An Overview Of Section 842 Of The Companies And Allied Matters Act 2020

An Overview Of Section 842 Of The Companies And Allied Matters Act 2020

By Joshua Gbenga Dada

The Companies and Allied Matters Act 2020 is the foremost legislation in Nigeria dealing with the registration of legal entities like companies, business names, and incorporated trustees.

Whilst it has introduced many laudable innovations and has been celebrated for its progressiveness, there is still a lot of skepticism surrounding the intent of the law as it relates to incorporated trustees provided for under Part F of the Act.

Specifically, my legal opinion here would be based on the provisions of section 842 of the Act – its potential for abuse and its possible impact on the rights of CSOs and other bodies governed by it.

This section falls under Part F of CAMA 2020 and deals with the power to direct the transfer of credits in a dormant bank. In a nutshell, this section imposes an obligation on banks to disclose to the Corporate Affairs Commission (CAC) any dormant account that it holds for an incorporated trustee. The CAC in turn is vested with the power to request from the affected association evidence of its activities – which the Commission will then review to guide it in determining whether or not such an association should be dissolved, and its funds transferred in line with the guidelines provided by the Act.

Section 842 of the amended CAMA does not stipulate any timeframe for notifying CAC of an association’s account being dormant, leaving the determination of such timeframe at the discretion of the bank. Although Section 482(1) of CAMA 2020 provides that the bank shall notify the commission ‘without delay’, the section does not provide a set timeframe and the banks are under no obligation to construe these wordings to mean a week, a month, or even a year and cannot reasonably be faulted if they determine a later time as being the appropriate time to notify CAC.

Furthermore, the timeframe stipulated for an association to respond to the request on its activities by the Commission is limited and can be deemed to be inadequate time to receive any appropriate response from the association. At 15 days from the time of making the request, the relevant association may be ill-prepared to submit any satisfactory report of its activities to the Commission.

This clearly negates the principle of ‘audi alteram partem– hear the other party’; as the association can rightly argue that they were not given enough time or opportunity to be heard. It is a well-known principle of law that every ‘defendant’ should be given adequate ‘time’ and ‘resources’ to prepare for his defense. Although the association, in this case, is not a defendant in a criminal trial, it is still a quasi-defendant because it seeks to defend its interest and that of its stakeholders, thus making the legal principle apply. A timeframe of 3 to 6 months is a more realistic timeframe to submit this report, especially when it is weighed against the need for the report to be ‘satisfactory’ in the estimation of the Commission.

Section 842 subsection (2) provides that the CAC would review the response of the association to determine whether or not it is satisfactory, and where it deems the response to be unsatisfactory, it will then proceed to dissolve the association. From this provision, it is clear that there is no defined or apparent set of rules or principles that guide the Commission in determining whether or not a response is satisfactory. This thus makes the determination of satisfaction clearly arbitrary and entirely at the behest of the Commission, without recourse to due process.

This section defeats one of the age-long pillars of justice to wit ‘nemo judex in causa sua – you cannot be a judge in your own cause’ because it gives the CAC unlimited powers to prosecute and make determinations concerning the association in question without recourse to any neutral third party. A more appropriate approach to dealing with this is to subject the findings of the CAC based on the response of the association, to a court of competent jurisdiction to determine whether the response is satisfactory.

Furthermore, there should be a set of rules which are clearly spelled out that guide the Judge in determining whether the response from the association is satisfactory. The approval of the minister is not deemed very appropriate for this purpose because he merely ratifies the determination and decision(s) of the Commission without being directly involved in the process leading up to the decision(s).

Also, the term ‘reasonable inquiries’ used in subsection (3) of section 842 is nebulous as it is very subjective and left largely to be determined by the Commission. In this case, the section ought to clearly stipulate and define steps that must be taken by the Commission for the purpose of locating any association.

Section 842 also confers arbitrary powers on the commission to make determinations over where (i.e., what association) the funds/property of such a dissolved association should be transferred. Although it provides that the association to which the funds/property is to be transferred must submit a memorandum to the Commission indicating its willingness to accept the amount/property, it is unlikely that any such transfer would not be accepted.

An appropriate drafting of this provision would incorporate the power of the court to ratify the suitability of an association to receive any such transfer and place an obligation on such association(s) to make an application to the Commission if interested in receiving such funds/property. This recommendation is in line with the legally recognized role of the courts in determining the suitability of any person or group for vesting property. Also, one consideration for ratifying the suitability of an association for receiving the funds/property of a dissolved association should be that they have similar objectives. This recommendation is in line with the provision of section 850(4) which deals with the dissolution of an association and the transfer of its funds/property.

The provisions of section 842 confer a lot of arbitrary powers to the Corporate Affairs Commission (CAC) with respect to dissolving an association and transferring its funds/property. The provisions of this section clearly negate the principles of natural justice which provide for hearing from both sides and that no one acts as a judge in their own case. It also negates the principle of checks and balances as many of the powers conferred on the Commission are not checked by the courts or other relevant institutions. This section has the potential to be abused by the Commission if it is not reviewed in line with basic principles of existing laws.

Joshua Gbenga Dada is a legal officer with the Administration of Criminal Justice Monitoring Committee (ACJMC). He is also a chartered arbitrator with the Nigerian Institute of Chartered Arbitrators.

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