflicts, companies must and should have a proper nomination and governance committee that have a job description for what is needed for a director based on CAMA”, She said.
Awe further added that enhancing the independence of some directors would substantially improve the protection of public investors.
What you should know:
The Companies and Allied Matters Act (Chapter C20) Laws of the Federation of Nigeria 2004 (CAMA 1990) was initially made law in Nigeria in 1990 as a decree of the military government. It was modeled on the English Companies Act 1985.
For thirty years, there were no significant amendments to the CAMA 1990, notwithstanding that England has, over the past three decades, amended and replaced its own Companies Act.
Nigerian companies had to, essentially, rely on a 30-year-old law to govern the way businesses operate in our dynamic and exponentially evolving global community. However, this all changed on Friday the 7th of August 2020, when President Muhammadu Buhari, gave his assent to the Companies and Allied Matters Act 2020 (CAMA 2020).