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The Boy Who Cried Wolf – Inside the Misinterpretations of the CAMA Act 2020

A Rejoinder to “State Theft, Cronyism and Civil Right Violations: Inside the Hidden Horrors of the CAMA 2020 Bill” as featured on NewsWireNGR on 16th of August 2020.

BY: Zikora Okwor-Wewan

Introduction

Imagine you woke up from a bad dream, only to find out that you are in another bad dream and then you wake up from that bad dream, but it is still another dream.

That in many ways is what it must be like to be Nigerian. Most things pertaining to Nigeria are a continuing series of nightmares; sometimes even the things that are supposed to help fix the nightmares – like proper journalism.

I read a recent feature on NewsWireNGR on the Corporate and Allied Matters Act 2020 (“the new Act” or “CAMA 2020”), stuck between surprise and cringe, as I assume most people who read said feature after actually reading the new Act would have been.

For what it is worth, it was a comparatively good read, not lacking for literature and comprised of well-expressed (if sometimes outrageous) thoughts. Its fault, of course, was in the purposeful lack of quality analysis on the very subject it attempted to address – the CAMA 2020, particularly as pertaining to the various provisions of the new Act it sought to critique.

In what was approximately 8 minutes of unnecessary alarmism, the writer of the feature attempted rather desperately to create a picture of doom where none exists and failed – crying wolf most unnecessarily down the wrong corridor.

Between insisting that the new Act does not improve the ease of doing business in Nigeria, and comparing the Act, albeit lightly, to other proposed laws and regulations put forward under the Buhari administration, “that all pursue the same holy trinity of legislative and regulatory agenda – attacking freedom of speech and the civil space, abrogating property rights and economic prospects and instituting regulators, offices and bodies that exist above the jurisdiction of the court system”, the writer made a gorgon of the new Act, in an incoherent attempt to vilify the Nigerian government.

Despite some shortcomings, I believe it deserves a more honest appraisal as it is quite frankly the work of various earnest stakeholders in the corporate space, and it is one of the most genuine pieces of legislation in Nigeria since forever.

This write-up seeks to as smoothly as possible, clarify some of the misinterpretations in that feature, and offer a more appropriate critique, where necessary, of some of the spots of bother within the new CAMA Act which the feature sought to address.

The feature in commencing claims that CAMA 2020 “over the course of its 870 sections spread out over 604 pages…has at least four clauses containing these anti-democratic policy directions strategically hidden in plain sight.”

In subsequent paragraphs, it addressed about five provisions of the new Act which the writer posits to be undemocratic and contrary to the common good of the Nigerian people.

These five provisions are outlined below and analysed from dispassionate legal, practical and rational standpoints.

The Nebulous NGO Conspiracy
Section 839 – Suspension of Trustees, Appointment of Interim Managers, etc.
This section provides that the Corporate Affairs Commission (CAC) may by order suspend the trustees of an association and appoint an interim manager or manager to manage the affairs of an association where it reasonably believes that –

There is or has been misconduct or mismanagement in the administration of the association;
To protect the property of the association;
To secure 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;
Public interest;
The affairs of the association are being run fraudulently.
Admittedly, this Section appears a bit overreaching and may present a concern if one chooses to be overly cynic. But a proper analysis of this section reveals that it is a relatively appropriate, if not standard, provision of Law on the regulation of NGOs.

It is not novel, or particularly out of place for government to regulate business entities in a manner that leads to the dissolution, winding up or change of control of such entities, in the event of certain improper practices by such an entity.

Under Section 314 of the CAMA 1990, the Commission had the power to investigate a Company whose affairs are being run improperly, and under 323 of the Act, the Commission could petition for the Company to be wound up after such investigation, and the Court could put the Company under receivership (effectively changing its control) further to this application. Of course, this is a different process, expectedly, since it pertains to the affairs of Companies.

A more appropriate comparison then is to the UK Charities Act, which provides in Section 76 that the UK Charity Commission can suspend the trustees of an NGO and appoint an interim manager “at any time after it has instituted an inquiry under section 46 with respect to any charity, the Commission is satisfied—

(a) That there is or has been any misconduct or mismanagement in the administration of the charity, or

(b) That it is necessary or desirable to act for the purpose of—

(i) Protecting the property of the charity, or

(ii) Securing a proper application for the purposes of the charity of that property or of property coming to the charity.

Not to belabour this heading, the UK is one of the modern standards for democracy and it tells of a misinterpretation to insist that a provision which is perfectly democratic in the UK context is any less so in Nigeria – not in itself anyways.

As compared to the UK Act, the only additional provisions in the new Act is the inclusion of public interest and fraudulent running of the NGO as grounds for suspension of trustees or appointment of interim managers.

It is not particularly undemocratic to protect the interest of the general public, nor is it indicative of a devious and underhanded agenda for the CAC, the body charged with regulating corporate affairs since 1990, be empowered to suspend the trustees of an NGO carrying out fraud.

The writer of the feature under examination claims that by the provision of this section “the government now has the power to remove the management of any such organisation and replace it with whoever it wants based on nothing more than what side of the bed it wakes.” This is not true.

For one thing, the CAC is not the government. It is a governmental organisation, but it does not work for the Federal Government nor does it exist at its wimp.

For another, the power to suspend trustees and appoint interim managers do not translate to taking over an NGO or replacing the management of an NGO with whomever it wants.

This power only allows for temporary external control of such an organisation, until new trustees can be appointed – hence the word “interim.”

Furthermore, this power is not exercised by the CAC! The CAC can only carry out a suspension upon order of Court, which can only be made after a petition has been made to the Court by the CAC or members of the NGO amounting to 1/5 of its members as provided in Section 839.

Additionally, the Commission does not have absolute power over who becomes an interim manager. This power is exercised in conjunction with the Court, who may even unilaterally replace an interim manager as under Section 839(8).

The Private Peccadillo
Section 705 – Qualification of Insolvency Practitioner
Perhaps the only Section which presents a realistic concern, Section 704 requires that Insolvency Practitioners be registered with the Business Recovery and Insolvency Practitioners Association of Nigeria (BRIPAN).

The writer exaggerates that “Section 704 looks like a boring, bog-standard section about company law and the process of liquidation and insolvency practise. A closer look, however, reveals something very unusual that meets all the criteria for what can be described as corruption.” This is not the case.

The concern with section 705 is that it compels registration with a private body to practice as an Insolvency Practitioner. While it is inarguably inappropriate to give powers to a private body in a Federal Act, the claim that this is a hallmark of corruption is just a bit highhanded.

Those who followed the development of the Act would recognise that BRIPAN has been a major contributor to the Bill, liaising with PEBEC, the CAC, other local and international stakeholders and even the World Bank to ensure reforms in the Insolvency space in Nigeria.

It underscores this development that BRIPAN was included in the new Act as an organization to help standardize practices in the insolvency space. It would not be the first time a private organisation has held a similar station in the Nigerian Corporate environment – the Nigerian Stock Exchange is a quick example.

Ultimately, the outright inclusion of BRIPAN in the Act is a bit bothersome, but it is more an overreaching by the Bill Drafters and relevant stakeholders than an attempt at cronyism by the Federal Government or the President.

The Bill itself was drafted by various stakeholders in the corporate space in Nigeria, with contribution from various categories of players in the space and not by the Federal government – it is hard to imagine then, that it can be a vehicle for Federal corruption.

The Caste of the Commons
Section 863 – Penalty for Carrying on Business without Registration
The writer of the feature in focus claims that this provision criminalizes the informal sector. This claim would be more off-putting if it wasn’t so ridiculous.

The provision of this Section imposes penalties on carrying out business as a Company, Limited Liability Partnership, Limited Partnership or under a business name without being registered under the Act.

For the avoidance of doubt, the penalty would apply only where:

The business is required by law to be registered. (a bank for example)
The business refuses to be registered or its attempt at registration is cancelled by the commission.
The entity goes ahead to carry on business, (fraudulently) pretending to be properly registered and holding out itself so to be.
With the exception of limited liability partnership and limited partnership (which were both introduced by the Act), the other two business types are standard corporate entities which were required to be registered under the previous Companies and Allied Matters Act (“the old Act” or “CAMA 1990”) and failure to register either was illegal.

Failure to register a business name was penalized in the old Act under Section 584 and failure to register a Company although not expressly penalized, was expressly contrary to the provisions of the Act and excluded any such unregistered entity from enjoying the status of a Company within the meaning of the Act.

The two additional business entities are similar to Companies and are required to be registered in all climes where they are operated.

Coming to the question of it, it is impossible to imagine that this Section affects the informal sector any more than the previous Act. Players in the informal sector predominantly operate sole proprietorships and can go ahead in this way. They are also allowed to run partnerships and even NGOs without having to register with CAC as they always have been.

A Syllogism of Standards
Section 17 – Pre-Action Notice
A pre-action notice is a letter usually given by an intending plaintiff’s solicitors to the prospective defendant, giving notice of intention to institute legal proceedings against them.

Statutory Bodies such as the NNPC, NAICOM, DPR and even Federal Universities etc. all have pre-action notice requirements in their enabling legislations. In fact, that old CAMA did not provide the CAC with a pre-action provision, from a legal jurisprudence standpoint, was a legislative oversight.

The claims by the writer that the inclusion of the requirement for pre-action notice is an attempt to put the CAC above the law smacks of a remarkable lack of knowledge of the Law and complementary lack of willingness to apply themselves to properly investigate the subject of their critique, which only barely falls short of an psychedelic excursion.

The Chinese Complot
Section 80 – Registration of Foreign Companies
The writer claims in another improperly wrought conspiracy theory that this section allows “Chinese Companies” to operate in Nigeria without registering. First, this Section is not even new! Section 56 of the Old CAMA provides that a foreign Company can be exempted from registering in Nigeria if they are:

foreign companies (other than those specified in paragraph (d) of this subsection) invited to Nigeria by or with the approval of the Federal Government to execute any specified individual project;
foreign companies which are in Nigeria for the execution of specific individual loan projects on behalf of a donor country or international organisation;
foreign government‐owned companies engaged solely in export promotion activities; and
Engineering consultants and technical experts engaged on any individual specialist project under contract with any of the governments in the Federation or any of their agencies or with any other body or person, where such contract has been approved by the Federal Government.
Section 80(1) of the new Act is mutatis mutatis (an exact replica) with the reproduced provision of the Old Act but it wasn’t a problem in the old Act.

Secondly, Chinese Companies? Wherefrom the above provision can it be interpreted that Chinese companies are exempt from registration in Nigeria?

If a Chinese company is invited for a project by the Federal Government and is as such exempted, how is this indicated of an exception specifically for Chinese companies?

Conclusion

There is an art to proper critiquing and it is in calling things as they are without mincing words whether for fear of repercussion or for want of favour from a benefactor, whether they be the general public.

Anything short of this is bad critiquing and the feature which is the subject of this rejoinder was as bad as I have seen in a while. It needn’t matter that the critique sort to favour the public sentiment (which is predominantly stationed against the government) while vilifying everybody’s villain (the Nigerian Government).

The fact remains that it was constituted of incorrect analysis, exaggerated interpretations and convoluted explanations meant to distort the truth, and this, however utilitarian the objective behind is, is utterly disingenuous.

I disapprove of the Nigerian government as much as the next person. It is consistent with common sense to be worried that the Nigeria government may exploit loopholes in new Laws, as they have with old Laws. But this is as much as there is to it. It is intrinsically a problem of government, not with the Laws.

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