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FRC Rule 2(c): Court sets aside qualification of audit committee chairman

By Peter Egwuatu

A FEDERAL high court sitting in Lagos has overruled Financial Reporting Council, FRC,  Rule 2(c) that only qualified accountants can be a chairman of the audit committee of a Public Liability Company, Plc.

Under SUIT NO FHC/L/ CS/1026/16 before Justice A O Faji with Barrister Chuks Chukwemeka as the lead counsel for Independent Shareholders Association of Nigeria, ISAN, the court stated that: “ The defendant, FRC has no power under the Financial Reporting Council of Nigeria Act to make any rule stipulating a qualification for membership or headship of audit committees of companies incorporated under the Companies and Allied Matters Act, CAMA; the defendant has no power under the Financial Reporting Council of Nigeria Act to prescribe any standard of financial reporting or any other standard that requires of any company incorporated under the Companies and Allied Matters Act anything that is inconsistent with or that modifies in any respect any provision of the Companies and Allied Matters   Act and 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.”

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In a press statement made available to Vanguard, the National Coordinator, ISAN, Mr. Adeniyi  A. Adebisi, said: “We as an Association considered the Rule 2(c) of the FRCN as an anomaly and meddlesome in the extreme because it was against the letters and spirit of the Companies and Allied Matters Act (CAMA) section 359.

We engaged the Executive Secretary of the FRCN on a number of occasions to reverse itself regarding the said rule, but it refused to do so. 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 N600,000.00 for the so called waiver to be granted.”

To this development, he said:” Given this ruling,  affected companies should be able to apply and collect refunds from FRCN for the N600,000 received for waivers under the Rule 2(c) which is now declared null and void.”


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