What is wrong with the new Companies and Allied Matters Act and the way forward

By Honest Eguridu

When President Muhammadu Buhari signed the Companies and Allied Matters Act, (CAMA) 2019 into law on August 7, 2020 it was greeted with a loud ovation by the legal and business communities because of the many audacious innovations the new Act has made to company registration, administration and ease of doing business in Nigeria. Little did most commentators know that there are provisions in the new Act that will cause a lot of anger and controversy over the regulation of religious and nonprofit organizations in Nigeria.

Some Historical Background Relevant to the New CAMA
In late 2016, the religious community and the civil society in Nigeria were rattled by the introduction of the Not-For-Profit Organisations Governance Code 2016 by the Financial Reporting Council of Nigeria (PRC) and the directive by the former Executive Secretary of the PRC, Jim Obazee, that Non-Governmental Organizations, Civil Society Organizations and all not-for-profit organizations, including churches and mosques should comply with a corporate governance code stipulating a maximum term of 20 years for heads of such entities.
This reportedly led to the stepping aside of the General Overseer of the Redeemed Christian Church of God, Pastor Enoch Adeboye, who had spent over 20 years as the helmsman of the church. He relinquished the position of the Nigerian National Overseer but remained the General Overseer of the church worldwide. What followed were series of controversies and public outcry by various interest groups within and outside the two major religions in Nigeria. The then very young administration of President Mohammadu Buhari being not prepared for the uproar and negative vibes the said PRC code was causing the government, decided to suspend the implementation of the controversial Not-For-Profit Organisations Governance Code 2016 and sacked the Executive Secretary of the Financial Reporting Council of Nigeria, Jim Obazee on January 9, 2017.
However, the “sacrificial” sack of Mr. Obazee and suspension of the PRC 2016 code temporarily doused the tension but did not quite abate the controversies because at about June 2016, a former speaker of Kogi State House of Assembly, a federal lawmaker, and Deputy Majority Leader of the House of Representative, late Honourable Umar Buba Jibril , then representing Lokoja/Kogi/Koton Karfe Constituency sponsored the Nigeria’s NGO Bill, which is “A Bill for an Act to Provide for the Establishment of a Non Governmental Organisation Regulatory Commission for the Supervision, Coordination and Monitoring of Non Governmental Organisations, Civil Society Organisations, etc in Nigeria and for other related matters”
The intent of late Honourable Umar’s bill as contained in the lead paper in support of the Bill was the need “to regulate Civil Society Organisations (CSOs) on matters relating to their funding, foreign affiliation and national security, and … to check any likelihood of CSOs being illegally sponsored against the interest of Nigeria.” Expectedly, the Bill drew wide condemnation from the civil society and religious bodies. Critics of the bill attacked it on the basis that the bill was anti-democratic, replete with vague adjectives, phrases and penalties framed around the objective of national security and national interest and that the language and tenor of the Bill leave no doubt that its primary objective is to clamp down on the Nigerian civil society by widening the state’s discretionary powers to interfere with NGO operations, and to impose additional layers of obstruction to a free civic space.
The NGO Bill passed the Second Reading stage in the House within a short period of time and was sent to the Committee on Civil Society and Development Partners for further legislative input. Because of the widespread criticism and protest against the NGO Bill a public hearing was hastily scheduled by the authorities for 14 and 15 December2017 to seek feedback from CSOs on the Bill. Despite the short notice, over 180 CSOs were in attendance with around 30 memoranda submitted and adopted. While the hearings were taking place in the National Assembly, hundreds of people demonstrated outside, wearing t-shirts and bearing banners with the slogan #NoToNGOBill.

The Catholic Bishop of Sokoto, Bishop Matthew Hassan Kukah made a graceful appearance at the hearing. In his speech that was punctuated with thunderous applause from the crowd, the respected Catholic Bishop stated that he stands with the civil society. According to him, without civil society, democracy would be in danger. He pointed out that Nigeria has so many laws covering what the Bill was seeking to achieve. On his part, Comrade Abdul Oroh, human rights activist and a member of the 5th Assembly also lent his voice in opposition to the Bill. He asked the House Committee to ‘kill the bill, as it does not serve any useful purpose’. He stated that the real intendment of the bill is to cripple civil society and block room for interrogation of government policies. The civil society is a force for good and does not need the current attempt to cripple it, he said. Many highly placed Nigerians including Senator Shehu Sani condemned the Bill while the debate was raging.

NGO Regulation Bill Smuggled into the New CAMA?
At the end of the day, none of the attendees at the public hearing supported the bill, and all the organisations that made presentations explicitly rejected it. The committee did not present its report to the lawmakers for consideration after the public hearing, thus indicating that the NGO Bill died a natural death at the committee level. Although there were media reports in 2019 about resuscitating the Bill by leadership of the House of Representatives following a purported security report that its likely some NGOs are funding insurgency in the North East, nothing concrete happened till date about the dead Bill. But the provisions of Sections 839 of the new CAMA has led to accusations of the Federal Government by Civil Society Groups and religious bodies that the import of the dead NGO Bill was inserted into the amended CAMA through the backdoor. It is baffling that the offensive provisions of the new CAMA escaped the watchful eyes of the Civil Society. Don’t our religious leaders and the civil society groups who are kicking against the Act have members of their churches and those sympathetic to their causes in the National Assembly who should watch out to protect their interest when the legislation was still at the Bill level? Was the offensive provision smuggled into the Act just before the presidential assent? That is most unlikely!

Suspension of Trustees and Appointment of Interim Managers
The section that has rattled religious leaders and civil society groups the most in the new CAMA is section 839 of the Act. The section is produced below for the purposes of clarity.
“839. (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 propert y 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.

Subsection 839 (2) is another section in the new Act that also provides for a different procedure for the suspension of trustees. That subsection provides that the trustees can also be suspended by an order of court upon a petition by the Commission (that is Corporate Affairs Commission) or one-fifth of the members of the association. However, the petitioners must present reasonable evidence or such as requested by the court. A comparative reading and scrutiny of Subsections 839(1) and 839(2) will disclose that while the court requires evidence, following a petition to suspend trustees, the Corporate Affairs Commission (CAC) simply require the belief, desire and some other interests disguised as public interest, to suspend trustees. In other words, the Registrar General of CAC does not need any evidence to suspend trustees of an organization, once he believes that the trustees have committed fraud or illegalities or that it is in the public interest that they should be suspended, the law permits him to do as he wishes!

The absolute and overriding discretion given to the Corporate Affairs Commission and the supervising Minister under the new Act can be interpreted to mean that the powers of the Corporate Affairs Commission overrides that of the courts. The belief and desires of the Registrar General and the Minister becomes superior to the judicial powers of the court under subsection 2. Therefore, one will be right to draw the conclusion that aggrieved members of an association do not need to go to court with a petition to suspend trustees. All they need to do is to lobby or appeal to the belief and desires of the Registrar General of the Corporate Affairs Commission or the supervising Minister.
Section 839(7) provides that after an enquiry into the affairs of the association, if the commission is satisfied as to the matters in subsection (1) may suspend and remove any trustee. This provision as most provisions of section 839, is too subjective and open to abuse by the operators of the Corporate Affairs Commission. It is apt that statory provisions that have provisos and clauses such as “reasonably believes”, “deem it necessary or desirable” and “public interest” can be manipulated to suit the narrow interest of self-serving political office holders and corrupt public servants
It is a cardinal cornerstone of the rule of law that no piece of legislation, especially the one that carries a sanction should be left to the whims and caprices of any one, not even a judge, not to talk of a Registrar General of a commission. The supreme court have held in plethora of cases that the interpretation of a penal legislation or any statute for that matter should not be left to the whims and caprices of the judge called upon to interpret the legislation. Any conduct which carries a sanction must not be left to conjecture or inference by any authority. So how can an important power to remove the heads of religious bodies and civil right groups be left to the whims of an individual in a country like Nigeria where there is high level of corruption and where our institutions are very weak and with a high level of bias between Christians and Muslims. Can a Christian Registrar General be fair to a Muslim cause and ensure that a Muslim association or Mosque is properly managed under an interim manager and vice versa?

Section 823 (1) recognizes the right of persons bound by custom, religion, kinship or nationality to appoint trustees for themselves. How then could the commission appoint a manager, who may not have anything in common with the community to manage the affairs of the association without specifying the limits of the powers of such a manager?
It is strongly recommended by this writer that the only way out of this logjam is to send back the Act to the National Assembly for amendment. The provisions of section 839(1) should be expunged completely. The powers to discipline and remove erring heads of CSOs and religious bodies should be left to only the courts under section 839(2) of the Act. Yes, this writer agrees that the churches, mosques and Civil society groups should be regulated but any act of sanction must be handed down by a court of competent jurisdiction and where an interim manager is appointed by the court he or she must work under the direct supervision of the court.

Power to Direct Transfer of Credits in Dormant Bank Account

Another controversial provision of the new CAMA is contained in section 842. The section is reproduced below for ease of reference.

“842. (1) Where a bank holds one or more accounts in the name of or on behalf of the incorporated trustees of a particular association, and the account, or, if it holds two or more accounts, and each of the accounts is dormant (as defined under the relevant banking regulation), the bank shall without delay notify the Commission of these facts.

(2) Where the Commission receives a notice under subsection (1), the Commission may request that the association provide evidence of its act ivities, and where the association fails to respond satisfactorily within 15 days of the request, the Commission may dissolve the association in accordance with section 850, and where an association is so dissolved, the Commission may give a direction to the bank concerned to transfer —
The provisions of subsection (2) shall also apply where the Commission is unable, after making reasonable inquiries, to locate an association registered under this Act or any of its trustees”
A cursory review of the provisions of section 842 will reveal that it is supposedly targeted to deregister associations that are no longer active. But again, the decision if an NGO is still active or not is made subject to whims of the Commission. The Act says if after 15 days there is no ‘satisfactory’ response from the association of evidence of its activities, the commission may apply to court to dissolve the NGO under section 850 of the Act. It is a good thing that the power to dissolve the association here is given to the court but the ground for such dissolution being a dormant account and failure to respond to the Commission in 15 days or non satisfactory response to the commission appears too draconian. What if the commission’s query did not get to the NGO in good time? What if the members of the management of the NGO are not readily available in 15 days to give the requisite response? And why must the Act make the dormancy of a bank account without more, a ground for a summary investigation that can lead to dissolution of an NGO in 15 days? It is recommended here that a more realistic time frame should be stipulated here for both the dormancy of a bank account and the time for response to forestall a situation where self-serving officials of the Commission may use this provision as a basis of witch-hunting an association.

No Member of the Governing Council or Body shall Receive Salary
Another section of the new Act that is worth our scrutiny is 838. (1) which provides thus:

838. (1) The income and property of a body or association whose trustees are incorporated under this Part of this Act shall be applied solely towards –

(a) the promotion of the objects of the body as set forth in its constitution; and

(b) no portion from it shall be paid or transferred directly or indirectly, by way of dividend, bonus, or otherwise by way of profit to any of the members of the association.

(2) Nothing in subsection (1) (b) shall prevent the payment, in good faith, of reasonable and proper remuneration to an officer or servant of the body in return for any service actually rendered to the body or association:

Provided that —

(a) with the exception of ex-officio members of the governing council, no member of a council or governing body shall be appointed to any salaried office of the body or any office of the body paid by fees; and

(b) no remuneration or other benefit in money or money’s worth shall be given by the body to any member of such council or governing body, except repayment of out-of-pocket expenses, reasonable rent for premises demised or let to the body or reasonable fee for services rendered.

In simple term, section 838(2) prohibits a spiritual Head, Bishop, General Overseer Imam, Sheik etc from receiving salary from an organization where he or she is a member of the Governing or Ruling Council. It is not practicable to be a spiritual head of a religious body without being part of the governing council. And most of our Pastors and Imams are on the mission work full time. If they are not on salary how can they survive? The reality is that the Heads of most of the religious bodies in Nigeria operate these organizations as their personal estates. They can hardly separate their personal income and properties from their religious organisations. While the motive behind this provision appears to be laudable, it is totally impracticable anywhere in the world for heads of religious bodies to work full time without salaries. That provision should be amended to allow for salary for any member of the governing council who works full time for the propagation of the aims and objectives of an Organisation.

Is the Corporate Affairs Commission Equipped for the Task?
Customers and users of the services of the Corporate Affairs Commission (CAC) for a long period of time now have been complaining of horrible experience in the process of trying to access the Abuja and Lagos offices. Just in July this year lawyers and other customers staged a protest to decry the abysmal mode of services by the CAC. It is one story of delay and frustration or the other. Name reservations that should take two to three hours now takes up to two weeks. Other forms of services such as registration of companies and incorporated Trustees now take months with complaints of lack of customer service culture being heaped at the commission and its members of staff. The pertinent question therefore is whether the CAC is equipped for this new challenge of supervising and securitizing the books of thousands of churches, mosques and CSOs all over the country. This is an onerous task which this writer believe cannot be effectively discharged by the CAC as it is presently constituted.
It is therefore recommended that a special department should be created by the CAC to handle matters relating to nonprofit organizations. The Act should be amended to reflect this provision and the CAC should acquire additional office space and recruit more staff to handle this very important and onerous task. If this is not done the new provisions regulating nonprofit organisations will amount to a mere wish.

Conclusion
Nonprofit organizations are regulated by laws all over the world. In the United Kingdom and America nonprofit organizations are made to subject their books and financial records to various levels of scrutiny to ensure compliance with extant laws and elimination of fraud in the day to day activities of the organizations. Almost all the mega churches in Nigeria have branches abroad and they submit themselves to unbridled scrutiny abroad. The difference here is that no one has ever asked them to submit their financial records for scrutiny in Nigeria but the right thing must be done if we want to build a nation that we all can be proud of.

The power to impose sanction erring nonprofit organizations must be left for the courts and every provision giving room for wide discretion by officials of the Corporate Affairs Commission in matters of sanctions of nonprofit organizations must be expunged from the Act. The commission must also be equipped for the new task.

Honesty Eguridu is a legal practitioner based in Lagos. He can be reached via honestyeguridu@yahoo.com