The Securities and Exchange Commission (SEC) has introduced new corporate governance rules prohibiting Chief Executive Officers (CEOs) from transitioning directly into board chairmanship roles within the same company or corporate group. A mandatory three-year “cooling-off” period has now been instituted.
The directive was contained in a circular released on Saturday, titled “Circular to All Public Companies and Capital Market Operators on the Transmutation of Independent Non-Executive Directors and Tenure of Directors.” It also bars Independent Non-Executive Directors (INEDs) from becoming Executive Directors in the same company or its group structure.
According to the SEC, these measures are aimed at preserving board independence and upholding sound corporate governance principles in Nigeria’s capital market.
“The Commission has observed a worrying trend of the transmutation of Independent Non-Executive Directors into Executive Directors, including the position of Chief Executive Officer,” the circular stated.
“This practice compromises the neutrality and objectivity expected of INEDs and undermines the core principles of independent directorship as outlined in the National Code of Corporate Governance (NCCG) and the SEC Corporate Governance Guidelines (SCGG).”
As such, the SEC directed all public companies and capital market operators to immediately discontinue the conversion of INEDs into executive roles within the same company or group.
On the issue of board succession, the Commission also introduced tenure limits and transition restrictions to promote transparency and prevent the undue concentration of power.
Specifically, the SEC stated that CEOs or Executive Directors who have served for 10 consecutive years in a company, or 12 consecutive years within a group, must step down. Such individuals may not be appointed as Chairman of the same company or group until after a mandatory three-year cooling-off period.
If appointed as Chairman following this period, their tenure must not exceed four years.
The Commission emphasized that these directives are backed by its powers under Section 355(r)(iv) of the Investments and Securities Act (ISA), 2025, which empowers it to prescribe corporate governance standards for regulated entities.
“These directives take immediate effect, and compliance is mandatory. Public companies and capital market operators are to incorporate these rules into their board appointments and succession planning,” the SEC stated.
It further clarified that the years already served by current appointees will count toward the newly established 10- and 12-year tenure limits.
These sweeping reforms are part of the Commission’s ongoing efforts to strengthen corporate governance, promote transparency, and protect investor interests across Nigeria’s capital markets.