The Securities and Exchange Commission (SEC) has issued a new directive prohibiting Independent Non-Executive Directors (INEDs) from transitioning into Executive Director roles within the same company or corporate group, as part of broader reforms to strengthen corporate governance in Nigeria.
In a circular addressed to all public companies and capital market operators, titled “Circular to All Public Companies and Capital Market Operators on the Transmutation of Independent Non-Executive Directors and Tenure of Directors,” the SEC emphasized that allowing INEDs to shift into executive positions compromises board independence and weakens objective oversight.
The regulatory body warned that such transitions contradict the principles outlined in the National Code of Corporate Governance (NCCG) and the SEC Corporate Governance Guidelines (SCGG), both of which stress the importance of impartial judgment in board functions. The SEC described the growing trend of rotating directorship roles among individuals within the same entity or group as a serious threat to transparency and accountability in corporate leadership.
In addition to banning the transmutation of INEDs into executive roles, the SEC introduced a mandatory three-year cooling-off period before a former Chief Executive Officer (CEO) or Executive Director can assume the role of Chairman in the same company. This measure aims to reinforce the separation of powers between management and oversight, promoting clearer governance structures across listed firms and significant public interest entities.
The circular also standardizes tenure limits for directors. Under the new rules, Directors of Capital Market Operators classified as significant public interest entities are restricted to a maximum of 10 consecutive years on the same company’s board, and up to 12 consecutive years within the same corporate group. Former CEOs or Executive Directors who complete their tenure must observe a three-year gap before being eligible for appointment as Chairman, and any such appointment may not exceed four years.
The SEC clarified that these directives take immediate effect and require full compliance by all affected entities. Companies must incorporate these guidelines into board appointments and succession planning processes without delay. Furthermore, time already served by current appointees will count toward the total allowable tenure under the new policy.
By implementing these measures, the SEC reaffirms its commitment to fostering stronger, more transparent governance practices across Nigeria’s capital markets, ensuring long-term accountability and investor confidence.
Follow us on Instagram.
https://www.instagram.com/businessnewsng?igsh=ZXpweTdjOGF1ZXdu
