What corporate governance means
Corporate governance is the system by which a company is run and held to account.
It covers who has authority to decide what, how those decisions are recorded, who reviews the people making them, what information shareholders receive, and how conflicts of interest are handled.
For a large company it involves board composition and independence, committees for audit and remuneration, disclosure obligations and formal reporting.
For a small Nigerian company it means something much simpler: knowing which decisions belong to the board and which to the shareholders, holding meetings and minuting them, keeping the statutory registers, filing what the CAC requires, and dealing with conflicts openly rather than informally.
The purpose is not compliance for its own sake. It is that a business whose decisions are recorded, whose records are current and whose authority is clear can be sold, funded and defended. One without any of that cannot.
How it is used
The practical minimum for a growing Nigerian company is short and it is achievable.
Board resolutions for significant decisions, dated and signed, held in one place. Bank accounts, borrowing, share issues, major contracts, appointments.
A register of members that is actually maintained, with share certificates issued and transfers recorded.
Annual returns filed at the CAC every year, and beneficial ownership information kept current.
Accounts prepared each year, audited where the company is above the exemption thresholds.
A shareholders agreement setting out reserved matters, information rights and what happens when somebody wants out.
A conflicts practice: a director with an interest in a transaction declares it and does not vote on it, and the declaration goes in the minutes.
None of that requires a governance department. It requires somebody in the business treating it as their job.
Key features
- The system by which a company is directed and held to account
- Covers authority, records, oversight, disclosure and conflicts
- CAMA 2020 codified directors' duties and requires audit committees for public companies
- The Nigerian Code of Corporate Governance applies to public and regulated entities
- Sector regulators impose their own codes in banking, insurance and pensions
- For a small company it means resolutions, registers, filings and accounts
How this works in Nigeria
The framework has three layers, and which applies depends on what kind of company you are.
CAMA applies to every company. It codified directors' duties, including the duty to act in the best interests of the company and to exercise powers for a proper purpose, requires public companies to have audit committees, and limits the number of public companies in which a person may be a director at the same time.
The Nigerian Code of Corporate Governance, issued by the Financial Reporting Council, applies to public companies and other public interest entities on an apply and explain basis, meaning a company applies the principles and explains how.
Sector codes sit on top. The Central Bank of Nigeria for banks, the National Insurance Commission for insurers, and the National Pension Commission for pension operators each impose their own requirements.
A small private company sits under the first layer only, and its obligations are the ones listed above rather than the full code.
The practical reason to care is transactional. Every Nigerian funding round and every acquisition begins with a request for the constitutional documents, the register of members, the board minutes, the annual returns and the accounts. A company that can produce them in a week is in a completely different negotiating position from one that spends two months reconstructing them.
Governance vs management vs compliance
Three functions that get conflated and are not the same.
Management runs the business day to day. It makes operational decisions, executes strategy and reports on results.
Governance decides who has authority, oversees management, and holds it to account. It is the board's function and the shareholders' function, and it operates through resolutions, meetings, records and reserved matters.
Compliance ensures the business meets its legal and regulatory obligations: filings, licences, tax, data protection, employment law. It is a management responsibility carried out under governance oversight.
A Nigerian company where the founder does all three, with nothing written down, is not badly governed because of bad intentions. It is badly governed because nothing distinguishes a decision from a thought, and neither an investor nor a court can tell what was actually decided.
Limits and risks
Governance frameworks are designed for large companies, and applying them wholesale to a small one produces paperwork rather than protection.
The codes are also largely voluntary outside regulated sectors, operating on an apply and explain basis rather than as hard requirements.
Good records do not produce good decisions. A company can minute its way through a bad strategy perfectly.
And in owner managed businesses the separation between board and shareholders is artificial, since the same people occupy both roles. The value there is in the record rather than in the oversight.
Worth knowing
Keep the board resolutions, the register of members and the annual returns current from the first year. Nigerian funding rounds and acquisitions begin with a document request, and a company that spends two months reconstructing its records has already lost negotiating position it will not get back.
Questions people ask
What is corporate governance?
The system by which a company is directed and held to account: who has authority to decide what, how decisions are recorded, who oversees management, what shareholders are told, and how conflicts are handled.
Does a small Nigerian company need corporate governance?
It needs the practical minimum: board resolutions for significant decisions, a maintained register of members, annual returns filed at the CAC, accounts prepared each year, and a shareholders agreement. Not a governance department.
What does CAMA 2020 require?
Among other things it codified directors' duties, requires public companies to have audit committees, and limits the number of public companies in which a person may serve as a director at the same time.
Does the Nigerian Code of Corporate Governance apply to my company?
It applies to public companies and other public interest entities on an apply and explain basis. Small private companies sit under CAMA rather than under the full Code, though sector regulators impose their own codes where relevant.
How should a conflict of interest be handled?
The director declares the interest, does not vote on the matter, and the declaration is recorded in the minutes. Handling it informally is what creates the problem later.
Why do investors care about governance?
Because due diligence starts with the constitutional documents, the register of members, board minutes, annual returns and accounts. A company that cannot produce them raises questions about everything else.