By: Jamiu
Akolade MCIArb

of the FRCN                 
The FRCN was created under the Financial
Reporting Council of Nigeria Act 2011 with the legislative intent to establish
a body to be ‘charged with the responsibility for, among other things,
developing and publishing accounting and financial reporting standards to be
observed in the preparation of financial statement of public entities in
. The
duties of the FRCN are stated under section 8 of the Act[2]. With regards
to the powers of the FRCN, it is clear that it has been empowered to among
other powers, enforce and approve enforcement of compliance with accounting,
auditing, corporate governance and financial reporting standards in Nigeria.[3]Ostensibly for
the purpose of exercising this power, a Directorate of Corporate Governance was
created under the Act to, among other duties, develop principles and practices
of corporate governance.[4]

of the FRCN’s powers: Eko Hotels v FRCN
However, with regards to the extent of the
applicability of the Act and the powers of the FRCN, it is clear from the Act
that such are restricted to ‘public interest entities’[5] which by the
meaning ascribed to that phrase under the Act excludes private companies that
routinely file returns only with the Corporate Affairs Commission and the
Federal Inland Revenue Service. The extent of the powers of the FRCN has been
tested in court in the case of Eko
Hotels v Financial Reporting Council of Nigeria[6]
. In
that case, the FRCN had sought to enforce its powers against Eko Hotels Limited
(EHL). EHL instituted an action at the Federal High Court challenging the
application of the Act to it as a private company on the ground that it was
excluded from the operations of the Act. The FRCN had written to EHL requesting
for evidence of compliance with the registration requirements of the Act and
payment of statutory and renewal dues. EHL responded by informing the FRCN that
it was a private company and that it only filed returns with the FIRS and CAC
and was therefore not a public interest entity as contemplated by the Act. The
FRCN however contended that EHL was a public interest entity because it filed
returns with the Nigerian Tourism Development Corporation.
The court ruled in favour of EHL on the
grounds that there is no provision in the Act which requires private companies
to be registered with the FRCN as the registration can only be extended to
public companies and public interest entities and that FRCN cannot seek to
exercise implied, incidental or consequential powers where there are no express
provisions in the Act empowering it to do so. Crucially, the court also held
that the functions and powers of the FRCN can only be exercised over public
interest entities, public companies, professional accountants and other
professionals engaged in the financial reporting process and the FRCN cannot
enlarge its regulatory powers beyond the limit provided in the statute.
Although FRCN has appealed this decision, it is still the position of the law
until it is set aside by a superior court[7].
It is our opinion that in view of the
decision of the court in Eko Hotels, the question of the applicability
of the provisions of the Act to private companies that only file returns with
the CAC and FIRS is not in doubt. Therefore, the applicability of the Code
should also be viewed within that prism. In this regard, we hold the view that
the Code is in the nature of a subsidiary legislation because it was made
pursuant to the powers of the FRCN donated by the Act[8]. As a
subsidiary legislation, the law is clear that it cannot contain provisions
which are contrary to the provisions of the enabling statute. In Barclays Bank of Nigeria Limited v Alhaji
, the Supreme
Court held that:
 “Subordinate legislation is invalid if it is repugnant to the general law
of the    country or if it
is repugnant to the provision of a statute which delegates to the    
    body or person making it, the powers so to do.” It is, however,
not bad merely         because it deals with something
which the general law does not deal with or because it makes unlawful something
which the general law does not make unlawful, but it must not, expressly or by
necessary implication, profess to alter the general law by making something
unlawful which the general law makes lawful, or vice versa, or by adding
something inconsistent with the provisions of a statute creating the same
offence”, (see on the subject of Bye Law: Halsbury Laws of England Vol. 26, 3rd
Edition, P. 516 Para 950). Accordingly, subordinate legislation ‘is prima
facie ultra vires if it is inconsistent with the substantive provisions of the
statute by which the enabling power is conferred” (which is not the case here)
“or of any other statute” (which is alleged or submitted to be the case here)
“and equally, of course, if it purports to affect existing statutes expressly”

(see Volume 36 Halsbury, Laws of England, 3rd Edition, Pages 491-492, Paragraph
743).” Per Idigbe, J.S.C. (Pp.19-20, Paras.G-E)”
Adopting the test laid down by the Supreme
Court in Barclays Bank above, the provisions of section 2 of the Code
which purports to make the Code applicable to (a) All public companies (whether
listed or not); (b) All private companies that are holding companies or
subsidiaries of public companies; and (c) All regulated private companies would
appear to be beyond the powers of the FRCN under the Act since the Act which is
the principal legislation has excluded private companies which only routinely
file returns with the CAC and FIRS[10]. Another
provision of the Code which conflict with the Act is Section 40.1.12 which
creates the concept of a ‘regulated private company’ which is defined as ‘private
companies that file returns to any regulatory authority other than the Federal
Inland Revenue Service and the Corporate Affairs Commission’
whereas no
such definition exists in the Act;
 The Code contradicts CAMA
Also, apart from the fact that the Code
contravenes the Act, it is also ultra vires the powers of the FRCN
because it conflicts with another statute – the Companies and Allied Matters
Act[11] (CAMA) which
regulates the operation of companies in Nigeria. For instance, the entire
provisions of section 6 of the Code regarding the election of directors and
chairman of boards of directors as well as regulating meetings of the board are
either conflicting with CAMA or alter its provisions. This would amount to an
implicit amendment or repeal of the provisions of CAMA which is beyond the
powers of FRCN.
In view of the foregoing, we are of the
view that the application of the Code to all private companies without taking
cognisance of the exceptions under the Act is unlawful and beyond the powers of
the FRCN. Also, even if the Code were applicable to all private companies the
provisions of the Code which are contrary to CAMA are likely to be declared
null and void by a court of law. The FRCN therefore needs to engage with
all stakeholders with a view to revising the Code to identify the conflicting
provisions highlighted above.
This piece represents the view of the writer and does not constitute legal
opinion. We welcome comments and questions regarding the issues raised.
See the Long Title to the Act.
“a.   Develop and
publish accounting and financial reporting standards to be observed in the
preparation of financial statement of public interest entities;
Review, promote and enforce compliance with
the accounting and financial reporting standards adopted by the Council;
Receive notices of non-compliance with
approved standards from preparers, users, other third parties or auditors of
financial statements;
Receive copies of annual reports and
financial statements of public interest entities from preparers within 60 days
of the approval of the Board;
Advise the Federal Government on matters
relating to accounting and financial reporting standards;
Maintain a register of professional
accountants and other professionals engaged in the financial reporting process;
g   Monitor
compliance with the reporting requirements specified in the adopted code of
corporate governance;
Promote compliance with the adopted standards issued by the International
Federation of Accountants and International Accounting Standards Board;
Monitor and promote education, research and training in the fields of
accounting, auditing, financial reporting and corporate governance;
j   Conduct practice reviews of registered professionals ;
k Review financial statements and reports of public interest entities;
l Enforce compliance with the Act and the rules of the Council on registered
professionals and the affected public interest entities;
m  Establish such systems, schemes or engage in any relevant activity, either
alone or in conjunction with any other organization or agency, whether local or
international, for the discharge of its functions;
n Receive copies of all qualified reports together with detailed explanations for
such qualifications from auditors of the financial statements within a period
of 30 days from the date of such qualification and such reports shall not be
announced to the public until all accounting issues relating to the reports are
resolved by the Council;
o Adopt and keep up-to-date accounting and financial reporting standards, and
ensure consistency between standards issued and the International Financial
Reporting Standards;
p. Specify, in the accounting and financial reporting standards, the minimum
requirements for recognition, measurement, presentation and disclosure in
annual financial statements, group annual financial statements or other
financial reports which every public interest entity shall comply with, in the
preparation of financial statements and reports;
Develop or adopt and keep up-to-date auditing standards issued by relevant
professional bodies and ensure consistency between the standards issued and the
auditing standards and pronouncements of the International Auditing and
Assurance Standards Board; and
Perform such other functions which in the opinion of the Board are necessary or
expedient to ensure the efficient performance of the functions of the Council.
Section 7(2) (a) Ibid.
Sections 49 and 50 Ibid.
“Public Interest Entities” under the Act means governments, government
organizations, quoted and unquoted companies and all other organizations which
are required by law to file returns with regulatory authorities and this
excludes private companies that routinely file returns only with the Corporate
Affairs Commission and the Federal Inland Revenue Service.
(Unreported: Suit No. FHC/L/CS/1430/2012 delivered on 21/03/2014)
See Vaswani v. Savalakh (1972) 12 SC 77.
Njoku v Iheanatu (2008) LPELR-3871(CA) the Court of Appeal held that:
subsidiary legislation or enactment is one that was subsequently made or
enacted under and pursuant to the power conferred by the principal legislation
or enactment. It derives its force and efficacy from the principal legislation
to which it is therefore secondary and complimentary’. 
(1978) 6-7 S.C
[10] See
section 2.1 of the Code viz Section 77 of the Act
Cap C20 LFN 2004.
Ed’s Note: This article was
originally published here.