Examining Section 842 Of The Companies And Allied Matters Act 2020

Examining Section 842 Of The Companies And Allied Matters Act 2020

By Akhigbe Adesuwa and Kelvin Osakpolor Onile

In August 2020, the presidential assent was given to a bill – the Companies and Allied Matters Act 2020, seeking to repeal the Companies and Allied Matters Act 1990.

The new Act has received much praise, as it brought with it novel innovations to restructure and regulate the corporate space, touching almost every part of corporate life in Nigeria and also addressing the shortcomings of the repealed act of 1990.

To a large extent, the provisions of this new act has received praise and is seen as a welcome innovation – a ray of sunshine that heralds the Nigerian corporate space into the future of corporate practice.

However, no light is cast without the expectancy of the emergence of shadows. Despite the praise this statute has received, there has been some controversy surrounding some of its provisions, particularly Part F of the Act which enables the Corporate Affairs commission – the CAC or the Commission – to meddle in the affairs of Incorporated Trustees. It has been argued that these provisions, if left unchecked, may constitute a contradiction to the provisions of the constitution on fundamental rights. One of such provisions in particular forms the crux of this write up.

Section 842 of the Companies and Allied Matters Act 2020 provides that banks are to notify the Corporate Affairs Commission about dormant accounts belonging to an association registered under Part F of the Act and grants the commission the power to dissolve such associations where they are unable to satisfy the commission within fifteen (15) days on its enquiry about their activities. This section further empowers the commission to direct that the amount standing to the credit of the relevant association in the account be transferred, to one or more associations that the commission so determines.

This section has become one of the greatly criticized provisions within the CAMA 2020, and is one of the subjects of the suit filed in 2021 by the Socio-Economic Rights and Accountability Project (SERAP) against the President of the Federal Republic of Nigeria, the Attorney General of the Federation, the Minister of Justice and the Corporate Affairs commission. It was argued that this section grants the CAC the arbitrary power to interfere with the finances of these associations, and is in violation of Section 44 of the Constitution of the Federal Republic of Nigeria as there are no provisions in the Act for compensating said associations. This begs the question of whether or not the wariness towards Section 842 of the CAMA 2020 is far fetched? It is this question we seek to address through an analysis of the above section.

One of the prominent criticisms leveled against Section 842 is that it violates the fundamentals of the right to own property as provided for within the letters and spirit of the constitution, particularly section 44. Section 44(1) of the Constitution of the Federal Republic of Nigeria 1999 as amended provides that where moveable property is taken compulsorily or interests in an immovable property is acquired compulsorily as prescribed by law, compensation must be paid to the owner of said property. The above subsection goes further to grant such a person right of access for the determination of his interest in the property and the amount of compensation in a court of law.
Upon a careful study of Section 842, CAMA 2020 and Section 44 of the Constitution, it is our submission that Section 842 of the CAMA 2020 is indeed in violation of the provisions of the constitution as it not only grants the CAC the power to interfere with and disburse the finances of associations registered under Part F of the CAMA 2020, but also makes no provision for the payment of compensation to said associations.

While it may be argued that the aim of Section 842 is to aid the Commission in identifying inactive organizations and redirecting their revenue to more active ones and also aid in reducing the possibility of these organizations being used as shells for money laundering schemes, it is our humble opinion that even the best laws with the most altruistic intentions are bound to fail when these laws vests unchecked powers on state machineries as is the case of Section 842, seeing as the CAC also reserves the discretionary right to dissolve an association in line with Section 850 of CAMA 2020 and also disburse the funds of the dissolved association.

On a final note, by virtue of Section 842, the discretion vested on the Commission to disburse the funds of an association to another association is dependent on the condition that said association is dissolved. However, the power of the Commission to dissolve an association is also discretionary and unchecked by virtue of Section 850 of the CAMA 2020. In addition, the absence of payment of compensation to said associations is in direct violation of Section 44 of the Constitution.

ADESUWA and ONILE are from the Faculty of Law, University of Benin and contributed this piece from Edo State

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