By John Okoh
The Independent Shareholders Association of Nigeria, ISAN, has won a suit it filed at the Federal High Court sitting in Lagos to challenge the rule by the Financial Reporting Council of Nigeria, FRCN, that only qualified accountant can be chairman of the auditing committee of a public liability company.
In a judgement, Justice A Faji said: ‘The Company and Allied Matters Act, CAMA, makes no provision for qualification of chairman of the audit committee. It would therefore seem that apart from section 359(4) which prescribes those who can be members of the committee, there is no other qualification.
“In so far as the rule (Rule 2c) therefore seeks to introduce a qualification that is outside the powers of the defendant, the defendant is not a law making body and cannot by its own rules (or subsidiary legislation at best) seek or attempt to amend a law of the National Assembly. The defendant is acting in defiance of ministerial directive. The document is not part of the national code of for corporate governance. Declarations ‘1’- ‘3’therefore succeed’.
ISAN members at a conference, recently
In 2015, the FRCN issued and published its Rule 2(c) which stated that “any person attesting as Chairman of Audit Committee to annual report statement, accounts, financial report, return, and other documents of a financial nature, shall be a professional member of an accounting body established by act of National Assembly”.
Vexed by this rule, the ISAN approached the FRCN for dialogue but to no avail. It therefore approached the court for a final pronouncement on the matter.
Counsel to the plaintiff, Barrister Chuks Chukwuemeka approached the court and asked it to set aside the following orders; (1) the publication purporting to be rules made by or in the name of the Defendant or in particular rule 2(c) thereof wherein is stated that; (2) “any person attesting, as chairman of Audit committee, to annual report, financial statements, accounts, financial report, returns and other documents of a financial nature, shall be a professional member of an accounting body established by Act of National Assembly:
(3) “Any other directive of the Defendant to companies incorporated under the CAMA published on the website of the Defendant or by any other means on the qualification for membership, headship or composition of an audit committee:
(4)“Any directive to any quoted company or any imposition of any sanction upon any quoted company or any director or officer, or any other agent of other professional engaged by any quoted company or any rule purportedly made by or in the name of the Defendant in purported performance of or purported exercise of any function or power reserved or ascribed to the Defendant under the Financial Reporting Council of Nigeria Act in the absence of the Board created for the Defendant under the Act.
On the basis of these demands, ISAN, through its lawyer asked the court to restrain the defendant and any officer or servant or agent of the defendant from further issuing or prescribing any standard or making any rule for or imposing any sanctions on any quoted company or any officer or agent or professional engaged by any quoted company in the absence of the Board created for the defendant under the Act and charged with overall control of the performance of its functions and exercise its powers.
The court granted the declaration sought under‘1’ ‘2 and‘3’ and refused to grant ‘4’ on the basis that it was too wide. With this ruling, Rule 2(c) of the Financial Reporting Council of Nigeria is now null and void.
Companies who had paid the N600,000 waivers charged by the FRCN can now apply and collect refunds as Rule 2(c) is now declared null and void.
The National Coordinator of ISAN, Adeniyi Adebisi told Thisage “We engaged the Executive Secretary of the FRCN on a number of occasions to reverse itself regarding the said rule, but it refused to do so. It insisted that a chairman of an Audit Committee of a public quoted company must be one professionally qualified as an accountant. We as an Association considered the Rule 2(c) of the FRCN as an anomaly and meddlesome in the extreme because it was against the letters and spirit of the Companies and Allied Matters Act (CAMA) section 359.
“To add salt to injury, public companies that could not provide a professionally qualified accountant as their Audit Committee chairman were required to apply for a waiver before their annual accounts can be approved. FRCN collects a sum of N600,000.00 for the so called waiver to be granted.
“In view of this rascally behaviour of the FRCN, our Association felt compelled to institute a legal action under SUIT NO FHC/L/ CS/1026/16 before Justice A O Faji with Barrister Chuks Chukwemeka as our lead counsel.”
“The Independent Shareholders Association of Nigeria will continue in its struggle to be the regulators of regulators to check persistent impunities of various government regulatory agencies in the capital market. While doing this, we will need the cooperation of relevant government agencies, public quoted companies, shareholders’ groups and of course, fellow shareholders. Together, we shall all be better for it.”
“It is worthy of note that regulators generally have succeeded in intimidating the regulated to the extent that they are prepared to accept anything offered them in the guise of regulation without as much as a protest. This is because they are afraid of being victimised in one way or the other for challenging the regulators. This is not good for the health of the Capital Market. Regulators and the regulated should be able to engage each other in matters that can promote better understanding.”
