On February 14, 2023, President Muhammadu Buhari signed into law the Business Facilitation (Miscellaneous Provisions) Act, 2023 (the “BFA”). Section 14 of the BFA amended sections 275 (1) and (2) of the Companies and Allied Matters Act, 2020, which previously provided as follows:
“(1) A public company shall have at least three independent directors.”
(2) “In a public company, any person who nominates candidates for the board who would comprise a majority of the members of the board shall nominate at least three persons who would be independent directors.”
With the Amendment, Sections 275 (1) and (2) now provide as follows:
“(1) A public company shall have at least one-third of the total number of its directors as independent directors.
(2) In a public company, any person who nominates candidates for the board, who would comprise a majority of the members of the board shall nominate at least one-third number of persons who would be independent directors
The consequence of the amendment is that public companies can no longer appoint a minimum of three (3) independent directors. The new requirement compels public companies to appoint not less than one-third of their board members as independent directors. So, for instance, if an affected public company has 18 members on its board, six (6) of them are required by the amendment to be independent directors. Under the old law, it would have been three (3). The impact of 275 (1) & (2) of CAMA (as amended) is that some public companies may need to replace Non-Executive Directors or Executive Directors on its board with independent directors to maintain the threshold of one-third of the board members provided by the new section 275 of CAMA. Some boards of public companies may lose policy control of their companies.
Some stakeholders have raised the question as to whether Section 275 (1) & (2) of CAMA (as amended) applies to banks that are public companies. Our position is that it does not apply to banks that are public companies because 275 (1) & (2) of CAMA (as amended) conflicts with two specific laws on banking: The Code of Corporate Governance for Banks and Discount Houses, 2014 (The code is subsidiary legislation of the CBN Act, thus has the effect of the CBN Act) and also the Banks and Other Financial Institutions Act (BOFIA), 2020. Sections 275 (1) & (2) of CAMA (as amended) may also be Unconstitutional.
Section 29 (1) of BOFIA, 2020 provides that “Notwithstanding anything to the contrary contained in this Act or in any other enactment, the Bank (the CBN) shall have and exercise regulatory and supervisory power over banks, other financial institutions, and specialised banks to the exclusion of any other agency or institution”. The Central Bank of Nigeria (CBN), pursuant to its exclusive regulatory and supervisory powers over banks in Section 29 (1) of BOFIA, has issued the Code of Corporate Governance for Banks and Discount Houses 2014. The Code in Section 2.2.4 provides as follows: “The board of banks shall have at least two (2) Non-Executive Directors as Independent Directors while that of Discount Houses shall have at least one (1) as defined in the CBN guidelines on the appointment of Independent Directors.”
It is trite law that ‘generalia specialibus non derogant’: where there is a conflict between a general legislation and a specific legislation on the same subject matter, the specific legislation prevails (see Bamgboye v Administrator-General, 1994, 14 WACA 616; Abubakar v Nasamu no.2, 2012, 17 NWLR, pt.1330, 523 at 576; and America Specification Autos Ltd & Anor v AMCON, 2017 LPELR-44016, CA.). Quite obviously, the amendment puts the position of CAMA (a general legislation) in conflict with the Code of Corporate Governance for Banks and Discount Houses, 2014, as well as the Banks and Other Financial Institutions Act (BOFIA), 2020(specific legislation). The combined effect of Section 29 (1) and the plethora of case laws is that Sections 275 (1) and (2) of CAMA (as amended) do not apply to banks that are public companies.
In addition, Sections 275 (1) and (2) of CAMA (as amended) appear to violate the right to freedom of association and enterprise. Compelling public companies to appoint to their board significant numbers of Independent Directors who may not share the vision of the public company can make the board lose policy control of the company. This is unconstitutional and amounts to indirect expropriation/violation of the right to free enterprise. This article is to bring this matter to the attention of the Corporate Affairs Commission (CAC) the administrator of the Companies and Allied Matter Act.