CORPORATE LAW PROJECT JURISDICTION: Nigeria FIRM: Olaniwun Ajayi LP (Submission coordinated by Edward Nathan Sonnenbergs) DATE: November 2010

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1 Mandate of the Special Representative of the Secretary- General (SRSG) on the Issue of Human Rights and Transnational Corporations and other Business Enterprises CORPORATE LAW PROJECT JURISDICTION: Nigeria FIRM: Olaniwun Ajayi LP (Submission coordinated by Edward Nathan Sonnenbergs) DATE: November 2010 This survey is an independent submission to the SRSG s Corporate Law Project. It is the sole work of Olaniwun Ajayi LP and the SRSG takes no position on any views expressed or implied in this report. More information about the Corporate Law Project is available at: A NOTE FROM THE UN SPECIAL REPRESENTATIVE ON BUSINESS AND HUMAN RIGHTS OCTOBER 2009

2 A NOTE FROM THE UN SPECIAL REPRESENTATIVE ON BUSINESS AND HUMAN RIGHTS September 2010 This survey is an independent submission to a project on corporate law and human rights under my mandate as Special Representative of the UN Secretary-General on Business and Human Rights: the Corporate Law Project. I am delighted that nineteen leading corporate law firms from around the world have agreed to make submissions to this project, and thank them for their engagement. The willingness of so many firms to provide their services pro bono in order to expand the common knowledge base indicates that corporate law firms worldwide appreciate that human rights are relevant to their clients needs. It is important at the outset to understand how this project fits into my wider work. I was appointed in 2005 by then UN Secretary-General Kofi Annan with a broad mandate to identify and clarify standards of corporate responsibility and accountability regarding human rights, including the role of states. In June 2008, after extensive global consultation with business, governments and civil society, I proposed a policy framework for managing business and human rights challenges to the United Nations Human Rights Council (Council). The Framework of Protect, Respect and Remedy rests on three differentiated yet complementary pillars: the state duty to protect against human rights abuses by third parties, including business, through appropriate policies, regulation, and adjudication; the corporate responsibility to respect human rights, which in essence means to act with due diligence to avoid infringing on the rights of others; and greater access for victims to effective remedy, judicial and non-judicial. You can read more about the Framework in my 2008, 2009 and 2010 reports to the Council, available at my website: The Council unanimously welcomed what is now commonly referred to as the U.N. Framework and extended my mandate by another three years, tasking me with operationalizing the Framework that is, to provide practical recommendations and concrete guidance to states, businesses and others on the Framework s implementation. There has already been considerable uptake of the U.N. Framework by all relevant stakeholders. It has also enjoyed unanimous backing in the Council; strong endorsements by international business associations and individual companies; and positive statements from civil society. A key aspect of the first pillar, the state duty to protect, is that states should foster corporate cultures respectful of rights both at home and abroad, through all appropriate avenues. In particular, I have been exploring the opportunities and challenges that corporate and securities law can provide in this regard. Corporate law directly shapes what companies do and how they do it. Yet its implications for human rights remain poorly understood. The two have often been viewed as distinct legal and policy spheres, populated by different communities of practice. The Corporate Law Project will allow me to explore this area further by gaining knowledge from over 40 jurisdictions as to how national laws and policies dealing with incorporation and listing; directors duties; reporting; stakeholder engagement; and corporate governance more generally currently require, facilitate or discourage companies from respecting human rights. I am interested not only in what laws currently exist, but also how corporate regulators and courts apply the law to require or facilitate consideration by companies of their human rights impacts and preventative or remedial action where appropriate. The project thus formally comprises part of my work on the state duty to protect. It will assist me to understand whether and how national corporate law principles and practices currently encourage companies to foster corporate cultures respectful of human rights. I will in turn consider what, if any, policy recommendations to make to states in this area, following consultation with all relevant 2

3 stakeholders. However it is just one element of my work on the state duty to protect, which also looks at other areas of the law and national policies which might help states to encourage companies to respect human rights. The project will also support my work on the corporate responsibility to respect and access to effective remedy. In relation to the responsibility to respect, I have explained that in addition to compliance with national laws, the baseline responsibility of companies is to respect human rights. To discharge the responsibility, I have recommended that companies conduct ongoing human rights due diligence whereby they become aware of, prevent, and mitigate adverse human rights impacts. The responsibility exists even where national laws are absent or not enforced because respecting rights is the very foundation of a company s social license to operate. It is recognized as such by virtually every voluntary business initiative, including the UN Global Compact, and soft law instruments such as the International Labour Organization Tripartite Declaration and the OECD Guidelines on Multinational Enterprises. Nevertheless, an understanding of national laws, including corporate law, remains vital to ensure companies understand and comply with their national legal obligations. Moreover, as my 2010 report to the Council highlights, companies may face noncompliance with corporate and securities laws where they fail to adequately assess and aggregate stakeholder-related risks, including human rights risks, and may thus be less likely to effectively disclose and mitigate them, as may be required. The Corporate Law Project s website is There you will find the original press release for this project; the research template the firms have agreed to follow; summary reports from two consultations held to date on the project; an over-arching trends paper bringing together the main themes from the firms surveys; and all completed firm surveys. My thanks again to all stakeholders who have contributed to this project. John G. Ruggie Special Representative of the UN Secretary-General on Business and Human Rights 3

4 ANSWERS TO UN QUESTIONNAIRES EXECUTIVE SUMMARY REGULATORY FRAMEWORK The Nigerian legal system belongs to the common law jurisdiction. The Constitution of the Federal Republic of Nigeria 1999 is the supreme law of the country to which every other law is subject. In Nigeria the conduct of business is regulated through federal legislation which is inclusive of the Companies and Allied Matters Act, Cap C20, Laws of the Federation of Nigeria, 2004 (CAMA), a law which regulates the formation, incorporation and winding up of companies in Nigeria, the Investment and Securities Act 2007, No. 29 (ISA), which is the primary legislation regulating the Nigerian capital market and the Banks and Other Financial Institutions Act, Cap B3 Laws of the Federation of Nigeria, 2004 (BOFIA) which regulates the activities of banks in Nigeria. Under these various laws, the bodies entrusted with regulating the conduct of business in Nigeria include the Corporate Affairs Commission, the Securities and Exchange Commission and the Central Bank of Nigeria. The Nigerian Stock Exchange was established as the Lagos Stock Exchange in 1961 by the Stock Exchange Act of It became known as the Nigerian Stock Exchange in December INCORPORATION AND LISTING The concept of limited liability and separate legal personality is a well established principle in Nigeria and is enshrined under CAMA. However there are certain exceptions to this concept which include; (1) where number of members fall below the legal minimum, (2) where number of directors of the company are less than two, (3) fraud, (4) reckless or fraudulent trading, (5) nonmention of company s name on a bill of exchange, (6) need to 4

5 ascertain reality of operations of holding and subsidiary companies, (7) investigation into related companies, (8) where the company is a sham and (9) the single enterprise/economic theory. In recent times a sense of duty to society and respect for human rights can be inferred from the provisions of certain laws which have been put in place to ensure the protection of fundamental human rights of individuals as well as protection of the environment. Examples are seen in Chapter IV of the 1999 Constitution of the Federal Republic of Nigeria, the Environmental Impact Assessment Act Cap E12, Laws of the Federation of Nigeria 2004 and the Harmful Waste (Special Criminal Provisions) Act Cap H1, Laws of the Federation of Nigeria DIRECTORS DUTIES Directors of a company by the provisions of CAMA owe a duty of care to the company, the shareholders and the employees. They stand in a fiduciary relationship towards the company and are to observe utmost good faith towards the company as well as have regard to the interests of the employees and shareholders. The duty to avoid legal risk and damage to the company s reputation can be implied from the fiduciary duties of directors as well as their duty of care and skill. There is also an implied obligation on companies to consider the impact of their activities on the rights of non-shareholders as well as avoid the infringement of the rights of such persons. The failure of a director to fulfill any of his duties renders him liable for breach of such duty, he may however have a defence if the court is of the opinion that he acted honestly and reasonably. In addition to the foregoing, Nigerian companies do not operate a two-tier board structure. 5

6 REPORTING Under the provisions of CAMA, companies are required to keep accounting records and the company directors are required to prepare financial statements for each year of operation, furthermore, the Environmental Impact Assessment Act Cap E12 Laws of the Federation of Nigeria 2004 mandates certain companies to submit an environmental impact assessment report on proposed projects which may adversely affect the environment. Although, CAMA does not provide for specific reporting obligations of the operations of companies on human rights, the environmental impact assessment report required to be submitted in accordance with the Environmental Impact Assessment Act must identify and assess the environmental effects of the proposed activities as well as any change the project may cause to the environment whether within or outside Nigeria. STAKEHOLDERS ENGAGEMENT We are not aware of any restrictions on shareholder proposals in Nigeria. There is also no express legislation requiring institutional investors and pension funds to consider the impact of their investment decisions on human rights. Generally, non-shareholders cannot attend a company s annual general meeting unless invited; the only non-shareholders entitled to address the company s annual general meeting are the secretary and the auditors of the company. Additionally, in the case of a company whose articles of association do not make shareholding a condition precedent for the appointment of the directors of a company, such a director although not a shareholder is entitled to address the company at its annual general meetings. 6

7 OTHER ISSUES OF CORPORATE GOVERNANCE There are in existence, certain codes of corporate governance in Nigeria created by the Government through the various regulatory bodies with the collaboration of the industry; these codes enjoin companies to conduct their business in a transparent manner, maintain ethical standards and comply with the laws of Nigeria. Nigeria however has no legislation requiring representation of certain constituencies like employees and communities on company boards. Neither are there particular laws prohibiting discrimination on company boards on the basis of gender, race or ethnic representation, however the Constitution of the Federal Republic of Nigeria states that a citizen of Nigeria shall not be subjected either expressly or by practical application to disabilities or restrictions to which other citizens of Nigeria are not made subject. In our view a significant challenge in Nigeria is that despite the existence of various laws and policies to safeguard human rights and encourage more responsible corporate behaviour, hurdles continue to exist as to the effective implementation and enforcement of these laws and policies. 7

8 SETTING THE LEGAL LANDSCAPE 1. Briefly explain the broader legal landscape regarding business and human rights. Business is defined as engaging in commercial activities as a means of livelihood or profit. The constitution of Nigeria enshrines a number of fundamental human rights that are attributable to individuals within Nigeria. Such rights include the right to life, right to the dignity of the human person, right to personal liberty, right to fair hearing, right to private and family life, right to freedom of thought, conscience and religion, right to freedom of expression and the press, right to peaceful assembly and association, right to freedom of movement, right to freedom from discrimination and the right to acquire immoveable property. In addition to the Constitution, there are other laws which aim to safeguard basic human rights, such as the Child s Right Act 2003, Trafficking in Persons (Prohibition) Law Enforcement Administration Act 2003, Trafficking in Persons (Power of Arrest, Search and Seizure) Regulations 2008, International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage 1971 (Ratification& Enforcement) Act 2006 (as amended), International Convention on Civil Liability for Oil Pollution Damage (Ratification & Enforcement) Act In view of the possible infringement of the rights of individuals by companies operating in Nigeria, particularly those engaged in the extractives industry, the Oil Pipelines Act and the Environmental Impact Assessment Act make provision for objections or comments from the public before the commencement of an activity that might 8

9 affect the environment as well as before the grant of an oil pipeline license to a person. 1 Furthermore companies, their directors and officers are usually liable where they commit an offence(s) under the laws that are binding on them. Such companies are usually bound to pay compensation to the individuals or communities who have been affected by their activities. In addition to the foregoing, there are certain codes of corporate governance in Nigeria that enjoin companies to carry out their businesses in a transparent manner and to comply with the laws of the land. While it is beyond the scope of this survey to explore this issue in detail, in our view a significant challenge in Nigeria is that despite the existence of various laws and policies to safeguard human rights and encourage more responsible corporate behaviour, hurdles continue to exist as to the effective implementation and enforcement of these laws and policies. REGULATORY FRAMEWORK 2. To what legal tradition does the jurisdiction belong, i.e. civil/common law, mixed Nigeria belongs to the common law jurisdiction. 3. Are corporate/securities laws regulated federally, provincially or both? In Nigeria, the corporate/securities laws are regulated federally. 4. Who are the government corporate/securities regulators and what are their respective powers? 1 Sections 8 and 9 Oil Pipelines Act Cap O7 LFN 2004 and Sections 7 and 8 Environmental Impact and Assessment Act Cap E12 LFN

10 The following are the government corporate/securities regulators: 4.1. The Securities and Exchange Commission- This body is established pursuant to the Investment and Securities Act 2007, No. 29. It is the apex regulator for the Nigerian capital market. The body is responsible for the registration and regulation of securities exchanges and offers of securities by public companies and entities. It also has the power to prohibit the trading in particular securities if in its opinion the interests of the public will be affected The Corporate Affairs Commission- This body which is charged with the duty of regulating the formation, incorporation and winding up of companies in Nigeria, is established by the Companies and Allied Matters Act, Cap C20, Laws of the Federation of Nigeria, 2004 (CAMA). This body also regulates the registration of business names and incorporated trustees in Nigeria The Central Bank of Nigeria This body is the apex bank in Nigeria and is established by the Banks and Other Financial Institutions Act, Cap B3 Laws of the Federation of Nigeria, It approves and regulates the operations of banks in Nigeria and is responsible for issuing banking licences to banks. It also regulates foreign exchange within the country. 5. Does the jurisdiction have a stock exchange(s)? Nigeria has a Stock Exchange. The Nigerian Stock Exchange was established in 1961 as the Lagos Stock Exchange by the Stock Exchanges Act of 1961 as a self-regulatory 2 Section 36 Investments and Securities Act

11 organisation. In December 1977 it became the Nigerian Stock Exchange. INCORPORATION AND LISTING 6. Do the concepts of limited liability and separate legal personality exist? The concepts of limited liability and separate legal personality of a body corporate are recognised by the laws in Nigeria. CAMA makes provision for the liability of the members of a company to be limited by the memorandum to the amount of unpaid shares held by them or in the case of a company limited by guarantee, to the amount undertaken by members to contribute to the assets of the company in the event of it being wound up. 3 Furthermore, CAMA provides that upon its incorporation, a company becomes an artificial legal person, separate and distinct from its members, having perpetual succession and a common seal, capable of exercising the power to hold land, and in sum, possessing all legal powers of a natural person of full capacity. 4 Although the legal personality of a company is distinct from that of its members, there are exceptional circumstances in which the law will disregard the separate corporate existence of a company and pay regard to the economic realities behind the legal façade, by lifting the veil of incorporation in the interest of justice. The following are instances wherein the veil of incorporation of a company can be lifted: 3 Section 21 of Companies and Allied Matters Act, Cap C20, Laws of the Federation of Nigeria 2004 (CAMA). 4 See generally Sections 37 & 38 CAMA and Marina Nominees Ltd. v. Federal Board of Inland Revenue (1986) 2 NWLR [Pt. 20] 48, Salomon v. Salomon (1986) A.C.22 11

12 6.1 Where the number of members fall below legal minimum The directors and officers are liable for the debts of a company where to their knowledge the company with less than two directors carries on business for more than six months Where the number of directors of the company is less than two. The directors and members are liable for the debts of the company where to their knowledge the company with less than two directors carries on business for more than sixty days Personal liability of directors and officers for fraud. By the provisions of CAMA, where a company receives money by way of loan or property for the execution of a specific purpose but fails to apply the money or property for that purpose, every director or officer who is in default will be liable to the party from whom the money or property was received Reckless or fraudulent trading Where in the course of winding up a company, it appears that the business of the company was carried on in a reckless manner or with the intention to defraud the creditors of the company or the creditors of any other person, the court may upon the application of the official receiver or the liquidator declare persons who were knowingly parties to the carrying of business in such a manner, personally 5 Section 93 CAMA. 6 Section 246 (3) CAMA. 7 Section 290 of CAMA. 12

13 responsible without the limitation of liability for all or any of the debts or other liabilities of the company Where the company is not mentioned on a bill of exchange. Every officer or person acting on behalf of such officer is liable to a holder of a bill of exchange which has been issued or authorized to be issued without the mention of the name of the company on such bill of exchange Holding and subsidiary companies Where there is the need to ascertain the reality of the operations of the holding company and its subsidiaries Investigation into Related Companies Where the Corporate Affairs Commission directs an investigation to be conducted on the affairs of a company, the investigation may where necessary be extended to the affairs of any related company to the extent that the extension is relevant to the main investigation and this might involve lifting the veil to ascertain the true nature of the affairs of the company in question. 6.8 Where the Company acts as Agent for Shareholders; or as a Sham The veil of incorporation is lifted in instances where the shareholders use the company as an agent and such shareholders will be held liable for the debts of the company. In Akande v. Omisade 11, the courts 8 Section 506 (1) of CAMA. 9 Section 548 of CAMA. 10 Section 336 to Suit No: FCA/L/108/80 of 4/5/83 (unreported). 13

14 held that if a company is formed for the express purpose of doing a wrongful or unlawful act or if it has been formed and those in control expressly direct a wrongful thing to be done, the individuals as well as the company are responsible to those to whom liability is legally owed. 6.9 Group of Companies, Single Enterprise/Single Economic Unit Theory. Where the courts are of the opinion that a group of companies are so related as to be recognised as a single enterprise, they may treat the acts of the group as acts of a single enterprise and may lift the veil when determining issues concerning the affairs of any member of the group. 7. Did incorporation or listing historically, or does it today, require any recognition of a duty to society, including respect for human rights? Historically, incorporation and listing did not require any recognition of a duty to society or respect for human rights. In recent times, though there is still no such requirement, companies are implicitly expected to carry out their activities in a manner that will not adversely affect the society. This can be inferred from the provisions of certain laws which have been put in place to ensure the protection of fundamental human rights of individuals as well as protection of the environment Do any stock exchanges have a responsible investment index, and is participation voluntary? (See e.g. the Johannesburg Stock Exchange s Socially Responsible Investment Index.) 12 Chapter 1V of the 1999 Constitution of the Federal Republic of Nigeria; Environmental Impact Assessment Act Cap E12, Laws of the Federation 2004; Harmful Waste (Special Criminal Provisions) Act Cap H1, Laws of the Federation

15 We are not aware of the existence of any responsible investment index in our jurisdiction and neither are we aware of any Nigerian company listed as a member of any of the international investment indices. DIRECTORS DUTIES 9. To whom are directors duties generally owed? The directors of a company primarily owe a duty of care to the company. By the provisions of CAMA, the directors are to act at all times in the interest of the company as a whole. 13 The directors in the performance of their duties are to have regard to the interests of the employees in general and the shareholders. This duty to act in the interest of the employees and the shareholders is however not directly owed to the employees and shareholders or enforceable by them but to the company itself. 10. Are there duties to avoid legal risk and damage to the company s reputation? If so, are they duties in their own right or are they incorporated into other duties? The duty of directors to avoid legal risks and damage to the company s reputation although not expressly stated in the Companies and Allied Matters Act could be implied from the fiduciary relationship of directors to the company as well as the duty to exercise care and skill. These duties enjoin directors of a company to observe utmost good faith towards the company in any transaction with it or on its behalf as well as to discharge their duties in good faith and with the degree of skill expected of a reasonable director. The failure to take reasonable care in 13 Section 279 (3) CAMA. 15

16 accordance with this duty will ground an action for negligence More generally, are directors required or permitted to consider the company s impacts on non-shareholders, including human rights impacts on the individuals and communities affected by the company s operations? Is the answer the same where the impacts occur outside the jurisdiction? Can or must directors consider such impacts by subsidiaries, suppliers and other business partners, whether occurring inside or outside the jurisdiction? (See e.g. s 172, UK Companies Act). a) By the general provisions of the Environmental Impact Assessment Act 15, there is an implied obligation on the part of the directors of certain companies such as telecommunication and oil extracting companies to consider the companies impacts on nonshareholders; this includes impacts that constitute a threat to the survival of individuals in the society. This implied obligation is derived from the provision of the Environmental Impact Assessment Act which prohibits the undertaking or authorization of a project or activity without the prior consideration of its environmental effects. 16 There is however no provision of CAMA that specifically requires the directors of a company to consider Human Rights impacts on nonshareholders, subsidiaries, suppliers or other business partners of the company. b) Generally, a company is bound by the laws of the country where it is incorporated. All companies incorporated in Nigeria, whether Nigerian or foreign, 14 See section 279 and 282 (Supra). 15 Cap E12 Laws of the Federation Section 2, Cap E12 Laws of the Federation

17 are bound to comply with most Nigerian laws, including the Environmental Impact Assessment Act. 12. If directors are required or permitted to consider the company s impacts on non-shareholders to what extent do they have a discretion in determining how to do so? There is no provision in CAMA that specifically requires directors to consider the impacts of the company on nonshareholders; to that extent they have discretion in fulfilling their duties as directors as regards impacts on non-shareholders especially in relation to human rights. Although there is no obligation imposed on the directors under CAMA, the Constitution of the Federal Republic of Nigeria which is the supreme law of the nation and which takes precedence over other laws is binding on both individuals and companies. In our view it is therefore possible to imply that the directors are bound to take into consideration impacts that will constitute a breach of any of the fundamental human rights provided in the constitution. Further the Environmental Impact Assessment Act requires companies to submit an environmental impact assessment report where the impact of the company s proposed project is likely to affect the environment. 13. What are the legal consequences of failing to fulfil any duties described above; and who may take action to initiate them? What are the defences available? Failure of a director to fulfill any of his duties renders him liable for breach of such duty. Although the general principle is that only the company can institute an action where a wrong has been done to the company, the law in certain circumstances permits the shareholders to institute 17

18 an action on behalf of the company. 17 The directors may however be exempt from liability for the breach of his duties where the court is of the opinion that such director acted honestly and reasonably and that having regard to the circumstances of the case, such director ought to be fairly excused. 14. Are there any other directors duties which might encourage a corporate culture respectful of human rights? Generally there are no other duties which directors owe, which may encourage a corporate culture respectful of human rights. 15. For all of the above, does the law provide guidance about the role of supervisory boards in cases of two tier board structures, as well as that of senior management? Nigerian companies do not operate a two-tier board structure. The directors duties in Nigeria are imposed by law and the senior management do not owe the same duties to the company as the directors. However, certain duties may be imposed on them under contractual terms or by codes of corporate governance. REPORTING 16. Are companies required or permitted to disclose the impacts of their operations ( includ ing human rights impacts) on nonshareholders, as well as any action taken or intended to address those impacts, whether as part of financial reporting obligations or a separate reporting regime? The Environmental Impact Assessment Act ( EIA ) 18 mandates certain companies such as telecommunication and multinational oil companies to submit an environmental impact assessment report on the effects of 17 Sections 262, 300,311, ,408(e) and 507 CAMA. 18 Section 1, Cap E 12 Laws of the Federation of Nigeria

19 their operations on the environment (whether adverse or favourable) in areas within Nigeria where the projects are proposed to be carried out. This is a condition precedent to the approval of their projects 19. The definition of environmental effect in the EIA is any change the project may cause to the environment, whether such change occurs within or outside Nigeria. It further includes any effect of such change on health and socio-economic conditions. The EIA also provides for the establishment of a review panel to consider an assessment of the international environmental effects of a project proposed to be conducted in Nigeria or on Federal lands and of which in the opinion of the president of Nigeria, such project is likely to cause serious adverse environmental effects outside of Nigeria and the Federal lands. 20 The objective of the environmental impact assessment report is to devise appropriate means to minimise undesirable and adverse environmental effects. The provisions of CAMA provide that every company should keep accounting records of the company. 21 The provisions of CAMA further mandate the directors of a company to prepare financial statements for each year of operation. The financial statements are to include among others the directors report, and the auditors reports, statements of the source and application of funds. 22 Where the company has subsidiaries, the directors are required to prepare group financial statements. 23 Companies are 19 Section 2 (Supra). 20 Section 48 EIA. 21 Section 331 CAMA 22 Section 334 CAMA 23 Section 336 CAMA. 19

20 further required to file their annual returns (the financial statements) with the Corporate Affairs Commission and can where they wish, post the statements on their website. The objective of the financial statements is to give the Corporate Affairs Commission a true and fair view of the state of affairs of the company. Notwithstanding the above, there is no direct obligation on the company to disclose the impact of their operations especially in relation to human rights impacts on nonshareholders. A company may report charitable contributions to the extent that they are financial contributions which would be included in the financial statement as part of the company expenditure. 17. Do reporting obligations extend to such impacts or actions outside the jurisdiction; to the impacts of subsidiaries, suppliers and other business partners, whether occurring inside or outside the jurisdiction? As stated above, there are no specific reporting obligations regarding impacts of a company s operations including human rights impacts under CAMA. Where the company by virtue of the industry within which its operations fall is required to report the environmental effects of certain proposed projects under the EIA, such obligations do not extend to subsidiaries, suppliers and other business partners. However, the environmental assessment report is to include specific information necessary to identify and assess the environmental effects of the proposed activities and from the definition of environmental effects within the EIA, these will be inclusive of the change the project may cause to the environment whether such change occurs within or outside Nigeria. 20

21 18. Who must verify these reports; who can access reports; and what are the legal consequences of failing to report or misrepresentation? The Federal Environmental Protection Agency is responsible for the verification of the environmental impact assessment report made pursuant to the EIA. The legal consequences for failing to report is that the company s project will not be approved by the Nigerian Environmental Protection Agency and in cases of misrepresentation, the company will be liable to pay a fine 24. Also where the company directors do not comply with the requirements of CAMA as regards the financial statements the directors would be guilty of an offence and liable to pay a fine 25. STAKEHOLDERS ENGAGEMENT 19. Are there any restrictions on circulating shareholder proposals which deal with impacts on non-shareholders, including human rights impacts? We are not aware of any restrictions on the circulation of shareholder proposals. The shareholders of a company have the right to be heard by the company without limitation to their respective shareholdings in the company and by virtue of this right; any shareholder can make proposals to the company which the company has the right to either accept or reject. However, in accepting a proposal made by a shareholder, the company is arguably bound by the provisions of the Nigerian constitution to ensure that such proposal does not constitute an infringement of the fundamental human rights of nonshareholders. 24 Section 60 Cap E12 LFN Section 346 of CAMA 21

22 20. Are institutional investors, including pension funds, required or permitted to consider such impacts in their investment decisions? There is no express legislation that requires institutional investors and pension funds to consider the impact of their investment decisions on human rights. 21. Can non-shareholders address companies annual general meetings? CAMA provides that only shareholders, persons to whom the ownership of a share devolves, directors of a company, auditors of a company and the company secretary are entitled to receive notices of a general meeting of the company. 26 Thus a non-shareholder cannot attend a company s annual general meeting unless invited and if invited such non-shareholder will neither be entitled to address the company nor vote at such general meeting. The only non-shareholders that can address the company at the annual general meeting of a company are the company secretary and the auditors of the company. 27 The law also entitles a shareholder to appoint a proxy to attend meetings of the company and such a proxy is entitled to exercise all the rights of the shareholder and can address the company meetings even where he is not a shareholder. 28 In addition to the foregoing, where the articles of a company do not make shareholding a condition precedent for the appointment of the directors of a company, such director although not a shareholder is entitled to address the company at its annual general meetings. 26 Section 219 CAMA. 27 Section 298 and 363 CAMA. 28 Section 230 CAMA. 22

23 OTHER ISSUES OF CORPORATE GOVERNANCE 22. Are there any other laws, policies, codes or guidelines related to corporate governance that might encourage companies to develop a corporate culture respectful of human rights, including through a human rights due diligence process? There are in existence certain codes of corporate governance in Nigeria such as the Code of Corporate Governance in Nigeria 2003 (this was formulated at the instance of the Security and Exchange Commission and the Corporate Affairs Commission), Code of Corporate Governance for Banks in Nigeria Post-Consolidation 2006, Code of Corporate Governance for Licensed Pension Operators 2008, and the Code of Corporate Governance for Insurance Industries in Nigeria These codes were created by the Government through the various regulatory bodies with the collaboration of the industry. The codes for the various sectors are binding on the relevant corporations that fall within them. The codes do not directly impact on human rights or make particular provisions regarding the environment; however they are intended to help in ensuring that companies conduct their business in a transparent manner, maintain ethical standards and comply with the laws of Nigeria. Also companies such as Shell and Chevron which are located in the oil producing regions of Nigeria have signed onto the Voluntary Principles for Security and Human Rights. These principles are to guide the companies in maintaining the safety and security of their operations within a framework that ensures the respect of human rights. However, in our view it should be noted that to date, Nigeria has no monitoring mechanism regarding these 23

24 principles and this makes it difficult to evaluate companies adherence to these principles. 23. Are there any laws requiring representation of particular constituencies (i.e. employees, representative of affected communities) on company boards? There is currently no legislation that requires certain constituencies like employees or communities to be represented on company boards. 24. Are there any laws requiring gender, racial/ethnic representation; or non-discrimination generally, on company boards? Although there is no specific law that prohibits discrimination on company boards, the Constitution of the Federal Republic of Nigeria states that a citizen of Nigeria shall not be subjected either expressly or by practical application to disabilities or restrictions to which other citizens of Nigeria are not made subject to. The Code of Corporate Governance in Nigeria 2003 also states that a company s board of directors should be composed in such a way as to ensure diversity of experience without compromising compatibility, integrity, availability, and independence. However there is nothing that suggests that this might apply to gender or racial diversity. The other codes of Corporate Governance make mention of the composition for the board of directors which should be followed by companies that fall within the relevant sectors; however there is nothing in the codes that expressly states that there should be the recognition of non-discrimination in the composition of a board of directors. Further, certain companies have codes of governance or best practice which preclude such companies from discriminating against an employee either on the basis of gender, race or ethnic representation. 24