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Dispute resolution and penalty regime under CAMA 2020 09 Oct 2020

The Companies and Allied Matters Act 2020 (CAMA) introduced two new dispute resolution innovations. The first is the power given to the Corporate Affairs Commission (CAC) to establish an Administrative Proceedings Committee vested with some far-reaching powers. The second is the discretionary powers of a court to impose fines.

Curiously, CAMA provides no parameters against which the amounts for the fines can be benchmarked. And the power to impose unspecified fines by a court and the CAC-constituted Committee will significantly alter the extant dispute resolution landscape for businesses and individuals.

Thus, this article examines the legal implications of these provisions in the new law and advises on possible ways to manage the associated risks.

Powers of the Committee

Section 851(4) of the Act empowers the Committee to provide parties alleged to have contravened the provisions of CAMA or its regulations the opportunity of being heard; resolve disputes or grievances arising from the operations of CAMA or its regulations; and impose administrative penalties for contravention of the provisions of the Act.

In addition to the power to impose administrative penalties, Section 851(10) empowers the Committee to suspend or revoke a company’s registration and recommend the culpable party for criminal prosecution. The decision of the Committee becomes effective when confirmed by the Board of CAC. A party who is dissatisfied with the decision may appeal to the Federal High Court (FHC).

Implicit Legal Issues

A review of the sections on the powers of the Committee reveals that the scope of the contravention or dispute referable to the Committee is quite unclear. It remains to be seen whether the Committee can adjudicate on all types of contraventions and disputes covered by CAMA.

Certainly, the scope of the Administrative Proceedings Committee’s work will not extend to matters which do not constitute a violation or dispute such as applications to the FHC to sanction mergers, acquisitions, etc. Equally, its work will not involve criminal violations, because the Committee is required to recommend criminal prosecution to the appropriate authority (Section 851 (10) (c) ). In fact, it is a moot point that only a court of law can determine criminal allegations.

However, where a situation gives rise to both civil and criminal violations, the Committee is not precluded from trying the civil violation. For instance, in Oni v. APC-SEC & Ors (2013), the appellate court held that the composition of a similar committee that was set up by the Securities and Exchange Commission (SEC) was constitutional and had the power to try the civil violations component of the case, notwithstanding it had a criminal dimension.
 
Furthermore, whether the referral of an alleged violation or dispute to the Committee is a condition precedent to the exercise of jurisdiction by the FHC is debatable. For example, can a director or a company brought ab initio before the FHC argue that the court lacks jurisdiction because the director or the company has not been given an opportunity to be heard first by the Committee? Whilst it is not impossible that such argument can be made, the efficacy of the argument is doubtful in certain instances.

An example is where an aggrieved party is explicitly empowered by some provisions of CAMA to approach the FHC for injunction against a company or its directors on a certain matter. An order for injunction can be applied for to restrain a defendant from the repetition or the continuance of a wrongful act. The timely benefit of such injunctive remedy will be lost if recourse must first be to the Committee.

Another instance is where parties to a dispute have an agreement that their dispute will be resolved by arbitration. The parties must refer the matter to arbitration and not to any other forum. See Mekwunye v. Imoukhuede (2019) LPELR-48996(SC). But where the subject matter is a violation of CAMA provisions, it will appear that CAC – which is not a party to the arbitration agreement – can validly drag the offending party before the Committee. The reason is that an arbitration agreement does not bind a non-party to it.

Power of the Courts to Impose Unspecified Fine

Certain sections in CAMA provide that an offender is liable on conviction to a fine of an amount to be determined by the court. These sections include 672 (3) and 677 (Penal Provisions), which relate to offences connected with winding up process. Such wide discretionary powers given to the courts arguably leaves corporate bodies and individuals at the mercy of the courts. This then raises a question of the validity or otherwise of the penal provisions.

Strikingly, their validity will depend on whether the provisions comply with the principle of legality (particularly the doctrine of nulla poena sine lege) enshrined in section 36 (12) of the 1999 Constitution of the Federal Republic of Nigeria as amended. In the United States and European Union, this principle is known as the vagueness doctrine and the principle of accessibility and foreseeability, respectively. It is also codified in Article 23 of the Rome Statute of International Criminal Court. The principle of legality has arguably assumed the status of international customary law. As a result, it cannot be derogated from, not even in times of war.

Legal Validity of the Discretion

Section 36 (12) of the Constitution essentially provides that a person shall not be convicted of a criminal offence unless that offence is defined and the penalty thereof is prescribed in a written law. The doctrine of nulla poena sine lege, which is codified in this section, has four components, but the one that is relevant to the present discourse is nulla poena sine lege certa, which provides that a penal provision must define the penalty with sufficient definiteness. The purpose of sufficient definiteness is basically to protect citizens against discriminatory, arbitrary and excessive penalty (DAE penalty), which may arise from excessive administrative or judicial discretion. Thus, the validity of the penal provisions in CAMA depends on whether they are capable of leading to DAE penalty.
 
It may be contended that the penal provisions are not capable of resulting in DAE penalty as some benchmarks and safeguards exist in our criminal procedure laws such as in Sections 420 (1) and 427 (1) of the Administration of Criminal Justice Act (ACJA). Section 427 (1) of ACJA provides thus: “A court, in fixing the amount of a fine to be imposed on a convict, shall take into consideration, amongst other things, the means of the convict.”

Similar provisions in Section 23 (1) of Criminal Procedure Code (CPC) and Section 382 (1) of the Criminal Procedure Act (CPA) have been applied by the courts. (See Thomas v. The State (1994) LPELR-3239(SC).) However, the constitutional validity of the provisions vis-à-vis the principle of nulla poena sine lege certa was not in question in the reviewed case.
Furthermore, it should go without saying that judicial discretion is not at large. A court is obliged to exercise its discretion judicially and judiciously; this entails exercising discretion with due regards to the peculiar facts of each case within the stipulations of the law and according to what is fair and just.

It may, thus, be concluded that if a court takes cognizance of the parameters in Section 427 (1) of ACJA or in other relevant laws when imposing a fine, the fine would be valid. But it may also be argued that the act of ascertaining the means of a convict may not be easy and practicable and may even give rise to further judicial arbitrariness. Thus, this concern makes the open-endedness of the fine less patronizing.

It can further be argued that assuming, for a moment, that the safeguards are sufficient to guide against excessive (and perhaps arbitrary) penalties, the indefiniteness of the penalty and the consideration for the (financial) status of the convicts will result in treating convicts unequally before the law. Hence, the penal provisions in CAMA and the putative safeguards under ACJA can be challenged for being a violation of the fundamental right to freedom from discrimination guaranteed under Section 42 of the Constitution and Articles 2 & 3 of the African Charter on Human and People’s Rights (Ratification and Enforcement) Act, Cap A9, LFN 2004.

No doubt, the arguments on both sides are appealing. It will be interesting to see how the courts will approach the question of validity when it eventually arises.

Conclusion and Recommendations

It seems CAC is yet to constitute the Administrative Proceedings Committee. Thus, in the meantime, matters can be referred directly to the courts without any concern. But post-constitution, an aggrieved party should double-check whether the subject-matter of its grievance is clearly for the courts to adjudicate on. If it is not very clear, recourse may be to the Committee. Better still, proper legal advice could be sought.

CAC should clarify the scope of the matters referable to the Committee. If charged under the penal provisions, it might be useful to draw the attention of the court to the parameters in ACJA to at least minimize the risk of excessive fines. Where a party is dissatisfied with the sum imposed, he or she may appeal and raise the validity question.

Isaac Ibikunle Esq, is an Associate at Olaniwun Ajayi LP, a Lagos-based Nigerian commercial law firm.