Legal analysis of Section 850 of CAMA 2020

Legal analysis of Section 850 of CAMA 2020

After years of anticipating the review of the primary law on companies in Nigeria, the President Muhammadu Buhari on August 7, 2020 signed into law the Companies and Allied Matters Act (CAMA) 2020. The repeal and re-enactment of the CAMA 1990 (CAP C20, LFN 2004) as CAMA 2020, is no doubt a major positive game changer in the corporate regulatory landscape.

However, some novel provisions introduced in its Part F have stirred reactions and debates among stakeholders in the corporate space on whether or not the said novel provisions are not in breach of basic fundamental rights principles as enshrined in the constitution and international treaties of which Nigeria is signatory.

This article therefore seeks to appraise the controversial provision of the CAMA 2020 affecting the ground for dissolution of an association by the Corporate Affairs Commission (CAC) with the aim of ascertaining whether or not the said provisions are civil and democratic within the context of corporate governance and the protection of basic human rights principles.

Section 850 of the Act added a new ground for dissolution of an association by the court or CAC to include withdrawal, cancellation, or revocation of certificate of registration by the vommission.

First, there is no provision that details how or why the court or CAC would withdraw, cancel, or revoke a certificate of registration of an association in the first place to warrant a dissolution. Furthermore, it does not provide a procedure for administrative redress where such occurs. Second, this goes back to the issue of the ill-fated Non-Gover mental (NGO) Regulation Bill and the importation of its provisions into this new law.

Under Clause 18 of the Bill, the Governing Board of the proposed Non-Governmental Organisations Regulatory Commission can automatically terminate or suspend a certificate of registration of an NGO where renewal is not granted. The proposed commission need not proffer reasons for refusal to grant renewal, just like the CAC under section 850 (2) (e) of CAMA, is not under an obligation to disclose its reasons for withdrawal, cancellation or revocation of certificate of registration.

This measure could be subject to abuse of power by persons (regulators) who do not want certain associations to continue operations, and could become politicised by such persons, particularly where they have any form of bias against an association, either for religious or political reasons.

A better drafted provision can be seen in the Kenyan Public Benefit Organisations (PBO) Act which provides that the Public Benefit Organisations Regulatory Authority (the ‘Authority’) may cancel a certificate of registration where the PBO has violated the provisions of the Act, is carrying out activities contrary to the Constitution and where there is substantial and credible evidence that the organisation has ceased to exist.

The procedure set out involves the issuance of a default notice, whereupon receipt of the default notice, the organisation may make representations in writing to the Authority regarding remedy or rectification of the default or violation of the Act. The organisation is given not less than 15 days to comply, and where the organisation fails to remedy or rectify the violation, the Authority may proceed to fine, suspend or cancel the certificate of registration. The organisation can within 60 days apply for review of the decision.

In addition, the new law (CAMA, 2020) stipulates that members of an association are to identify an institution for transfer of its property upon dissolution or winding up and if the receiving institution is not identified, the property would be transferred to some ‘charitable object’. However, a definition of ‘charitable object’ is not provided, hence, property of an association may end up been transferred to association(s) which hitherto are rivals to the association dissolved or wound up, in the guise of failure to identify an institution for transfer of property upon dissolution or winding up. Depending on the handlers of the CAC at the time, associations stand the risk of losing their coveted property to institutions or associations that they won’t ordinarily give access to their property.

Guidance can be taken from legislation from other jurisdictions. For instance, Section 2 of the Kenyan Act defines ‘public benefit’ as ‘an activity that supports or promotes public benefit by enhancing or promoting the economic, environmental, social or cultural development or protecting the environment, or lobbying or advocating on issues of general public interest or the interest or well-being of the general public or a category of individual or organizations.’

Unfortunately, Section 850 of CAMA 2020 is laden with possible, enormous abuse of powers by the CAC with nearly no remedy available in law, for associations affected. This does not look good for associations and their individual members in Nigeria, as it is capable of affecting how they operate freely, for fear of the unknown befalling their association.

Ekpa Esq. is a lecturer in the Faculty of Law, Kogi State University, Anyigba.