Companies and Allied Matters Act, 2020 – Why the Mixed Reactions?


Being a paper delivered on 2nd day of October, 2020 at the lecture organized by the Christian Association of Nigeria [CAN], Ijebu Ode, Ogun State, Nigeria holden at Cathedral Church of Our Savior, Italowajoda, Ijebu Ode, Ogun State.


Speaker: Moruff O. Balogun, Esq.,
Public Relations Officer,
Nigerian Bar Association,
Ijebu Ode Branch,Ogun State.

Introduction:

The President of the Federal Republic of Nigeria, President Muhammadu Buhari signed into law the Companies and Allied matters Act (CAMA) on 7TH day of August, 2020.

Some prominent Nigerians especially the business owners have submitted that the new CAMA is Nigeria’s most significant business legislation in three decades, and it introduces new provisions that promote businesses and reduce regulatory hurdles.

The old CAMA was enacted in 1990, and the National Assembly deemed it fit and proper to legally incorporate the developments which the corporate sector of the economy had witnessed over time into an Act. Hence CAMA 2020 came into being.

The essence of this lecture is to analyse and discuss the effects of the provisions of new CAMA on religious bodies, and it would not be out of place to expeditiously and briefly mention other new innovations as contained in CAMA 2020 in the passing.

For example:

Enhancement of minority shareholder protection and engagement:
S. 265 (6) restricts firm from appointing a director to hold the office of the Chairman and Chief Executive officer of a private company.
Provision of single member/shareholder companies:
S.18 (2) of the new CAMA now makes it possible to establish a private company with only one (1) member or shareholder.
Procurement of a Common Seal is no longer a mandatory requirement:
The procurement of a Common Seal is no longer a mandatory requirement according to S.98 of the new CAMA: Every company is required under the previous Act to have a common seal, the use of which is to be regulated by the Articles of Association. This amendment is in line with international best practices as most jurisdictions around the world have expunged the requirement from their respective laws.

Provision for electronic filing, electronic share transfer and e-meetings for private companies : The new CAMA makes provision for electronic filing, electronic share transfer and e-meetings for private companies. S.861 of the new CAMA provides that certified true copies of electronically filed documents are admissible in evidence, with equal validity with the original documents. S.176 (1) also provides that instruments of transfer of shares shall include electronic instruments of transfer.
Provision for virtual Annual General Meetings :
The new CAMA also provides for remote or virtual general meetings, provided that such meetings are conducted in accordance with the Articles of Association of the company. This will facilitate participation at such meetings from any location within and outside the shores of the country, at minimal costs. This is especially relevant today given the disruptions caused by the Covid-19 pandemic to company operations around the world.
Exemption from appointing Auditors -:
Small companies or any company having a single shareholder are no longer mandated to appoint auditors at the annual general meeting to audit the financial records of the company. S. 402 of the new CAMA provides for the exemption in relation to the audit of accounts in respect of a financial year.
Creation of Limited Liability Partnerships (LLPs) and Limited Partnerships (LPs) –
The new CAMA introduces the concept of Limited Liability Partnerships (LLPs) and Limited Partnerships (LPs). This combines the organisational flexibility and tax status of a partnership with the limited liability of members of a company.
Merger of Incorporated Trustees – S. 849 of the new Act provides for merger between two or more associations with similar aims and objects under such terms and conditions as may be prescribed by the CAC.

SUSPENSION OF TRUSTEES, APPOINTMENT OF INTERIM MANAGERS, ETC.

Section 839 of CAMA 2020 and its effects on religious bodies

SEC. 839 provides:
(1) The Commission may by order suspend the trustees of an association and appoint an interim manager or managers to manage the affairs of an association where it reasonably believes that —
(a) there is or has been any misconduct or mismanagement in the administration of the association;
(b) it is necessary or desirable for the purpose of —
(i) protecting the property of the association,
(ii) securing a proper application for the property of the association towards achieving the objects of the association, the purposes of the association of that property or of the property coming to the association,
(iii) public interest; or
(c) the affairs of the association are being run fraudulently.

(2) The trustees shall be suspended by an order of Court upon the petition of the Commission or members consisting one-fifth of the association and the petitioners shall present all reasonable evidence or such evidence as requested by the Court in respect of the petition.

(3) Upon the hearing of the petition and the appointment of the interim manager, the Court, with the assistance of the Commission, may make provision with respect to the functions to be performed by the interim manager or managers appointed by the order –
(a) the powers and duties of the interim manager or managers which may include the powers and duties of the trustees of the association concerned; and
(b) any power or duty specified under paragraph (a) to be exercisable or discharged by the interim manager or managers to the exclusion of the trustees.

(4) The functions shall be performed by the interim manager or managers under the supervision of the Commission.

(5) The reference in subsection (1) to misconduct or mismanagement extends to the employment for —
(a) the remuneration or reward of persons acting in the affairs of the association, or
(b) other administrative purposes, of sums which are excessive in relation to the property which is or is likely to be applied or applicable for the purposes of the association.
(6) A court of competent jurisdiction may, upon the petition of the Commission or members of the association —
(a) order or suspend any person, officer, agent or employee of the association from office or employment, provided that such suspension does not exceed 12 months from the date of the order or suspension;
(b) by order appoint such number of additional trustees as it considers necessary for the proper administration of the association;
(c) by order —
(i) vest any property held by or in trust for the association in the official custodian, who shall be a person so designated by the court from time to time;
(ii) require the persons in whom any such property is vested to transfer it to the official custodian who will be an individual as the court may, from time to time designate, or
(iii) appoint any person to transfer any such property to the official custodian;
(d) order any person who holds any property on behalf of the association, or of any trustee for it, not to part with the property without the approval of the Court;
(e) order any debtor of the association not to make any payment in or towards the discharge of the debtor’s liability directly to the association but to make such payment into an interest yielding account held by the Commission for the benefit of the association;
(f) by order restrict (regardless of anything in the trusts of the association) the transactions which may be entered into, or the nature or amount of the payments which may be made, in the administration of the association without the approval of the court; or
(g) by order appoint an interim manager to act as receiver and manager in respect of the property and affairs of the association.

(7) Where, at any time after the Commission has made an enquiry into the affairs of the association, it is satisfied as to the matters mentioned in subsection (1), it may suspend or remove —
(a) any trustee who has been responsible for or privy to the misconduct or mismanagement or whose conduct contributed to or facilitated it; or
(b) by order of the Court, establish a scheme for the administration of the association.

(8) The court may by order replace a trustee removed under subsection (7).

(9) A person who contravenes an order under subsection (6) (d), (e) and (f) commits an offence and is liable on conviction to fine as the Court deems fit or imprisonment for a term of 6 months or to both.

(10) The Commission may make regulations in respect of —
(a) the functions, powers and remuneration of the interim manager and the manner in which the interim manager shall make reports to the Commission; and
(b) making reports to the Commission, and such other things as may be necessary for the effective administration of the association during the period of its interim administration.
(11) The Commission shall only exercise its power under this section in respect of any association with the approval of the Minister.

The section grants the CAC the power to suspend the trustees of an association and appoint an interim manager(s) to manage the affairs of that association upon a reasonable belief of the occurrence of any of 6 conditions. The conditions are misconduct/mismanagement, need to protect the association’s property, need to redirect the association’s property towards its objects, public interest or fraudulent running of the association’s affairs.
But is this power absolute? Absolutely not!

The section goes on to state the authorized body that can actually suspend the trustees. That body is the Court. What this means is that the CAC can only petition the Court for the suspension of the trustees but does not possess the power to suo motu suspend the trustees, contrary to what sub-section (1) suggests.

The second point to note is that it is not only the CAC that can make the petition. The petition can also be made by one-fifth (that is 20 percent) of the members of the association. Another point of note is that the petition, whether by the CAC or the stated members, must be supported by reasonable evidence, or such evidence requested by the Court to be presented.

And the CAC cannot bring any suspension petition to the Court unless the Minister’s [minister of Industry, Trade and Investment] approval is first sought and obtained.
The last point to bring out is the fact that the section clearly provides that suspension of trustees shall not exceed 12 months.
So let us take a look at the checks and balances contained in the law.

The CAC cannot unilaterally suspend the Board of Trustees of any association.
The CAC must first gather reasonable evidence before commencing the process that should culminate in the suspension of the offending trustees. Such reasonable evidence must be evidence that can stand up to scrutiny in court.

The CAC must secure the approval of their supervising Minister before applying to Court. It is implied here that the reasonable evidence gathered must first be presented to the Minister for his approval. After obtaining the Minister’s approval, there is one more hurdle for the Commission: File a Petition for Suspension of Board of Trustees to the Court.

The gathered evidence will then go through a second scrutiny by the Court. It is only when the Court is satisfied that the Order to suspend the trustees would be made.

The Court’s power to suspend the Board of Trustees is limited to 12 months only. After 12 months, there would be a reversion.
As a side note, the power to petition the Court for this Order can also be exercised by 20 percent of the members.

At this point, the question needs to be asked. What is wrong with Section 839? The fear that the Commission has been given wide ranging autocratic powers to take over or annex NGOs, religious bodies and other associations is, to my mind, unfounded. There are enough checks and balances contained in the said Section to prevent any autocratic or high handed execution.

I am also aware that there are far onerous laws guiding associations and incorporated trustees in other countries, especially in the western world. A lot of the bodies complaining about the Section 839 obey far worse governing laws in UK, USA and other countries. So it smacks of double standards to obey the same laws in other countries but the same organisation then turns around to rail against the laws of their own land.
For example, in the United Kingdom, the right to remove a trustee of a charitable organisation is contained in the Companies Act 2006 and in the Trustee Act 1925.

There are four ways in which a trustee can be removed from office:
[a] by express provision in the trust deed;
[b] under section 36 of the Trustee Act 1925;
[c] under section 41 of the Trustee Act 1925; or
[d] under the court’s inherent jurisdiction.
The court in UK enjoys an inherent jurisdiction to force a trustee out of office. Guidance on this ability was offered by the Privy Council in Letterstedt v Broers
Furthermore, the Charity Commission for England and Wales in its published Guidance titled, “The essential trustee: what you need to know, what you need to do” states in paragraph 3.2 thus: “CIOs must include provisions in their constitutions for appointment and removal of trustees.
The Commission can use its powers to appoint or remove trustees if the charity’s trustees (or members, if applicable) are unable to do so. CIO means Charitable Incorporated Organisation which is the same as Incorporated Trustees in Nigeria.

The United States also has similar provisions regarding the appointment and removal of charitable trustees. And it is a constant across all these nations that trustees can be removed for breach of trust, conflicts of interest, costs, and the need to tie up loose ends, etcetera. The argument has been raised about whether the Nigeria section 839 will be administered neutrally and impartially. The first response is that that same fear can be raised against any laws anywhere in this world.

That fear cannot prevent the enactment of laws reasonably designed for a civilized society. Else, as Thomas Hobbes stated, our lives would be nasty, brutish and short.
The second response would be what has been stated severally in this piece. The section contains enough balances to prevent the actualization of such fears. For the exercise of the Commission’s power of suspension of the Board of Trustees, three levels of approval must first fall in line – the Commission itself, the Minister and the Court.

In summary therefore, we should all applaud to a certain extend the inclusion of Section 839 in CAMA. It would earnestly grow the culture of proper corporate governance, foster financial transparency, record keeping and the reduction of profligacy among our non-governmental organisations, religious bodies and other incorporated trustees.

THE APPOINTMENT OF A MANAGER(S): A RED FLAG

Having objectively settled the issue of the suspension of the board of trustees, the next is the appointment of a manager to manage the affairs of the association or organization whose board of trustees had been suspended. The act says upon the hearing of the petition and the appointment of interim manager, the court with the assistance of the commission, may make provision with the respect to the functions to be performed by the interim manager or manager appointed by the order.

As good as the above provision is, the only key that spoils the dog’s mouth is the failure of the Act to state and specify the qualification, religion or ethnic background etc of the manager or managers to be appointed by the court with the assistance of the commission. Meaning, for a Mosque a Christian can be appointed,vice versa and for even a school, an illiterate can be appointed as a manager. Very funny.

Although, the Registrar General of C. A. C. Alh. Garba Abubakar while speaking with journalists in Abuja on 23rd day of August, 2020 stated: “We have a provision dealing with the suspension of trustee and appointment of Interim manager(s) as enshrined in Section 839 of the Companies and Allied Act. 2020. This is not targeted at any group but what we have done is to bring our law to be consistent with what is obtained in other countries. All these provisions borrowed from the Charities Act of the United Kingdom (UK).”

I want to categorically state that it is not enough for the government to import law without more, there is need for holistic consideration of the circumstances and peculiarities of the country (Nigeria) where such law is imported to. That which the government failed to do.

The Act should have gone further to state that ,the court in appointing a manager should put into consideration the religion, ethnic background, interest etc of the manager to be appointed. Some people have argued that no court would appoint a Muslim to manage a church, and no court would appoint a Christian to manage a Mosque. This submission in my humble view is a mere belief or statement of opinion as no cause of action would arise therefrom if the contrary is done.

In law, when certain things are mentioned, it excludes the unmentioned.

What is not in the Act cannot be read into it.
We therefore appeal to the government and other stakeholders to objectively look, address and take appropriate legislative steps on the issue bordering on the appointment of the manager and what the court should consider such as religion, ethnic background, qualification etc in determining the right person to be appointed as a manager in the interest of peace and tranquility.

In conclusion it is equally important to point out the provisions of the law dealing with dormant accounts by incorporated Trustees, the law has imposed an obligation on the banks to inform the Commission about any account of any Association that has been dormant for the period of five years, and once they give that information, no transaction should be allowed on that account without notifications to CAC, even when we have reasons to believe that the account is now active, they can not allow unhindered access to the account without notification to the CAC.

The law has also given CAC the right where such an account is dormant to give directives for the balance to be transferred to another Association with similar objective because the whole essence of having money in an incorporated Trustee account is to utilized it to pursue the objective of that association.

So if instance you have established an organisation to support maybe the IDPs, and you have money in your account that has been there for five years, you are not supporting anybody and nobody is touching the money, the money is not for you personally, after five years, CAC can give directives that this money should be moved to another organisation that is established for similar objectives so that this money will be utilised.

Associations are now required to maintain financial information with the C. A. C., their day to day income, their expenditures at the end of the year when they are filling in their financial returns, the law requires them to submit the account statement of the association to CAC.

Thanks for listening.
Moruff O. Balogun Esq.
Public Relations officer
Nigerian Bar Association, Ijebu Ode, Branch.


Share:

1 thought on “Companies and Allied Matters Act, 2020 – Why the Mixed Reactions?

  1. Once #CAMA is signed into law, it will reshape the way Nigerians do business by markedly reducing many of the unnecessary regulatory hurdles that #SMEs encounter. Its assent will also signal to the rest of the world that truly, #NigeriaIsReadyForBusiness.

Leave a Reply

Your email address will not be published. Required fields are marked *