The Securities and Exchange Commission (SEC) has banned Independent Non-Executive Directors (INEDs) from becoming Executive Directors in the same company or corporate group. This decision aims to protect board independence and strengthen governance across Nigeria’s capital markets.
The SEC shared this directive in a recent circular. It was titled: “Circular to All Public Companies and Capital Market Operators on the Transmutation of Independent Non-Executive Directors and Tenure of Directors.” The Commission noted a growing trend where INEDs were later appointed to executive roles, including that of Chief Executive Officer (CEO). According to the SEC, this practice weakens the objectivity expected from independent board members.
The Commission stated that such transitions go against the principles of good governance. It also added that this undermines rules outlined in the National Code of Corporate Governance and the SEC’s own guidelines. For this reason, the SEC has ordered public companies and major capital market operators to stop this practice immediately.
In addition, the SEC introduced a new rule. A CEO who steps down cannot become Chairman of the same company right away. There must be a three-year cooling-off period. This ensures a clear line between leadership and oversight roles.
The circular also introduced term limits. Directors can now serve up to ten consecutive years in a single company. Within a group structure, the limit is twelve years. After that, they must leave their position. If a former CEO or Executive Director is appointed Chairman, it must be after the three-year break. Their term as Chairman can then last a maximum of four years.
