Corporate Governance fast rose to the lime light following the failures of some banks in the UK far back in the late 1980's and 1990's. It was gathered that the predominant reasons why the banks failed were as a result of acts covered up; inadequate monitoring and maintenance of the people on the board, absence of adequate financial control.
This failure gave rise to the birth of corporate governance first in the UK before other countries embraced it and gradually domiciled it.
Why bother with the issue of Corporate Governance?
Corporate Governance refers to the way in which companies are governed and to what purpose it seeks actualization of these goals. It concerns itself with practise and procedures for trying to ensure that the company is run in a such a way to achieve its set objectives.
Importance Of Corporate Governance
1. It helps the company to achieve its set objectives stated in the Memorandum and Articles of Association;
2. It helps to satisfy the interest of the board of directors, shareholders and other interest groups of a company;
3. It effectively helps in seperation of ownership from management functions.
Private Company Requirements Under CAMA 2004
The Company and Allied Matters Act (C.A.M.A. 2004) states the following requirements in respect to a private company:
- Individuals desiring to form the company must have the capacity to form a company Section 20 CAMA 2004;
- The Private company should clearly state in its memorandum that it is a private company;
- Membership should not exceed 50;
- Is restricted from inviting the public in its dealings in terms of debentures, deposit money payable on call Section 22 CAMA 2004;
- Maintain all required statutory books;
- Have the authorised minimum share capital of N10,000;
- Should properly convene, conduct and constitute all meetings;
- Number of directors should not be less than 2;
- Appoint a company secretary and submit particulars to the Corporate Affairs Commission within 14 days;
- Keep proper financial statements and accounting records;
- Submit and file Annual returns to the Corporate Affairs Commission within the company’s accounting year.
Is Corporate Governance applicable in a Private Company setting?
Corporate Governance should be applicable especially to companies that have significant portion of shares held by members that are not involved in the running of the company. Many times, it is difficult to argue in favour of a formal corporate governance beyond the minimum requirement of law as the directors have a close relationship. The board should endeavour to set the mark as they are responsible for giving direction to the company.
A divergent perspective states that Private companies should be required to consider the interest of the minority shareholders noting fully that minority protection is protected by the law and does not require corporate governance to reinforce it. This view has fuelled the non-challancy of private companies towards the application of Corporate Governance.
After thought:
Every smart organization especially private companies can leverage on the foundations of corporate Governance policies towards building a great empire for success and a long term goal. Private companies are therefore not compelled to obey all provisions of corporate governance but are encouraged to apply same.
Labels: Corporate Governance, Private Company
