What Is Wrong With Section 839 Of CAMA 2020 – The Power To Suspend The Board Of Trustees Of An Association?

By Prince Uzeme Olomu-Agbodo

The recently passed Companies and Allied Matters Act (CAMA) 2020 has been generally hailed as a positive move in the right direction. That is, until someone pointed out the new powers granted to the Registrar General of the Corporate Affairs Commission (CAC) via Section 839 of the Act. This article attempts to analyse the “offending” Section 839 to bring out its defects, if any. This will be done seriatim.

The section grants the CAC the power to suspend the trustees of an association and appoint an interim manager(s) to manage the affairs of that association upon a reasonable belief of the occurrence of any of 6 conditions. The conditions are misconduct/mismanagement, need to protect the association’s property, need to redirect the association’s property towards its objects, public interest or fraudulent running of the association’s affairs.

But is this power absolute? Absolutely not!

The section goes on to state the authorized body that can actually suspend the trustees. That body is the Court. What this means is that the CAC can only petition the Court for the suspension of the trustees but do not possess the power to suo motu suspend the trustees, contrary to what sub-section (1) suggests.

The second point to note is that it is not only the CAC that can make the petition. The petition can also be made by one-fifth (that is 20 percent) of the members of the association.

Another point of note is the fact that the petition cannot be bare. The petition, whether by the CAC or the stated members, must be supported by reasonable evidence, or such evidence requested by the Court to be presented.

And the CAC cannot bring any suspension petition to the Court unless the Minister’s approval is first sought and obtained.

The last point to bring out is the fact that the section clearly provides that suspension of trustees shall not exceed 12 months.

So let us take a look at the checks and balances contained in the law.

1. The CAC cannot unilaterally suspend the Board of Trustees of any association.
2. The CAC must first gather reasonable evidence before commencing the process that should culminate in the suspension of the offending trustees.
3. Such reasonable evidence must be evidence that can stand up to scrutiny in court.
4. The CAC must secure the approval of their supervising Minister before applying to Court. It is implied here that the reasonable evidence gathered must first be presented to the Minister for his approval.
5. After obtaining the Minister’s approval, there is one more hurdle for the Commission: File a Petition for Suspension of Board of Trustees to the Court.
6. The gathered evidence will then go through a second scrutiny by the Court.
7. It is only when the Court is satisfied that the Order to suspend the trustees would be made.
8. The Court’s power to suspend the Board of Trustees is limited to 12 months only. After 12 months, there would be a reversion.
9. As a side note, the power to petition the Court for this Order can also be exercised by 20 percent of the members.

At this point, the question needs to be asked. What is wrong with Section 839? It is this writer’s opinion that the section is very much in order. The fear that the Commission has been given wide ranging autocratic powers to take over or annex NGOs, religious bodies and other associations is, to my mind, unfounded. There are enough checks and balances contained in the said Section to prevent any autocratic or high handed execution.

This writer is also aware that there are far onerous laws guiding associations and incorporated trustees in other countries, especially in the western world. A lot of the bodies complaining about the Section 839 obey far worse governing laws in UK, USA and other countries. So it smacks of double standards to obey the same laws in other countries but the same organisation then turns around to rail against the laws of their own land.

For example, in the United Kingdom, the right to remove a trustee of a charitable organisation is contained in the Companies Act 2006 and in the Trustee Act 1925.

There are four ways in which a trustee can be removed from office:

[a] by express provision in the trust deed;

[b] under section 36 of the Trustee Act 1925;

[c] under section 41 of the Trustee Act 1925; or

[d] under the court’s inherent jurisdiction.

The court in UK enjoys an inherent jurisdiction to force a trustee out of office. Guidance on this ability was offered by the Privy Council in Letterstedt v Broers

Furthermore, the Charity Commission for England and Wales in its published Guidance titled, “The essential trustee: what you need to know, what you need to do” states in paragraph 3.2 thus: “CIOs must include provisions in their constitutions for appointment and removal of trustees. The Commission can use its powers to appoint or remove trustees if the charity’s trustees (or members, if applicable) are unable to do so. CIO means Charitable Incorporated Organisation which is the same as Incorporated Trustees in Nigeria.

The United States also has similar provisions regarding the appointment and removal of charitable trustees. And it is a constant across all these nations that trustees can be removed for breach of trust, conflicts of interest, costs, and the need to tie up loose ends, etcetera.

The argument has been raised about whether the Nigeria section 839 will be administered neutrally and impartially. The first response is that that same fear can be raised against any laws anywhere in this world. That fear cannot prevent the enactment of laws reasonably designed for a civilized society. Else, as Thomas Hobbes stated, our lives would be nasty, brutish and short.

The second response would be what has been stated severally in this piece. The section contains enough balances to prevent the actualization of such fears. For the exercise of the Commission’s power of suspension of the Board of Trustees, three levels of approval must first fall in line – the Commission itself, the Minister and the Court.

In summary therefore, we should all applaud the inclusion of Section 839 in CAMA. It would earnestly grow the culture of proper corporate governance, engender financial transparency, record keeping and the reduction of profligacy among our non-governmental organisations, religious bodies and other incorporated trustees.

Prince Uzeme Olomu-Agbodo, Legal Practitioner