How much power should a regulator have over an organisation, and where should that power end? This question goes to the heart of corporate governance. Regulators are expected to enforce the law, protect stakeholders and address misconduct. At the same time, organisations need room to manage their affairs, make decisions and fulfil their mandates without unwarranted interference. Striking the right balance is a continuing challenge for boards and public authorities.
A recent Court of Appeal decision concerning provisions of Nigeria’s Companies and Allied Matters Act (CAMA), 2020, has brought this question into focus. The court affirmed the nullification of eight provisions governing incorporated trustees, finding that they infringed upon constitutionally protected freedoms of religion and association. It also modified the lower court’s decision on a separate provision governing administrative proceedings, restricting the extent to which an administrative committee could exercise judicial powers while preserving its other administrative and regulatory functions. The decision raises a question that extends beyond the immediate legal dispute: how can oversight prevent abuse without creating another source of it?
The Purpose and Limits of Regulation
Regulation serves a necessary purpose. Organisations manage funds, employ people, enter into contracts and make decisions that affect members, customers, beneficiaries and the wider public. Without appropriate supervision, misconduct may go undetected, financial resources may be mismanaged, and those entrusted with leadership may face insufficient scrutiny. Regulatory authorities therefore require powers to investigate suspected breaches, enforce statutory obligations and respond to established failures. However, the possession of such powers does not mean that they should be exercised without clear limits.
Where legislation grants extensive discretion to a regulator, questions may arise about the grounds for intervention, the procedures to be followed and the safeguards available to affected organisations. These questions become particularly important when an intervention could alter leadership arrangements, transfer control of assets or disrupt an institution’s operations. The distinction between legitimate oversight and excessive control lies partly in the clarity of the law and the manner in which regulatory powers are exercised. Authority must have a legal basis, serve a lawful purpose and remain subject to the safeguards prescribed by law. For boards, this is a reminder that compliance involves more than responding to regulatory demands. It also requires an understanding of the organisation’s legal responsibilities and the limits of the powers exercised by those who supervise it.
Independence Does Not Remove Accountability
Institutional independence is important because organisations need to make decisions in accordance with their objectives and legitimate responsibilities. This is particularly relevant to incorporated trustees, professional associations, charities and other bodies whose activities depend on the decisions of their governing councils.
However, independence should not be confused with immunity from scrutiny. An organisation that enjoys freedom to manage its affairs must still demonstrate that its leadership is acting responsibly. Boards and trustees have a duty to safeguard organisational assets, monitor financial performance, manage risks and ensure compliance with applicable laws. They must also establish clear procedures for approving expenditure, managing conflicts of interest, handling complaints and addressing allegations of misconduct.
Weak internal controls can expose an organisation to financial losses, disputes and reputational damage. They may also undermine the confidence of members, donors, beneficiaries and other stakeholders. The responsibility for sound governance therefore rests first with those entrusted with leadership. External regulation cannot replace the judgement, discipline and accountability expected of a governing body.
A well-governed institution should be able to demonstrate that its independence is supported by proper records, transparent decisions and credible oversight arrangements. These measures help protect its autonomy while showing that its leadership is answerable for the use of its authority.
When Intervention Requires Greater Scrutiny
Regulatory intervention may be justified where an organisation fails to meet its legal obligations or where credible evidence points to serious misconduct. The challenge is to ensure that the response is appropriate to the circumstances and consistent with the law.
Intervention affecting the appointment or removal of trustees, the control of funds, or the management of an organisation can have consequences beyond the immediate concern that prompted it. It may affect employees, beneficiaries, members, creditors and other parties who depend on the institution’s continued operation.
For this reason, the grounds for intervention should be clear, the procedures fair and the measures taken proportionate to the problem being addressed. Those affected should have access to the remedies and review procedures provided by law.
The distinction between administrative and judicial functions also matters. Regulators may investigate complaints and take administrative action within their statutory mandates. However, the determination of disputes requiring judicial authority must respect the constitutional powers of the courts.
The recent appellate decision illustrates the importance of these distinctions. Its treatment of the provisions governing incorporated trustees, alongside its more limited ruling on administrative proceedings, demonstrates that questions about regulatory power may require separate consideration of the authority granted by each provision.
For governance practitioners, the lesson is not that intervention is inherently wrong. Rather, the legitimacy of an intervention depends on its legal basis, purpose, procedure and scope.
What Boards Should Do
The issues raised by the decision have practical implications for directors, trustees and governing councils. Boards should review their governing documents and internal policies regularly. Responsibilities, approval limits and procedures for resolving disputes should be clearly stated. Ambiguity over who may make decisions can create internal conflict and increase exposure to legal challenges.
Governing bodies should strengthen financial controls and independent oversight. Regular audits, accurate financial records, conflict-of-interest declarations and clear reporting lines help identify problems before they become serious failures.
Organisations should maintain constructive relationships with regulators. Timely responses to lawful requests, accurate records and a clear understanding of statutory obligations can reduce avoidable disputes. Where the scope of a regulatory demand is uncertain, appropriate legal advice can help establish the organisation’s obligations and available options. Finally, boards should treat legal and regulatory developments as part of their risk oversight responsibilities. Changes in legislation and court decisions may affect existing policies, governance arrangements and compliance procedures. These developments should be assessed and, where necessary, brought to the board’s attention for appropriate action.
The Balance That Good Governance Requires
The debate over regulatory power and institutional independence should not be reduced to a choice between unrestricted oversight and unrestricted autonomy. Neither extreme provides a sound basis for responsible governance.
Regulators need sufficient authority to enforce the law and address genuine failures. Organisations, in turn, must be able to manage their affairs within the law while remaining accountable for their decisions. Both responsibilities depend on clear rules, fair procedures and respect for the proper limits of authority.
For boards, the enduring lesson is that independence must be supported by responsible leadership, while oversight must remain subject to legal restraint. The strength of a governance system lies not in the concentration of power, but in the clarity of its limits and the accountability of those who exercise it.