New Challenges
it would make no difference that the parent body is a charitable organisation. The taxable income would be limited to the business aspect of the organisation, so, if I decide to go into the business of printing from my charitable organisation and make profit, that income would be taxable.
Now, to the argument that Section 839(1) is designed to take over churches. The section provides for the suspension of trustees of an association and to appoint an interim manager over its affairs (administrative), under certain specified conditions. I would have tended to agree with that argument if that section ends there, but it does not, rather, it has three other sub-sections under (1) and additional 10 other sub-sections, all of which have to be read communally and not in isolation under the rules of interpretation of Statutes. I will suggest that every Christian who has one misgiving or the other go and read it, even if a layman, and if necessary, consult a Lawyer. No one should rely solely on what someone’s views are, but we must educate ourselves so we can proffer sound argument on any point. With profound respect to the proponents of this argument, I am unable to agree with them. On the face of it, the Section does not say so, and in the interpretation of statutes, it is not permissible to import into a law what it does not say, especially where the words employed are clear and unambiguous. Secondly, no specific reference was made to churches, mosques, or a particular faith.
Sub-section (a) of Section 839 provides an instructive condition precedent to the suspension of the trustees and interim take-over of an association, and it is that IF there has been any misconduct or mismanagement in the administration of the association, or IF it is necessary or desirable for the protection of the property of the association or ensuring its proper application towards its set objectives. Sub-section (c) states that this power may be exercised, if the affairs of the association are being run fraudulently. To further allay the fears in some quarters, sub-section (2) then provides that an order of court would be required to do this, and in approaching the court by the Petitioner or the Registrar-General (RG), the application must be supported by 20% of the association, who shall also present all reasonable evidence of their allegations to the court. It is ambiguous whether the 20% here speaks to the trustees or the larger organisation, which could be hundreds of thousands. I submit that, common sense can only suggest that it is referring to 20% of the trustees.
For the avoidance of doubt, I am a strong proponent of accountability and transparency in both private and public lives, and more so, in religious settings which are to exemplify what their followers must seek to imbibe, because basically, this accords with what the Christian religion teaches. See: 1Cor.4:1-2, 2Cor.8:20-21. Paul says in 2Cor.8:20-21 thus:
21 “Avoiding this, that no man should blame us in this abundance which is administered by us.
22 “Providing for honest things, not only in the sight of the Lord, but also in the sight of men.”
The Bible is replete with verses enjoining us to be accountable as stewards of the manifold blessings of God, and this is precisely what most serious churches teach and try to live by, which is why several people are attracted to some of them in the first place; and as long as we keep to the tenets of the Bible, which is our Constitution as Christians, (which that section seeks to replicate and enforce), we should have nothing to fear.
Basis of Regulation of Not-for-Profit Organisations
When a person or group of persons apply to register a charitable organisation otherwise known as “Not-for- Profit” organisation, the implications are that he is undertaking a venture that would benefit the society and therefore, government would confer on it some privileges such as exemption from taxes. In consideration, whatever funds that come into it are for the public, and not for personal use. Consequently, the organisation is accountable to government, so, government must regulate the organisation to ensure that its funds are properly applied in and or towards its declared objectives. This is a sacred duty government owes to its citizens, and it would amount to gross abdication of that responsibility if government fails to do so. Every responsible citizen pays tax as he is obliged to do, but if government decides to exempt some because of the value they add to the society, that organisation has both legal and moral obligations to be accountable for funds contributed to it. This is the international best practice all over the world. In my view, this should be a given and not open to debate. Assuming for a moment that bad motive is behind the law in question, it would be literally impossible for any church that’s complying with the law to fall victim of it.
There is no nation on earth that can be run without laws. The alternative would be chaos and violence. To my mind, all that those sections seek to do, is to ensure probity, accountability and transparency by all associations operating in the country; whether they be churches, mosques, social or academic; so long as they are not for profit and are non-tax paying. They cannot eat their cake and have it. In the last few years, we have seen fracas in some churches with members of the laity throwing chairs at the clergy in the church for what they perceived as financial recklessness on the part of the former, and it took the authorities to wade in and prevent a breakdown of law and order. Several other such incidents are either not known or reported and it is therefore, incumbent on any responsible government to put in place laws that would drive sanity into the system.
I shudder to ask why the largest churches which are largely orthodox such as the Catholic Church and the Anglican Communion in Nigeria for example, are not complaining about the law. Certainly, they have the highest number of adherents and if they are comfortable with the law, we should be asking the right questions. Only this August, the UK Charity Commission was reported to have taken over the management of a popular Nigerian church in the UK, for what it described as breaches of the Charity Commission’s laws and Regulations. It wasn’t the first, and I do not think it will be the last. The same rules apply in the US to charitable organisations, including churches. Internationally acclaimed preachers in the US have been and are being indicted regularly under identical laws, and the heavens did not fall.
Many may remember that only late last year or so, the sitting American President’s NGO, Donald J. Trump Organisation, was indicted for mismanagement of its funds and ordered to refund about $2m to public coffers. Additional disciplinary measures were also taken against the organisation.
Why should Nigeria or any association be an exception? I can see none. The world has become a global village, and transparency and accountability have become the twin pillars upon which it is being built. I have no doubt that the Nigerian church and its leadership as I know it, has no problem with accountability and transparency as they comply with similar laws in Europe and the Western world at large, where they have churches. I believe that what those who have misgivings need, is proper education by their Lawyers. It would be instructive to hear from those opposed to the law to point out the material differences between the parallel laws in the UK and the US which they obey dutifully, and CAMA that they are so venomously opposed to. This will help us to better appreciate their positions, and ascertain if there are any marked differences in the laws. From my knowledge of those laws, there is no material difference with ours. Perhaps, they should also explain why they abide by the laws in those countries and do not want to in Nigeria.
Now the Law has been enacted, what next?
No matter what position we all take on the matter, the fact remains that it is now the law of our land and as law-abiding citizens, we have a civic duty to obey it, with dire consequences for disobedience. Objections to some of its provisions, ought to have been taken long before now. But, this does not mean that aggrieved parties are left without remedies. Firstly, they can approach the NASS for an amendment of the sections they are unhappy with. However, as previously articulated in this paper, it will be a difficult task in these circumstances to find justification to seek its removal from the law or, to have it expunged because one is unable to justify why a breach of it should not be punished, being what the Act seeks to prevent or punish as provided in Section 839 (1 & 2).
The only other remedy available to any organisation that is unhappy with the law, is to apply to de-register as a Not-for-Profit. Happily under the Act, it is not mandatory for an NGO such as a religious organisation to be registered, because under the Act, an organisation can voluntarily choose not to register or opt out of registration, and thereafter, government will not be able to regulate it. However, once it is de-registered, it loses all its privileges, including but not limited to its tax exempt status.
Self-Regulation is Key
I would like to end this write up with a word of admonition. The issue of regulating “Not-For-Profit” organisations is not new in Nigeria, and the idea was first floated by the Jonathan administration which was actually responsible for drafting the original provisions. I
“THE ONLY OTHER REMEDY AVAILABLE TO ANY ORGANISATION THAT IS UNHAPPY WITH THE LAW, IS TO APPLY TO DE-REGISTER AS A NOT-FOR-PROFIT. HAPPILY, UNDER THE ACT, IT IS NOT MANDATORY FOR AN NGO SUCH AS A RELIGIOUS ORGANISATION TO BE REGISTERED ....... ”
was privileged to have a copy of that draft law, and I dare say that it was much more detailed and maybe, draconian than this abridged version. For instance, it proposed to limit the age of a serving General Overseer/Superintendent of a church to 70 years, which personally, I did not consider right, as such matters should be left for the particular organisations to determine in their respective Constitutions.
A few years ago, the Vice President delivered a paper to the Body of Senior Advocates of Nigeria (BOSAN) of which he is a member, on the occasion of our annual dinner in Lagos, the object of which was to challenge us to self-regulate. As a privileged group of Lawyers, my colleagues and I were thoroughly inspired and challenged by the speech. We all left the dinner, seriously thinking how to heed the golden advice. He reviewed the history of the world’s leading monarchs and ruling classes, including the British and Dutch monarchs, and noted that from their inception, they recognised that they are a privileged class of people. They also recognised that to continue to enjoy these privileges, they needed to self-regulate their behaviour in line with what is universally acceptable, namely; that it must be accountable, transparent, and that they must all be subject to the rule of law like everyone else, failing which, they stood the risk of losing their privileges.
As the British monarch exemplifies the values of the British people, members of the family must at all times conduct themselves in a manner that is compatible with their status. The same goes for the political class all over the world or, should I say in civilised climes. Where a member of any ruling class behaves in a manner that is inconsistent with his status, such a person sticks out like sore thumbs and risks losing his privileged position in no time.
Conclusion
The time has come for the Church to self-regulate its affairs by being accountable in matters of administration and finance, and to make the conduct of its business transparent, so that there would be no need to be regulated by government. More importantly, the government and other private institutions would look up to church organisations for leadership in the areas of accountability and transparency. Until that is done and seen to be done, any responsible government would consider it its duty to ensure that it runs, not like an independent association within the Republic, but as one that is subject to its laws. For government not to wade in, in such circumstances, would be to invite every other interest group in the country to seek autonomy in it’s affairs within the State. The only plausible consequence, in such circumstances, would be utter chaos.
In that regard, God forbid!
CAMA Will Enhance Corporate Governance
Chuks Nwana
Background The latest company law amendment to the existing legislation, has generated a lot of interest and opinions in the public space. Generally our company law has not been proactive as it has been unable to pre-empt the changes that happen every day and new processes of doing business. This reaction explains why Nigeria has been slow to keep pace in the fast and dynamic world of corporate evolutions, and so, we have had an amendment to the Companies Act Ordinance of 1912 in 1968 , subsequently updated in 1990 up until the latest codification. In other jurisdictions company law amendments occur at least every ten years. It is common knowledge that the corporate world is in a state of constant flux and changes happen on a regular basis, and government decided that a wholesale overhaul of the law will be better than ad hoc amendments .
In effect, some of the provisions become very obsolete in a matter of years as can be seen in some of the penalty provisions under the previous Act which are ridiculous in view of the present value of the Naira. In some situations, the innovations in the laws always reflect the preponderance of judicial opinion, either in Nigeria or from common law jurisdictions around the world.
It has come to be recognised that a proper and efficient legal framework is essential for business to thrive in an emerging economy, and for this reason, this present Government has aggressively promoted the ease of doing business in Nigeria, and sought to have favourable rating under the United Nations chart on friendly environments for investment of capital. It became obvious that the 1990 Act was insufficient to meet the evolving business environment where the world has become a global village, and international capital only goes to an environment where it is wanted. The new law is an attempt to approximate international best practices, but it has nevertheless, generated concerned observations particularly where some provisions have not taken into account our peculiar local circumstances.
The New Section 18(2) CAMA
I intend to dwell essentially on the provisions of Section 18(2) of the new law, which makes it possible for a single shareholder to incorporate a company. Hitherto, the law required a minimum of two shareholders for the incorporation of a company, and that was the prevalent attitude in many jurisdictions. Over time and for practical and expedient purposes, companies can now be incorporated with just one person, so that issues of compatibility and sometimes corporate warfare can be avoided. In almost all civil and common law jurisdictions, it has become the standard for companies to have a sole shareholder, and Nigeria finally joined the bandwagon. The provision of this section is also elastic enough to include companies that have a sole shareholder that is a company.
Under the common law and statute, shares are considered to be personal assets or chattels like cars and clothes that inheres in an individual or corporate entity and over which they enjoy certain rights including alienation, sale, transfer or gift . Individual shares in a company enjoy the attributes of a personal property that can be freely transmitted to other persons, either testate or intestate. Under the repealed Act, the whole essence of having more than one shareholder was for the company to be sustainable in one way or the other, when any of the shareholders passes away. This was the logic behind family companies where perpetual succession was guaranteed not only by law, but by an operational device which allowed the company to go on with the other members of the family when the progenitor is no longer around. For the reasons referred to above, sole shareholding is attractive for easy and fast corporate engagement, especially in advanced societies where the process and regulation in respect of transmission of shares upon death is seamless, and driven by technology.
Under our existing probate and succession laws, where a person dies his/her assets devolves on his personal representatives where he has written a will and has disclosed the sole shareholding in a company, or in the absence of a will, the assets both personal and real remain in abeyance until letters of administration are obtained .
The purpose of this contribution is to draw attention to the chaos, lack of data and confusion that obtains in most probate registries in Nigeria. With the possible exception of maybe one or two States, the probate registries belong to the Stone Age. Consequently, it takes an average of more than two years to obtain letters of probate or administration, and where they are obtained, they may be mired in bruising legal disputations which may not be resolved for several years. The available records and statistics show that about 80% of chieftaincy, land, estate, probate and succession issues in superior courts of record, go all the way to the Supreme court and may never get resolved until after about 15 years. It is therefore easy to imagine that where the family is even aware of the existence of the company , the issues about and around vesting or transmitting the shares to the personal representatives or administrators will take many, many years because of the slow and lethargic process of processing applications for grant of letters of probate or administration. Anyone versatile in probate and asset investigation knows that sole shareholding in a company will be difficult to discover, especially where the shareholder dies suddenly. The effect of this unsavoury situation is that the company will be in limbo and the registry will be holding details of companies that have ceased to exist in practical terms, and which vision has died with the sole share holder. This is
the main reason why several businesses do not survive the death of their founder. It was for this reason that the law provided for two or more shareholders, so that the surviving shareholder(s) can continue with the vision especially in emerging economies where the macroeconomic structures are absent.
I draw attention to the validity of the
Supreme court decision in TIKA TORE
PRESS v ABINA (1973) 4 S.C. 53 where the court held that personal representatives do not assume automatic membership or shareholding of a company until the formal registration as a member, and can therefore, not exercise any rights of membership to attend any meetings, vote or even earn dividend . It is recognised however, that this position may not be tenable if the articles of association of the company provide otherwise. The important issue in this context, is whether a sole shareholder can get into a contract with himself to provide for rites of transmission of shares upon his demise, if we understand that an articles of association is actually supposed to be a contract between members of the company, and not one person. Section 155(5) of the 1990 Act, is in my view, actually a statutory repeal of the Supreme Court decision to the effect that, personal representatives are entitled to receive dividends, bonuses and the like, only after they have been formally registered as members of the company with the letters of probate or administration.
Shares are not automatically transmitted, and shareholders are either the shareholder, the personal representatives or to any other person to whom shares have been transferred by operation of law.
In some situations the personal representatives may not be interested in continuing with the line of business, and in the absence of any other shareholder who could acquire the shares, the company dies a natural death. I consider that in the particular situation of Nigeria, it cannot really be the intendment of the law that companies with single shareholders should die, the moment the shareholder ceases to exist. May I also add that, there are potentials to use a one man shareholding as an instrument for fraud when it becomes necessary to lift the veil, as tracking a sole shareholder may be almost impossible.
It is my view, and under the Nigerian situation, that sole shareholding will only serve a transactional and narrow purpose, and businessmen are better advised to ruminate carefully on the consequences of having a company that dies a day after their death. Perhaps, we may need to undertake a big digital overhaul of our data base and the probate registry, to ensure that grant of letters of probate and administration can be achieved within 90 days in a network that is connected to the Corporate Affairs Commission databank. This overhaul and efficient processing of applications must be part of the objectives of easing the pains of conducting business in Nigeria.
Without prejudice to what the judicial attitude may ultimately be to these new provisions, the electronic filing of documents and some virtual meetings have been validated by the Evidence Act, and we can project that the courts will not unsettle the compliance with the digital age.
The situation of where a company is also the shareholder does not present a situation as challenging as that of an individual shareholder, because the company sole shareholder (provided that an individual is not the sole share holder in the holding company) will have perpetual succession and the company will be sustained, as against where the death of an individual share holder may result in the involuntary death of the company.
Conclusion
In the final analysis, the new Companies Act is a curious blend of keeping pace with international developments in the area of corporate governance, establishing a friendlier legal framework to satisfy the interest of businesses, and to ease business transactions, but at the same time, it is very important to pay attention to local sensibilities and actually drive the process with profound attention to our customary and digital situation.
Chuks Nwana
"....... PROVISIONS OF SECTION 18(2) OF THE NEW LAW ...... COMPANIES CAN NOW BE INCORPORATED WITH JUST ONE PERSON, SO THAT ISSUES OF COMPATIBILITY AND SOMETIMES CORPORATE WARFARE CAN BE AVOIDED”