Daily Law Tips (Tip 634) by Onyekachi Umah, Esq., LL.M, ACIArb(UK)
CAC Can Now Takeover Churches, Mosques, Associations, and NGOs?
With Nigeria ranking low on the ease of doing business, came external pressures to fast track formation and management of business in Nigeria. Some say, the new Companies and Allied Matters Act 2020 is the messiah, however, the stakeholders in the not-for-profit sector think otherwise. The President of Nigeria, on 7 August 2020, signed into law a new company law to regulate formation and management of companies and other related issues, including not-for-profit and non-governmental organisations in Nigeria. In this work, “not-for-profit” and “organisations” includes and covers; groups of persons, associations, societies, clubs, religious groups, not-for-profit organizations and non-governmental organizations.
Before the advent of the Companies and Allied Matters Act 2020 (CAMA 2020), there was an earlier but now repealed (dead), Companies and Allied Matters Act made since 1990. By the former federal law, not-for-profit and non-governmental organisations were registered and managed under a federal agency; the Corporate Affairs Commission (CAC). This role of the CAC has not changed rather more powers have been added to the CAC, including powers that are arguably unjustifiable, undemocratic, anti-business and anti-development. For example, regulation of a part of law practise and bailing out of insolvent companies without setting a fixed standard, among other issues.
Earlier on 4 July 2020, I made a publication (CAC Cannot Deregister an Incorporated Trustee [Association/Group/NGO/NPO] and examined the then powers of CAC to register or deregister not-for-profit organisations under the old law. My finding was that registration of not-for-profits is not mandatory and that CAC lacks the power to deregister a not-for-profit organisation. However, a month later, the new CAMA 2020 came into existence and the powers of CAC have developed enormously overnight on legislative fertilizer.
By the new CAMA 2020, the CAC has powers to accept application from two or more persons representing groups of persons, associations, societies, clubs, religious groups, not-for-profit organizations and non-governmental organizations, for registration to become a corporate body. Also, the CAC can now suspend trustees/management of organizations for corruption and in their place appoint interim trustees/managers. The suspension is designed to last not more than 12 months. Also, the property and accounts of the organisation will be taken over by the interim trustees/managers.
Earlier by the old CAMA 1990, CAC could apply to court to terminate/dissolve organisations. By the old law, the only reasons that a court may allow dissolution of a not-for-profit organisation, include; that the aims and objectives of the organisation has been realized and there is no need to keep the organisation; the aims and objectives have become illegal; the organisation was formed for a specific period and the period has expired or that it is just and equitable to dissolve the organisation. The court will have to hear the petition for dissolution to be filed by CAC and must invite the persons that will be affected by the dissolution.
Now by the new law (CAMA 2020), the CAC can now suspend the trustees of a not-for-profit organisation, where CAC merely believes that there is or has been a misconduct/mismanagement/fraud in the administration/affairs of an organization; it is necessary/desirable to do so in order to protect the property of an organization or that it is in the public interest to do so. Misconduct and mismanagement include over-invoicing/misappropriation and the payment of salary or any remuneration/reward to persons managing the affairs of not-for-profit organisation.
This is really what is expected of every not-for-profit organisation even in the old law, since not-for-profit organisation is charity and its founders/managers are not to get rewards/salaries for their selfless works. However, the old CAMA, failed to empower CAC with pragmatic powers to check the growing excesses of not-for-profit organisations and their founders/managers across Nigeria. With this, whistle blowers and audits will reveal misconduct to CAC and CAC can suspend concerned founders/managers. Note that, instead of forming a not-for-profit organisation as a disguise for business/social ventures (to evade tax and other legal responsibilities), it is better one forms a company/partnership/business name so that he and his cronies can continue making profit, paying remunerations/rewards to themselves and spending their wealth with little or no scrutiny. Charity must be charity!
On how CAC can suspend trustees, there seem to be 2 early schools of thought. The first school argues that CAC can suspend trustees through its own administrative order. While the second school, argues that CAC can suspend a trustee, by seeking and obtaining an order of court. A critical examination of the new law, reveals that CAC cannot suspend trustees and appoint interim trustees without an order of court.
Above all, trustees can now be suspended by CAC (directly/outrightly or through courts, which eve school you belong to) and strangers can be imposed on a not-for-profit organisation as interim trustees/managers. This anti-corruption tool is designed to limit the abuse seen in organisations where property of organisations are plundered by founders, trustees and managers and even employed on matters contrary to the objectives of their organizations. So, any founder/manager that is corrupt is gradually inviting strangers to take over the affairs of his not-for-profit organisation. Thus says the new CAMA 2020, being the law law and it will continue to apply to all persons and not-for-profit organisations.
My authorities are:
1. Sections 823, 838, 839, 868 and 870 of the Companies and Allied Matters Act 2020.
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