The Intersection of Nigeria’s Corporate Sector; Corporate Structure, Governance and Finance (Building on the Regulatory Framework,CAMA,2020).
Navigating the balance of three pillars in the Corporate word is just like a three sided coin, of which each side is equally vital. Firstly, there is a need to delve into the definition of what we mean by the term “Corporate Structure”. Okay, so you know that situation when you want to start up your company, Thinking about different size and nature you want your company to be formed and developed, The potential goals it needs to fulfill either monthly or annually depending on your target and the people who is going to be assigned to different departments to make these goals come into reality; that’s the whole concept of what a corporate Structure is all about.
Therefore, in simple terms, we can say Corporate structure refers to the organization of different departments or business units within a company. Depending on a company's goals and the industry in which it operates, corporate structure can differ significantly between companies.
Also, Corporate governance is concerned with the processes and structures through which members interested in the overall well being of the firm take measures to protect the interests of the stakeholders. Good corporate governance is centered on the principles of accountability, transparency, fairness and responsibility in the management of the firm. The institution of corporate governance in a firm is an attempt to ensure the separation of ownership and control, and this often results in principal-agent problems Agency theory explains the conflict of interests between the shareholders and managers. The separation of ownership and control has been one of the most contentious issues in the financial literature.
In the Finance Structure of a Company,
CAMA 2020 has replaced the concept of authorized share capital with a requirement for minimum issued share capital. Under the Act, companies are no longer required to have authorized share capital. Instead, section 27 of CAMA 2020 requires companies to have a minimum issued share capital, which varies depending on the type of company. Before CAMA 2020, companies had to have a minimum authorized share capital, which was the total share capital that could be issued by the company. At least 25% of this authorized share capital had to be issued as shares to shareholders. However, CAMA 2020 has done away with this concept, and instead requires companies to have a minimum issued share capital, which must be at least ₦100,000 (One Hundred Thousand Naira) for private companies and ₦2,000,000 (Two Million Naira) for public companies. Thus, under CAMA 2020, authorized share capital has been eliminated as a concept. The law now only recognizes issued share capital, which is defined as the total share capital of a company at any given time.This means that companies can no longer have unissued shares.
I’m going somewhere, Kindly follow me, For every Law Students now, we all know that The significant Law, regulatory framework, Principles that all Companies in Nigeria must use as a focal point for effective Corporate Structure and Governance in Nigeria is the Companies and Allied Matters Act 2020,(CAMA) which is a modern and streamlined piece of legislation that aims to make it easier to do business in Nigeria. The Act is designed to create a more competitive and attractive environment for businesses, and to make it easier for them to operate within the country. The goal of CAMA 2020 is therefore to create an enabling environment that encourages both foreign and domestic investment, while also protecting the interests of existing businesses. An enabling environment is one that is conducive to business growth and development, and that provides a level playing field for all businesses operating within the country. This will ultimately help to boost economic activity and create opportunities for both businesses and the wider community. Perhaps, CAMA 2020 is intended to promote regulatory quality and efficiency, in order to make it easier for businesses of all sizes to operate in Nigeria and thus introduced significant changes to the laws governing companies in Nigeria which aim to address the legal, regulatory and administrative obstacles that have made doing business in Nigeria difficult especially for small and medium-sized enterprises, and have deterred investment in the country.
A Brief Take on the Nigeria code of Corporate Governance(As a means of Corporate Structuring):
In 2018, the Nigerian Code of Corporate Governance (NCCG) was issued for private companies, public companies and not-for-profit Entities. The new Code is made up of seven (7) parts and contains twenty- eight (28) principles. It covers the ‘board of directors’, ‘audit’, ‘relationship with shareholders’, ‘business conduct with ethics’, ‘sustainability’, ’transparency’ and ‘definitions’. The Code is principle- based and requires the ‘apply or explain’ approach. All companies are required to apply the Code or explain the reasons for not adopting them. The rationale for using the ‘apply or explain’ approach is to encourage better corporate governance practices in Nigerian companies. The issuer of the Code, the Financial Reporting Council of Nigeria, will monitor the implementation of the Code through sectoral or industry regulators. Each sectoral regulator has been empowered to impose appropriate sanctions for violations of the Code based on sectoral or industry laws and regulations. The 2018 NCCG improves on the previous code in three key areas namely;
(i) by specifying an effective whistle-blowing framework for reporting any illegal or unethical behavior.
(ii) by requiring companies to pay attention to sustainability issues including environmental, social, occupational and community health and safety
issues.
(iii) and by promoting full and comprehensive disclosure and transparency to investors and stakeholders.
Conclusion:
In conclusion, The legal framework through which a corporate entity or enterprise derives its basic orientation and direction in Nigeria are covered by corporate governance regulations and mechanisms. This viewpoint views corporate structure and corporate governance in terms of shareholder protection, managerial control, and economic theory's popular principal- agency concerns. The corporate governance structure lays out how the corporation's rights and obligations are distributed among its various stakeholders. It has the advantage of lowering transaction costs, capital costs, and financial crisis vulnerability in a company. The tale of stewardship that regulates corporate governance indicates that directors are generally trustworthy and hence capable of acting in the public and shareholder's best interests. In Nigeria, corporate governance has evolved from the Companies and Allied Matters Act of 1990 to the Companies and Allied Matters Act of 2020. Nigeria has also implemented other legislation that businesses and organizations must follow. Internal and external influences can be examined in the corporate governance system.
