EKAETE HUNTER



ISSUES ARISING OUT OF S. 102 OF THE COMPANIES AND ALLIED MATTERS ACT AND S. 29 OF COMPANIES REGULATIONS BACKGROUNDSECTION 102 (1) OF THE COMPANIES AND ALLIED MATTERS ACT (CAMA), CAP. C20, LAWS OF THE FEDERATION OF NIGERIA (LFN), 2004 (“Section 102”) provides:“102 (1)?A company?having a share capital, whether or not the shares have been converted into stock,?may in general meeting?and not otherwise,?increase its share capital?by new shares of such amount as it thinks expedient.” [Emphasis mine]In relation to and for a better appreciation of the foregoing, SECTION 233(6) CAMA states that:A company may, by its articles, provide that any matter not required by the articles or by this Act to be passed by a special resolution, shall be passed by an ordinary resolution.??However, PARAGRAPH 29 OF THE COMPANIES REGULATIONS (“Paragraph 29”) also provides for the steps that are required of a company in order to increase its authorized capital. It states?inter alia:“Requirements for filing of notice of increase in authorized share capital shall include the following?–Special resolution for increase in share capital signed by a director and secretary or two directorsUpdated annual returnUpdated section 553 where applicableEvidence of payment of FRC annual duesPayment of fees?? If the two legislations highlighted above i.e, the Companies and Allied Matters Act (CAMA) and Companies Regulations (the “Regulations”) had adhered strictly to the same requirements for a Company to increase its share capital, this legal opinion would have been needless and would have amounted to a futile search for a thing which is not lost. In Nigeria’s corporate and companies’ firmament, the increase in shares of a running concern is common place. Hence, companies have had cause to worry over the appropriate procedure to adopt. The Companies and Allied Matters Act (CAMA) is an Act of the National Assembly and the powers of the Corporate Affairs Commission (CAC) are derived from the Act. The Regulations on the other hand are made pursuant to CAC’s regulatory powers as conferred by CAMA and serves as a subsidiary legislation to CAMA. Nonetheless, Companies Regulations satisfies as legislation that Companies over the years have had to abide with.The purport of this opinion is to examine the propriety and the legal effect of the inconsistency, if any, in the provisions of paragraph 29 and section 102.LEGAL ARGUMENTS ON WHETHER THERE IS A CONTRADICTIONFor some, Paragraph 29 is an attempt to amend or expand the provisions of CAMA without recourse to the legislation. In other words, CAC might have exceeded powers expressly conferred by CAMA.Another argument is that, paragraph 29 is?ultra vires, hence, it should be declared null and void to the extent of its inconsistency. This should be so because it robs registered companies under CAMA the liberty or freedom given to them by SECTION 233(6) CAMA as hereunder stated:233. Resolutions?? A resolution shall be an ordinary resolution when it has been passed by a simple majority of votes cast by such members of the company as, being entitled to do so, vote in person or by proxy at a general meeting.?? A resolution shall be a special resolution when it has been passed by not less than three fourths of the votes cast by such members of the company as, being entitled to do so, vote in person or by proxy at a general meeting of which 21 days' notice, specifying the intention to propose the resolution as a special resolution, has been duly given:?? Provided that, if it is so agreed by majority in number of the members having the right to attend and vote at any such meeting, being a majority together holding not less than 95 per cent in nominal value of the shares giving that right or, in the case of a company not having a share capital, together representing not less than 95 per cent of the total voting rights at that meeting of all the members, a resolution may be proposed and passed as a special resolution at a meeting of which less than 21 days' notice has been given.?? At any meeting at which a special resolution is submitted to be passed, a declaration of the chairman that the resolution is carried shall, unless a poll is demanded, be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against the resolution.?? In computing the majority of a poll demanded on the question that a special resolution be passed, reference shall be had to the number of votes cast for and against the resolution.?? For the purposes of this section, notice of a meeting shall be deemed to be duly given and the meeting to be duly held when the notice is given and the meeting held in the manner provided by this Act or the articles.?? A company may, by its articles, provide that any matter not required by the articles or by this Act to be passed by a special resolution, shall be passed by an ordinary resolution.??The compelling logic that underlies the argument of the proponents of the above school of thought is perhaps well captured in Babajide Idowu’s article titled ‘Legal Issues in Companies Regulations 2012’ in the following words:“Clearly…the Minister has surreptitiously amended the provisions of CAMA which is clearly unconstitutional. In the case of?Kuusu v. Udom (1990) 1 NWLR (pt. 127) 421, it was stated expressly that a statute can only be amended or repealed by another statute which can only be done by the National Assembly. Furthermore, in the case of?Din v. Attorney General of the Federation (1988) 4 NWLR (pt.87) 147, it was stated that a legal notice (in this case the Companies Regulations 2012) being a subsidiary legislation does not have a legal life as it cannot stand alone as a separate piece of legislation.It is therefore clear that the new provisions introduced in the regulation cannot stand. The National Assembly should be called upon to make necessary amendments to the Act. Pending when the needful is done, I have found solace in the case of?Ewete v. Gyang (1997) 3 NWLR (PT. 496) 728?where the court made a pronouncement on resolution of conflict between an enabling law and subsidiary legislation made thereunder. The Court held thus “it is settled law that a subordinate legislation is prima facie, ultra vires if it is inconsistent with the substantive provisions of the statute by which the enabling power is conferred.” However, another school of thought has advanced a more logically compelling argument. They have argued that prudent perusal of the Regulations will reveal that the said provision does not contradict the provisions of CAMA, this argument is quite articulate in that it presupposes that the Regulations is the remedy to the lacuna that the strict provisions of CAMA may offer in a situation where a company omits to specify the nature of the resolution to be passed when it intends to increase its share capital. If this argument finds favour in this subject matter, it may mean that Paragraph 29 of the Regulations should rather be embraced and its ingenuity hailed for its timely intervention to clarify the doubts in the relevant provisions of CAMA.IS THERE ACTUALLY A CONTRADICTION?There is no doubt that the Regulations is an administrative guideline for CAC matters. It is in this regard that mention need to be made of the age-long principle of law that relates to subsidiary legislations. A subsidiary legislation, made pursuant to the powers conferred by the principal legislation or enactment, derives its force and efficacy from the principal legislation to which it is secondary and complimentary. The law is trite, that where a subsidiary legislation by any part of its provisions contradicts the provisions of its principal enactment, such subsidiary legislation shall to the extent of its inconsistency be declared null and void. This age-long principle of law is as solid as the Biblical rock of Gibraltar that remains unshaken.In NJOKU & ORS. v. IHEANATU & ORS (2008) LPELR-3871(CA) the Court of Appeal held that: "A subsidiary legislation or enactment is one that was subsequently made or enacted under and pursuant to the power conferred by the principal legislation or enactment. It derives its force and efficacy from the principal legislation to which it is therefore secondary and complimentary.”See DIN V. A.G.F. (1988) 4 NWLR (1987) 147, ISHOLA V. AJIBOYE (1994) 6 NWLR (35552) 506 &OLARENWAJU V. OYEYEMI (2001) 2 NWLR (697) 229."Per GARBA, J.C.A (P. 20-21, Paras. G-B). Similarly, OLANREWAJU V. OYEYEMI (2001) 2 NWLR (Pt. 697) 229 the Court reiterated this principle of law and stated that a subsidiary legislation, having acquired its authority and validity from and subject to the provisions of the parent enabling statute, it is beyond the said subsidiary legislation to expand or define the limits of the substantive statute.Having established that Companies Regulations is a subsidiary of CAMA which is the parent law and having carefully noted that there is a disparity/contradiction in the provisions of the each legislation with respect to the procedure for increase in share capital, the next question is what then is the way out?.The way outUnder the provisions of section 102 of CAMA, there is no demand or requirement for any specific type of resolution to be passed when a company intends to increase its share capital. However, in plethora of cases as in?LONGE V. FBN PLC (2010) 6 NWLR (PT. 1189) 1S.C., where the word ‘resolution’ is used in a loose sense under the provisions of CAMA or in the Articles of Association of a company as a post incorporation procedure in a company, then that ‘resolution’ would in that instance and for that purpose acquire the status of an ordinary resolution. This means that as far as company’s procedure is concerned, resolution means ordinary resolution unless it is defined otherwise by the express provisions of CAMA or the Articles of Association of a company. But, section 233(6) of CAMA has laid every contention to rest, the said provision has given liberty to every Company to adopt ordinary resolution its procedure when CAMA or even the company’s Articles requires a company to pass a resolution and the required resolution is not a special resolution. Since the subject matter of discourse; increase in share capital, is within the contemplation of Section 233(6) of CAMA, any attempt by the CAC or any other regulatory body at that, to rob companies of the privilege endowed upon them through the statutory provisions of Section 233(6) can and should be regarded as?ultra vires. ‘Ultra vires’, has received judicial definition and in the?EKANEM & ORS. V. OBU?(2010) LPELR-4084 the court defined it as ‘beyond or above the power conferred’.Accordingly, a subordinate legislation is invalid if it is repugnant to the general law of the country or if it is repugnant to the provision of a statute which delegates to the body or person making it the powers so to do. The subordinate legislation 'is prima facie ultra vires if it is inconsistent with the substantive provisions of the statute by which the enabling power is conferred “and equally, of course, if it purports to affect existing statutes expressly.” See BARCLAYS BANK OF NIGERIA LTD. V. ASHIRU & ORS. (1978) 6-7 S.C. (REPRINT) There are a plethora of judicial authorities over the desired legal relation that is expected between a principal and substantive legislation. A subsidiary legislation does not and can never rank at par with its parent legislation. A principal legislation cannot vest a legal right on a person, so that a subsidiary legislation may later turn around to divest that person of the same legal right. The court will frown bitterly at such an incidence. CONCLUSIONIt is worthy to note, that the contention on whether to adopt a special or ordinary resolution for a company’s increase in share capital is not without its peculiar impediment. This is clearly so because lawyers and stakeholders are confronted with this uncertainty not as matter of mere academic exercise, but as a matter of life issue in which case regulatory compliance is a necessity and clients (companies) need to be advised appropriately. Accordingly, due to the economic effect that attends to the urgent desire for a company to restructure or to enlarge its coast and perhaps also, due to a lawyer or stakeholder’s disposition to maintain a good client base relationship, lawyers and stakeholders might have withdrawn from a possible tussle with the CAC, which could have occurred as a result of the insistence that the right procedure be followed. Again, because proving the point might lead to a protracted court case, it might not be an option in many quarters.However, unless and until the said provision of the Regulation is challenged, the CAC may continue to enjoy a good time, enforcing special resolution for increase of share capital. It is therefore contended by this legal opinion that any company affected by the administrative decision of the CAC should head to court for the judicial review of the CAC compliance on the need for special resolution. This approach will certainly be successful and would be applauded in the legal community. Tope Akinyode Esq. ................
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