Company Regulations, 2017: An amendment of the Companies and Allied Matters Act, 2004
By ODIGBO UGOCHUKWU SANDRA
According to the Companies and Allied Matters Act[i], one of the requirements for application for registration of a company is the Statutory Declaration of Compliance[ii]. This requirement demands a certificate declaring that the promoters of the company have complied with all the requirements of the law. The Declaration must be deposed to by a Legal Practitioner as defined under the Legal Practitioners Act. This requirement under the law has created a situation whereby promoters of a proposed company must seek the expertise of a Legal Practitioner before an application for registration can be made. Because of this, the lawyer has a duty to ensure that in preparing for registration, the promoters follow the letter of the law in all pre-incorporation transactions[iii]. However, the newest amendment of the Companies Regulation has substantially changed this provision. An examination of this amendment is the focus of this paper.
Legal practitioners, in the Nigerian Context, may also be referred to as Lawyers, Attorneys, Advocates, Solicitors, Barristers, Esquire and a lot of other such terms that denote involvement in legal practice[iv]. He is a person, who through a regular program of study, is learned in legal matters and has been licensed to practice his or her profession. From the inception of the Nigerian Modern Legal practice as it is today, certain roles and rights have been known to belong to Lawyers. These roles include preparation of land documents[v], declaration of statutory compliance in the registration of companies at the Corporate Affairs Commission(CAC)[vi], appointment as Attorneys-General[vii], becoming Judges[viii], and other such rights/roles. These form the functions of Legal Practitioners in addition to Litigation.
THE LAW AS IT WAS
The Presidential Enabling Business Environment Council[ix](PEBEC) was created by the Federal Government to improve the business environment and make Nigeria a progressively easier place for businesses to start and thrive[x]. One of the reforms proposed by PEBEC is the direct registration of companies by first directors and subscribers. The adoption and codification[xi] of this proposal has removed the restriction that only accredited agents could register companies. Part of the documents required for registration under Section 35 Companies and Allied Matters Act is a statutory declaration in the prescribed form by a legal practitioner. In other words, a lawyer’s declaration is a mandatory requirement for the valid registration of a company as this goes to show that the promoters of the company have complied with all the provisions of the Act and other laws.
The requirement of the Section stated above was to the effect that promoters who intended to apply for the registration of a company had to seek the expertise of a lawyer before such application. The lawyer thus, had a duty[xii] to oversee the procedure for application and inspect pre-incorporation contracts to ensure that the application was not in contravention of any laws and that all requirements under all applicable laws had been followed.
THE LAW AS AMENDED
On the 5th day of April, 2017, the honourable minister of Industry, Trade, and Investment, Dr. Okechukwu E. Enelamah pursuant to the powers vested in him by Section 16, 585 and 609 of CAMA, amended the Companies Regulations, 2012[xiii] to the effect that applications for registration of a company could be brought either physically to the offices provided in the amendment or through electronic means by any of the following:
- A legal practitioner, Chartered Accountant or Chartered Secretary, duly accredited by the Commission as an agent;
- A first director or subscriber to the memorandum of association in respect of new registration under Part A of CAMA;
- A proprietor or partner in respect of application under Part B;
- A trustee in respect of application under Part C of CAMA;
- A duly appointed secretary in respect of Post-incorporation application under Parts A and C of CAMA.
In a bid to circumvent the provision of Section 35(3), Regulation 11(b) provides that the sum of 500 naira be paid by any of the persons listed in (2) above to the commission in exchange for deposition by a Legal Practitioner working with the commission of the Statutory Declaration of Compliance. This provision has not sat well with lawyers in Nigeria and outcries have been heard against it.[xiv]
In a matter brought by Ernest Nkwocha Esq. against the Minister of Industry, Trade and Investment, Corporate Affairs Commission and The Attorney General of the Federation[xv] at the Federal High Court, Kano Judicial Division, he contended that Section 585 and 609 of CAMA which the Minister placed reliance on do not in any way grant the Minister the power to make the kind of provision the Minister made in Regulation 11(b) of Companies Regulation 2012 (as amended). He stated that the only valid law the minister relied upon is Section 16 of CAMA, and argued further that the Section does not also grant the Minister such power. He stated also that Sections 16 of CAMA is a general rule while Section 35(3) of CAMA dealing with Statutory Declaration Compliance is a special and particular provision appearing subsequently to the general rule in Section 16. He further canvassed that one does not need to be an astute lawyer to know the legal import and purport of this in our laws; that one of the trite rules of interpretation of statutes is that generalia specialibus non derogant[xvi], stressing that, this in law means that Section 35(3) of CAMA overrides the general provision in section 16 of CAMA.
The Respondents contended that legal practitioners in the employment of the CAC have powers to practice as legal practitioners which include signing pleadings, appearance in court and making declaration of compliance. Furthermore, it was submitted that the regulation does not foreclose the directors or subscribers from engaging the services of legal practitioners in private practice to make such statutory declaration of compliance and that it is only where the directors or subscribers are not able to engage or afford the services of a legal practitioner that Regulation 11(b) can be activated-for ease of doing business in Nigeria. Counsel submitted that it will amount to a negative construction if officers in the service of the CAC are authorized by law to appear in court and can carry out all functions of legal practitioners but are precluded from making a mere statutory declaration of compliance.
The court HELD that Legal practitioners in the employ of the CAC are barred from giving such an opinion to the CAC. Section 35(3) of CAMA is very clear on whom to do such declaration-a legal practitioner. [xvii]
It is my view that the section does not anticipate that legal practitioners in the employ of the CAC will perform the act otherwise the section would not have provided that the statutory declaration ‘shall be produced to the Commission’. As the Legal Practitioners under the employ of the CAC are part of the CAC, it will amount to an abuse of legal interpretation to provide that the CAC can sign the statutory Declaration. This is equivalent to cancelling the requirement for the Declaration totally.
The provision of Regulation 11 (as amended) is an attempt to abuse the literal interpretation of Section 35. The amendment of the Companies Regulation seems to imply that the insertion of the requirement of the Declaration duly signed by a lawyer is useless and unnecessary. It is clear from the wording of CAMA that the Statutory Declaration, already signed by a lawyer who was in the position to oversee the pre-application process should be produced to the commission, not one issued by the commission.
THE AMENDMENT OF THE REGULATION: AN AMENDMENT OF CAMA?
Regulation 11(b) as amended provides thus:
‘’where application for new registration under Part A is presented by any of the persons mentioned in Regulation 11(a)(ii), the Statutory Declaration of Compliance SHALL be deposed to by a Legal Practitioner in the service of the Commission and the presenter shall pay the sum of N500 only to the Commission as cost of notarization.’’[xviii]
In the case of Ernest Nkwocha and 2 ors V the Minister for Industry, Trade and Investment and 2 ors[xix], The court further held thus:
‘’ the word used in Regulation 11 (b) is ‘shall’ thus expressly excluding other legal practitioners from signing the Declaration of Compliance for people registering a company who fall under Regulation 119b)(ii). It is my view that this is an amendment to section 35(3) of CAMA. The 1st Respondent has no such powers, and none was conferred to it by the provisions of sections 16, 585 and 609 of CAMA whether expressly or by implication.’’[xx]
By this decision, the court opined that the use of the word ‘shall’ in the amendment was an attempt to amend CAMA, which power the Minister didn’t have. The respondents have filed an appeal at the Court of Appeal, Kaduna Judicial Division. The appeal is yet to be decided.
In legal drafting and interpretation, the word ‘shall’ is used to mean compulsion. Where ‘shall’ is used before an act to be done, it is understood that the law makes that action compulsory upon anyone who wishes to carry out that action. In the case of Corporate Ideals Ins. Ltd. V. Ajaokuta Steel CO. Ltd.[xxi], the court on the import of ‘shall’ when used in a statute stated thus:
‘’where the provision of a statutue is garbed with the word ‘shall’, it connotes that it is imperative that the provision be obeyed. This is so because ‘shall’ is a word of command. It imposes a duty and makes the provision mandatory’[xxii]
From decision of the honourable trial judge, it is clear that ‘shall’ connotes mandatoriness. It therefore follows, that the provision of Regulation 11b is one of compulsion and command.
The role of a Legal Practitioner in the registration of a proposed company is one that cannot be over emphasized. Where a lawyer is involved in the pre-registration of a proposed company, he acts as the agent of the law[xxiii]. He keeps an eye out for sharp practices and illegality. He guides the promoters and steers them in the right direction. This involvement of a legal practitioner is what the Corporate Affairs Commission counts on. The purpose of the required Declaration is clear from its name: Statutory Declaration of Compliance. The Declaration serves to assure the Commission that all the details in the forms are correct, that the law has been complied with, and that no uncouth practices have been employed in preparation for the application. This assurance saves the Commission the stress of going through a background check and of attempting to confirm all the details provided by the applicants.
The innovation introduced by PEBEC and signed by the Minister, although thoughtful, should have taken into consideration, the original reason for including the Statutory Declaration of Compliance in the documents required for registration. Although the Amendment sought to cover the lacuna that would have been created if the Declaration had been scrapped totally by providing that lawyers in the employ of the CAC should sign the Declaration instead, that provision trivializes the requirement for the Declaration in the first place.
In addition, the amendment failed to take into consideration, the effect on the business and economic impact on the lives of lawyers. It is obvious that this amendment will greatly affect the financial status of lawyers across Nigeria, some of whom made a living from the charge of registering compamies.
Moreover, the general provision of Section 16, CAMA from which the minister derived the power to amend the regulations is subject to the specific provision of Section 35 as explained in this paper. The result of this is that the general provision in Section 16 cannot be cited as grounds to contravene the provision of Section 35. The rationale behind this is explained extensively in the body of this work.
Furthermore, the use of ‘shall’ in Regulation 11b connotes that where the person seeking to apply for registration is a first director or subscriber to the Memorandum of Association, the Declaration for gthat person’s application can only be deposed to by a lawyer in the employ of the Corporate Affairs Commission. This excludes all other lawyers and puts a restriction on the general provision of CAMA and on the rights of the legal practitioner as we know it. Thus, this amendment seeks to amend CAMA and the Minister for Industry, Trade and Investment definitely doesn’t have power to amend CAMA.
Conclusively, I register my agreement with learned Judge Egwuatu where he held that it is unreasonable to assume that the provision of CAMA can be interpreted to mean a deposition by CAC to be submitted to CAC. That interpretation which the defendants relied on is obviously improbable. Furthermore, the use of ‘shall’ which is known in legal lingo to mean compulsion by the Amendment is interpreted to mean that only lawyers working under the CAC can depose to the Statutory Declaration where the application is brought to the CAC by a first director or a subscriber to the Memorandum. This excludes all other lawyers not employed under the CAC. Thus, it is my opinion, that the Minister for Industry, Trade and Investment has the power to amend the Companies Regulations in line with the powers granted him under CAMA. However, he has exceeded those powers where he attempts to use such amendment to amend or alter or contravene the provisions of CAMA which is the parent law of the Companies Regulations. Hence, the specific provision contained in Section 35, CAMA supersedes the power given to the minister in Section 16 to make amendments to the Regulations and further supersedes the provision of Regulation 11b. Consequently, the provision of Regulation 11b[xxiv] is void and of no effect.
[i] Section 35, Companies and Allied Matters Act, Cap C20, LFN 2004.
[ii] Section 35 Supra.
[iii] Legal Practitioners Act, Cap L11, LFN 2004
[v] Rule 22(1), The Rules of Professional Conduct for Legal Practitioners, 2007.
[vi] Companies and Allied Matters Act, Cap C20, LFN 2004
[vii] Section 150, Constitution of the Federal Republic of Nigeria, Cap C23, LFN 2004.
[viii] Constitution of the Federal Republic of Nigeria, Cap C23, LFN 2004.
[ix] Hereinafter referred to as PEBEC.
[xi] Companies Regulations, 2012 (as amended)
[xii] Legal Practitioners Act, CAP L11, LFN 2004
[xiii] Regulation 11
[xv] FHC/KN/CS/86/2018 (unreported)
[xvi] Nobis-Elendu V. I.N.E.C (2015) 16 NWLR (1485) 207 which provided that where a specific provision of a statute is subsequent to a general provision, the specific provision prevails in the event of any conflict between the two.
[xvii] CAC Lawyers Cannot Depose To Statutory Declaration Of Compliance: Recent FHC Decision In Nkwocha V. Min Of Industry; available at < https://thenigerialawyer.com/cac-lawyers-cannot-depose-to-statutory-declaration-of-compliance-recent-fhc-decision-in-nkwocha-v-min-of-industry-download-the-judgement/ > assessed on 19th March, 2019.
[xviii] Regulation 11(b), Companies Regulations, 2012 (as amended)
[xix] Ibid., 4
[xx] Per Justice A. O. Egwuatu
[xxi] (2014) 7 NWLR (1405) 1165
[xxiii] Model Rules of Professional Conduct: Preamble & Scope; available at < https://www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_professional_conduct/model_rules_of_professional_conduct_preamble_scope/ > assessed on 19th March, 2019
[xxiv] Companies Regulations, 2012 (as amended)