Attracting Investments Through Corporate Governance: What Companies and Start-Ups Seeking Funding in Nigeria Need to Know.


Corporate governance refers to the set or system of rules, practices, and processes that direct, controls, or determines a company’s operations and ensures balancing the various company stakeholder interests. i.e. shareholders/Investors, senior management executives, customers, suppliers, financiers, the government, and the community. A critical reason for corporate governance by companies, especially those seeking funding, is to improve investor confidence in the said Company. Between 2020 and Q1 2021, the Nigerian start-up ecosystem witnessed several fund- raising milestones. There is no end to this in sight. Many have argued that better investor protections increase the readiness of investors to provide financing to companies. Consequently, companies (including private companies and start-ups) seeking investments/funding need to ensure compatibility with Corporate Governance best practices to increase their attractiveness for investor financing.

In 2019, the Nigerian Minister of Trade and Investment, Mr Okechukwu Enelamah, issued the Regulation on the Adoption and Compliance with the Nigerian Code of Corporate Governance of 2018 “NCCG 2018” initially approved by the Financial Reporting Council of Nigeria (“FRCN”). The focus of this Regulation was to institutionalise an across board corporate governance standard for all Nigerian companies considering that the previous sector-specific codes were limited in their application. The NCCG 2018’s application extends to entities listed therein to wit: all public companies (listed and unlisted); all private companies that are holding companies of listed companies or other regulated entities; all concessioned or privatised companies; and all regulated private companies (i.e. private companies that file a return with any regulator other than the Corporate affairs commission and the Federal Inland Revenue Service. While generic start-ups not contained hereunder, the need to have sound corporate governance remain critical for funding by investors.
The Code provides for a principle-based “Apply and Explain” approach which cuts across six core areas, all of which affect investor confidence to wit: Board of Directors and Officers or the Board, Assurance; Relationship with Shareholders, Business Conduct and Ethics, Sustainability and Transparency.

1. Board of Directors and Officers or the Board:

The Board’s role is to give sound entrepreneurial and strategic business leadership to a company; investors look to find this trait and capacity in the board composition. However, beyond this, the Board is also required to promote an ethical culture and drive responsible corporate citizenship, which all add up to the Company’s corporate governance point. Hereunder, the NCCG 2018 makes recommendations, many of which could impact investor confidence in the Company and affect their For example, the Code recommends that:

  • The Board should be of sufficient size to effectively undertake and fulfil its business; to oversee, monitor, direct and control the Company’s activities and be relative to the scale and complexity of its operations.1 [Note: As opposed to preceding codes that prescribe a minimum or a maximum number of directors comprising the Board, the NCCG 2018 is more focused on the relativity of the Board’s size to the Company’s ];
  • The Board should promote diversity in its membership across a variety of attributes relevant for promoting better decision- making and effective governance. These attributes include a field of knowledge, skills and experience, and age, culture, and The Board should have the policy to govern this process and establish measurable objectives for achieving diversity in gender and other areas.2 [Note: This particularly instructive considering that there exist diversity-led investors. We find that there are investors who, beyond the idea or business of the Company, look to see how much effort is placed on diversity by the Company.];
  • No individual or small group of individuals should dominate the Board’s decision-making and the positions of the Chairman of the Board3 and the Managing Director/Chief Executive Officer (MD/CEO) of the Company should be separate such that no person can combine the two positions.4 [Note: The main focus here is to spread control and reduce absolutism to promote objectivity in achieving the Company’s goals. This creates confidence in the investors in that their interest is better to secure with this dilution.]
  • The Chairman of the Board should be a NED and not be involved in the Company’s day-to-day operations, which should be the primary responsibility of the MD/CEO and the management team.5 Also, generally, the MD/CEO or an Executive Director (ED) should not subsequently be the Chairman of the same Company.6 However, where the Board decides that a former MD/CEO or an ED should become Chairman, the Company should adopt a cool-off period of three years.7

2. Assurance:

Assurance covers issues such as risk management, internal and external audits and Whistleblowing. Some of the critical points hereunder that, if implemented, could positively affect investor attitude and confidence. For example, the Board is encouraged to:

  • Establish a risk management framework that defines the Company’s risk policy, risk appetite, and risk limits and identifies, assesses, monitors, and manages critical business risks to safeguards shareholders’ investments and the Company’s assets.8
  • articulate, implement and review the Company’s internal control systems to strengthen the risk management framework;9
  • conduct at least annually, or more often in companies with complex operations, a thorough risk assessment covering all aspects of the Company’s business and ensure that mitigating strategies have been put in place to manage identified risks10
  • Ensure the internal audit function should be headed by a member of senior management who is a professional with relevant qualifications, competence, objectivity and experience; and is registered with a recognised professional body.11
  • Ensure there is an external assessment of the effectiveness of the internal audit function at least once every three years by a qualified independent reviewer to be appointed by the Board.12
  • Appoint External auditors to subject to the extent applicable laws.13 And that to protect the integrity of the external audit, the Company may retain such external audit firms for no longer than ten years continuously.14 External audit firms disengaged after ten years of continuous service may not be considered for reappointment until seven years after their disengagement.15

3. Relationship with Shareholders:

One way to attract investor confidence is to show the Company has a positive demeanour towards engaging shareholders. The NNCG 2018 recommends that:

  • General Meetings should be conducted in an open manner allowing for free discussions on all issues on the agenda. Sufficient time should be allocated to shareholders, particularly minorities, to participate fully and contribute effectively at such meetings.16
  • The venue of a General Meeting should be accessible to shareholders to ensure that shareholders are not disenfranchised on account of the choice of venue.17
  • The Board should develop a policy that ensures appropriate engagement with shareholders.18

4. Business Conduct and Ethics:

The presence of professional business and ethical standards advances the protection of and enhances the Company’s reputation while simultaneously fostering good conduct and investor confidence. The NCCG 2018 recommends that:

  • The Board should model a top-down commitment to professional business and ethical standards by formulating and periodically reviewing the Code of Business Conduct and Ethics.19
  • The Board should be responsible for monitoring adherence to the Code of Business Conduct and Ethics to ensure that breaches are effectively sanctioned.20

5. Sustainability:

Sustainability road map is one attractive feature companies and start-ups looking to get funding should have. This road map may concern the environment, social welfare, occupation, health, etc. The NCCG 2018 recommends that:

  • The Board should establish policies and practices regarding its social, ethical, safety, working conditions, health and environmental responsibilities, and policies addressing corruption.21
  • The Board should monitor the implementation of sustainability policies and report the extent of compliance with the guidelines.22

6. Transparency:

The central focus herein concerns stakeholder communication and disclosures. Investors require constant information to keep abreast of the Company’s activities and are entitled to the Company’s disclosures where necessary. Of all the modes of attracting investor confidence, this appears to be the most significant. The NCCG 2018 recommends that:

  • The Board should adopt and implement a stakeholder management and communication policy.23
  • The Board should ensure that the reports and other communication issued to stakeholders are in clear and easily understood language.24
  • The Board should ensure that the Company’s annual report includes a corporate governance report that provides clear information on the Company’s governance structures, policies and practices, and environmental and social risks and opportunities.25
  • The Board should use its best judgment to disclose any material matter even though not explicitly required by this Code to be disclosed if, in the Board’s opinion, it can affect the present or anticipated financial condition of the Company or its status as a going concern. The onus of proof of such possible adverse effect is on the Board.26
  • The Company should establish policies and procedures for the identification, communication and response to concerns from stakeholders.27


Overall, corporate governance covers principles set by companies to direct their operations. A company or start-up that prioritises strong and transparent corporate governance makes better ethical decisions that benefit its operations and its stakeholders. Critically, this positions the Company as an attractive ground for investment, especially where the said Company’s financial projections are simultaneously promising. It is essential to note that although the NCCG imposes no penalty for non-compliance with its provisions, the NCCG states that the implementation of the NCCG will be monitored by the FRCN through the various sectoral regulators and registered exchanges with such power impose appropriate sanctions for non-compliance.



1 Principle 2 Recommendation 2.1 NCCG 2018

2 Principle 2 Recommendation 2.4 NCCG 2018

3 Principle 2 Recommendation 2.6 NCCG 2018


4 Principle 2 Recommendation 2.7 NCCG 2018

5 Principle 3 Recommendation 3.2 NCCG 2018

6 Principle 3 Recommendation 3.3 NCCG 2018

7 Ibid

8 Principle 17 Recommendation 17.1 NCCG 2018

9Principle 17 Recommendation 17.4 NCCG 2018

10 Principle 17 Recommendation 17.5 NCCG 2018

11 Principle 17 Recommendation 17.8 NCCG 2018

12 Principle 18 Recommendation 18.6 NCCG 2018

13 Principle 20 Recommendation 20.1 NCCG 2018

14 Principle 20 Recommendation 20.2 NCCG 2018

15 Ibid

16 Principle 21 Recommendation 21.1 NCCG 2018

17 Principle 21 Recommendation 21.2 NCCG 2018

18 Principle 22 Recommendation 22.1 NCCG 2018

19 Principle 24 Recommendation 24.1 NCCG 2018

20 Principle 24 Recommendation 24.2 NCCG 2018

21 Principle 26 Recommendation 26.1 NCCG 2018

22 Principle 26 Recommendation 26.3 NCCG 2018

23 Principle 27 Recommendation 27.1 NCCG 2018

24 Principle 27 Recommendation 27.2 NCCG 2018

25 Principle 28 Recommendation 28.1 NCCG 2018

26 Principle 28 Recommendation 28.4 NCCG 2018

27 Principle 28 Recommendation 28.9 NCCG 2018

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