Court nullifies FRC’s decision on audit committee chair qualification

The Financial Reporting Council of Nigeria (FRCN’s) decision on audit committee chairman’s qualification has been reversed, as shareholders under the aegis of Independent Shareholders Association of Nigeria (ISAN), on Friday, won the case against the Council.

The FRCN had in 2015, issued and published a statement that “any person attesting as Chairman of Audit Committee to annual report statement, accounts, financial report, return, and other documents of a financial nature, shall be a professional member of an accounting body established by act of the National Assembly.”

But ISAN considered the FRCN Rule 2(c) as an anomaly, and meddlesome in the extreme, saying it was against the letters and spirit of the Companies and Allied Matters Act (CAMA) Section 359.In a statement dated December 29, 2017, also made available to The Guardian, the National Coordinator of ISAN, Adeniyi Adebisi, explained that they engaged the Executive Secretary of the FRCN on a number of occasions to reverse the contentious rule, but the Council refused.

“It insisted that a chairman of an Audit Committee of a public quoted company must be one professionally qualified as an accountant. To add salt to injury, public companies that could not provide a professionally qualified accountant as their Audit Committee chairman were required to apply for a waiver before their annual accounts can be approved.

“FRCN collects a sum of N600,000 for the so called waiver to be granted. In view of this rascally behaviour of the FRCN, our Association felt compelled to institute a legal action under SUIT NO FHC/L/ CS/1026/16 before Justice A. O. Faji, with Barrister Chuks Chukwemeka, as our lead counsel,” Adebisi said.

He explained that ISAN had urged the High Court to: set aside the publication purporting to be rules made by FRCN (Defendant); set aside any other directive of FRCN to companies incorporated under the CAMA published on its websites or by any other means on the qualification for membership, headship or composition of an audit committee. It further solicited the court to set aside any directive to any quoted company or any imposition of any sanction upon any quoted company or any director or officer, or any other agent of other professional engaged by any quoted company among others.

Adebisi quoted that in his ruling, Justice A. O. Faji, declared that “The defendant has no power under the FRCN Act to prescribe any standard of financial reporting or any other standard that requires of any company incorporated under the CAMA anything that is inconsistent with or that modifies in any respect any provision of the CAMA. The defendant is bound to exercise its functions in accordance with any law in force in the country and therefore may not prescribe any standard or make any other prescription, which is inconsistent with any other law made by the National Assembly.

“In the absence of the board established for the defendant and charged with overall control of the defendant under the Financial Reporting Council of Nigeria Act neither the Executive Secretary of the defendant nor any other persons can constitute themselves into the defendant or act in the name of the defendant to be exercised by the defendant to affect the legal rights and obligations of any person outside of the defendant under the Financial Reporting Council of Nigeria Act.”

Adebisi therefore argued that with this declaration, Rule 2(c) of the FRCN is now null and void. “Luckily, the ISAN will continue in its struggle to be the regulators of regulators to check persistent impunities of various government regulatory agencies in the capital market. “While doing this, we will need the cooperation of relevant government agencies, public quoted companies, shareholders’ groups and of course, fellow shareholders. Together, we shall all be better for it.”