CAMA, 2020: Corporate Accountability and Transparency
A Summary Review of the Companies and Allied Matters Act, 2020
By Munachi Ugochukwu
While legitimate corporate businesses have an integral role in national development, the involvement of Politically Exposed Persons (PEPs) who conceal corruptly acquired wealth through the complex networks of companies deliberately created to hide their identities has further increased the risks they pose to non-fortified economies. In 2019, the former Executive Chairman of the Federal Inland Revenue Service, Mr Tunde Fowler, said that Nigeria loses about $15bn (N5.37tn at N358/dollar) to tax evasion annually.
It is to this end that the imperative to establish a Beneficial Ownership (BO) register as contextualized in its contemporary form by the Financial Action Task Force (FATF) which stresses the establishment of a publicly accessible central register for warehousing personal information of natural persons that own, control and benefit from corporate entities, was predicated.
The Nigerian government had expressed its commitment to this end at the London Anti-Corruption Summit in May 2016 to strengthen anti-corruption reforms, one of which was the Companies and Allied Matters Act (CAMA) Bill, which contained explicit provisions for the establishment and functioning of the Beneficial Ownership (BO) Registry.
The bill which had been signed by both legislative Houses of the 8th and 9th Assemblies, was finally granted assent by the President on Friday the 7th of August, 2020. The CAMA repeals and replaces the extant Companies and Allied Matters Act, 1990 and has been touted as the most significant business legislation in the last three decades, particularly as it introduces several corporate legal innovations aimed at enhancing ease of doing business in the country.
While the innovations to ease business have been reviewed quite exhaustively, the legislative document has not received its due credit on its key contributory role to corporate accountability and private sector governance, which it owes largely to the transparency clause requiring the disclosure of persons with significant control of companies in a register of beneficial owners. By extension, this provision which portends the efficient regulation of business entities, complements efforts towards greatly improving domestic resource revenue in its potential to address the curbing of illicit financial outflows, which costs the country around 17 billion US dollars ($17bn), annually to Nigerian and international companies operating within the Nigerian jurisdiction.
Prior to the Presidential assent, the issues around digitalization and funding of the register have been largely addressed by the CAC in conjunction with the OGP secretariat and the World Bank, through a multi-donor grant for the development of an electronic register and documentation and there are presently:
- Ongoing upgrades of IT infrastructure to accommodate register with an in-house committee already set up to design a workflow.
- Ongoing engagements with relevant stakeholders to enlighten them on the benefits of the disclosure regime in line with the OGP commitments.
- Adoption of UK principles of disclosure, with the national threshold for disclosure set at 5% as opposed to the UK’s 25%.
It is however worthy to note that this tool- the BO register, is not an end in itself but a means to an end as the law is not enough to guarantee compliance. To this end, three key endeavours are required, viz:
There needs to be inclusion by engaging key stakeholders and emphasizing gains and by providing ease of compliance. The integration process commenced two years ago by the Open Government Partnership in Nigeria, between the Corporate Affairs Commission (CAC) and Anti-corruption Agencies (ACAs), Bureau of Public Procurement (BPP), organized private sector (OPS) and other open contract and procurement-saddled institutions, somewhat guarantees the sustenance of the commitment. Also, while a large section of the organized private sector (OPS) is in support of this transparency and accountability drive, others have raised cogent concerns over information rights for public disclosure posing security concerns. This can however be addressed in process implementation by regulators (CAC) who have guaranteed secure accessibility to certain information.
The realization that both the government and the private sector must contribute their quota towards building Nigeria’s economy and drive development is now mainstream and progressive governments globally are designing policies and roadmaps to this end. It is necessary to note that the register will provide both checks and benefits to companies and the mentality that its establishment will benefit the country to the detriment of the OPS and multi-national enterprises (MNEs) should be eschewed. A true ecosystem of open governance must include open collaborative processes and it is imperative that even without a law, private sector operators like the OPS and CSOs should impose on their corporate governance structures, the principles, processes and values that make disclosure a default action and advocacy must be sustained for the paradigm shift for self-regulation by the OPS and CSOs to this effect.
With the establishment of the register, there is a new challenge as existing rules emphasize the need for accurate, reliable and up-to-date beneficial ownership information. According to a 2018 study on how well G20 and guest countries are implementing the G20 High Level Principles on Beneficial Ownership, no governments that collect beneficial ownership information, verify it. However, a paper published by the Tax Justice Network (TJN) proposed a way of checking the validity of data provided: an information technology system combined with advanced analytics to identify red flags.
The verification process involves ensuring that people in the official register are who they say they are (authentication), that those persons have agreed to be involved in a legal entity (authorization), and that all the registered data is valid (for example, the address exists and the purpose of the company is accurate). It also involves checks after the legal entity is set up to ensure information is up-to-date and to identify potential red flags. It proposes a verification process that is fully automated information technology system with human supervision with access to relevant data, held by national and foreign authorities for cross-checking and advanced analysis.
The process could be managed by the beneficial ownership or company register, or another public body that has experience with data analytics, such as financial intelligence units or tax authorities and the responsible body needs to be adequately resourced and empowered to conduct such checks.
Adapted from “Beneficial ownership verification: ensuring the truthfulness and accuracy of registered ownership information,” Tax Justice Network