CEOs banned from assuming the position of Board Chairman in the same Company – says SEC

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The Securities and Exchange Commission (SEC) has issued a new directive aimed at strengthening corporate governance and preventing the concentration of power in public companies and capital market operators. The directive prohibits Chief Executive Officers and Executive Directors from immediately assuming the position of Board Chairman within the same company or group after leaving office, introducing a mandatory three-year “cool off period” before such transitions can take place.

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The SEC expressed concern over the “worrying trend of the transmutation/conversion of Independent Non-Executive Directors (INEDs) to Executive Directors, including to the position of the Chief Executive Officer,” warning that such practices undermine board independence. “This practice clearly erodes the neutrality of the transmuting INEDs, compromises their ability going forward to provide objective judgment and is generally antithetical to the principles which underpin independent directorship,” the Commission stated

The new rules also introduce strict tenure limits for directors in Capital Market Operators considered to be of significant public interest. Directors will now be limited to 10 consecutive years in the same company and 12 years within the same group structure. A Chief Executive Officer or Executive Director who steps down after 10 or 12 consecutive years cannot be appointed as Chairman until the expiration of a 3-year “cool off period.” The tenure of such former Chief Executive Officer and Executive Director as Chairman shall be for a maximum of 4 years and no more.

“The foregoing directives take immediate effect and compliance is mandatory. Public Companies and Capital Market Operators are therefore required to take the directives into account in their board appointments and succession planning,” the SEC stated. The Commission also clarified that years already served by current officeholders will count toward the newly established tenure caps.

The SEC’s new directive is backed by its powers under Section 355(r)(iv) of the Investments and Securities Act (ISA) 2025, which authorizes it to set governance standards for regulated entities. The move is expected to promote board independence and enhance corporate governance practices in Nigeria’s capital market.

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