Nigeria is a member of the Open Government Partnership which seeks to introduce greater transparency, accountability and service delivery across all sectors of public governance. One of the key commitments made by Nigeria is the establishment of a Public Register of Beneficial Owners of Companies. The commitment has an implementation period of January 2017 to December 2019.
The commitment is basically to make it possible to identify the natural persons who directly or indirectly own, control or enjoy the benefits of corporate entities. This column this week seeks to review the implementation of the commitment so far and propose pathways to its full implementation.
Ordinarily, a company is a legal person before the law and has a distinct personality from its owners. Hence, companies have been used to facilitate corruption and other crimes. The veil of incorporation is not usually lifted unless individuals behind the companies trade recklessly, use it as an engine of fraud or to commit crimes and in other specially designated circumstances. The Nigerian OGP commitment states the rationale of the beneficial ownership (BO) intervention as follows: “If beneficial owners were identified, there would be the possibility of tracing money linked to tax evasion, corruption, money laundering, drug trafficking and terrorism financing”. The expected outcome is increased tax revenue from corporate entities and reduction of the possibility of hiding proceeds of corruption. Implementing the commitment is programmed to involve ministries, departments and agencies of government, civil society, professional groups, etc.
The introduction of the BO is hinged on the amendment of the Companies and Allied Matters Act (CAMA) which provides for the old school background of secrecy and the thick veil of incorporation. The Eighth National Assembly in its last interventions sought to amend the CAMA. The amendment, inter alia, made provisions for the implementation of Nigeria’s BO commitment, and forwarded the same to President Muhammadu Buhari for assent.
The bill in Section119 created an obligation on persons with significant control to inform the company in writing of the particulars of such control and for the company to inform the Corporate Affairs Commission that a BO has been created. Furthermore, the CAC is obliged to create a register of persons with significant control. But the section does not indicate whether the register will be available to the public. However, by Section 112 (2), any member or, with the permission of the company, which permission shall not be unreasonably withheld, any other person may require a copy of the register, or of any part thereof, on payment of such amount that the Commission may prescribe from time to time or such lesser sum as the company may prescribe for every page thereof required to be copied.
The bill defines a person with significant control as a person “directly or indirectly holding at least five per cent of the shares or interest in a company or limited liability partnership; directly or indirectly holding at least five per cent of the voting rights in a company or limited liability partnership; directly or indirectly holding the right to appoint or remove a majority of the directors or partners in a company or limited liability partnership”. Other categories include persons “otherwise having the right to exercise or actually exercising significant influence or control over a company or limited liability partnership; or having the right to exercise, or actually exercising significant influence or control over the activities of a trust or firm whether or not it is a legal entity…” Further, the bill outlaws the issuance of bearer shares which are shares represented by a certificate, warrant or other document (in any form or by whatever name called) which states or otherwise indicates that the bearer of the certificate is the owner of the shares.
Nigeria is not alone on the BO journey as many countries have already passed legislation and made rules for its implementation. These countries include Brazil, Costa Rica, South Africa, Namibia, the European Union, etc. However, Nigeria’s proposed threshold of five per cent interest (for persons to qualify as a person with significant interest) is lower than what is obtainable in other jurisdictions where it varies from 10% -25% interest. Accordingly, the BO is defined by the Financial Action Task Force as natural person(s) who ultimately owns or controls a customer and/or the natural person on whose behalf, a transaction is being conducted. It also includes those persons who exercise ultimate effective control over a legal person or arrangement.
There is still a challenge in the provisions of the amended CAMA. According to experts: “When an entity (e.g.: a trust, a company) records who its beneficial owner(s) is (are), it creates a register of beneficial ownership. When a regulator or an official registrar collects and collates this information in one place, it creates a central register of beneficial ownership. Some registers can be accessed by anyone (in which case they are “public”), while others are only accessible by law enforcement and tax authorities”. This is still a cumbersome process of going after particular companies to get details of the beneficial owners when the amendment talks about persons who need the information making an application to the company. This should have been replaced with provisions for an electronic portal, available to the public, where individuals can search to access information.
However, these interventions in the amendment of CAMA and the introduction of the BO are almost being laid to waste because the President has not assented to the CAMA amendment. There is no information in the public domain as to his objections to the provisions of the bill. It will amount to blowing hot and cold at the same time for Nigeria through the President, to commit to beneficial ownership at an international forum under the OGP, and turn back at home to decline asset to a bill which seeks to implement the commitment. If the President has any objection(s) to the bill, he should make the same public, so that the legislature can explore the possibility of addressing the objections. But if he has none, he should give assent to the bill.
Further, if the BO has been clogged together with a number of other amendments to CAMA, and there are objections to other parts of the bill (beyond BO), which has over five hundred sections, then this should be made clear by the President, so that the legislature can isolate the sections on the BO and repackage them as a separate bill for his assent. Nigeria can no longer afford to continue on this trajectory of approbating and reprobating.
Institution building, new policies and programmes are needed for the struggle to entrench transparency in governance, fight corruption and reduce waste in governance. The BO provisions provide a framework to the next level of governance reforms.
Dear Mr. President, kindly take action on the CAMA Amendment Bill.
