Unifying Nigeria's Sectoral Corporate Governance Regimes Through A National Code Of Corporate Governance For The Private Sector

The Code prescribes a mandatory rotation period of five (5) years for audit partners assigned to undertake the external audit of a company[49] and specifies instances where a retired partner of an audit firm which provided, or is providing audit services, may be hired[50] as well as instances where a partner or staff of an audit company (from the level of Audit Manager and above), which has provided audit services to a company, may be employed by such company[51].

In addition to the foregoing, the Code provides that where the existing or first statutory auditor is an International Firm[52], the second auditor, who must be appointed by a show of hands in an Annual General Meeting, rather than a poll, shall be a National Firm[53]. The rationale for distinguishing between International and National Firms appears to be unclear and fails to portend on how this distinction will improve corporate governance mechanics in companies.

In relation to the mandatory voting by show of hands instead of by poll for the purposes of appointing a National Firm as an auditor, it is important to highlight that CAMA provides for rights of the chairman of a board as well as specific categories of members at a general meeting to demand a poll when a resolution is put to vote[54]. Indeed, to give credence to how important the right to demand a poll is, Section 225 makes void any provision in a Company’s Articles that excludes the right to demand a poll. The only instance where the right to demand a poll is excluded, is with respect to the election of members of the audit committee as established by a public company under Section 359 of CAMA.

However, from our reading of certain provisions of the Code, it would appear that these provisions attempt to extinguish the right to demand a poll, by restricting the voting in relation to a resolution for appointment of subsequent auditors (other than the first auditor), to a show of hands.

Additionally, the Code also attempts to restrict voting by members in a general meeting to a show of hands only in instances, where FRCN, being 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, directs, by regulatory order, that the company approaches its members to consider and resolve whether on the basis of any facts revealed, the company in general meeting shall change its auditors.

Given the clear departure from an engrained provision of CAMA which preserves the traditional right of a shareholder (which is personal and cannot not be extinguished except with the consent of the relevant shareholder) intrinsically linked to the shares held by the shareholder, the drafters of the Code must cause these offending provisions to be expunged as they conflict rather deeply with the provisions of CAMA and the rights of shareholders.

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[49] Section 19.5 of the Code
[50] Section 19.6 (a) of the Code
[51] Section 19.6 (b) of the Code
[52] Defined in the Code as an “audit firm that has at least a non-Nigerian partner in the Firm whether incidental or otherwise; whilst a National Firm was defined as an audit firm that has no non-Nigerian in the partnership in the firm whether incidental or otherwise.
[53] Section 19.2.2 of the Code
[54] Section 224 of the CAMA