WHO IS THE BEST DECISION BODY FOR INCORPORATED TRUSTEE UNDER THE CAMA.

Know the best decision body for incorporated trustee under the Cama.

CHAMAN LAW FIRM

2/13/2022 3 min read

WHO IS THE BEST DECISION BODY FOR INCORPORATED TRUSTEE UNDER THE CAMA.

As the dust begins to settle on the recently assented Companies and Allied Matters Act (“CAMA”) it has elicited strong reactions from different stakeholders, most notably religious bodies who have kicked against sections of the law deemed to be overly intrusive and authoritarian.

The full impact of CAMA remains to be seen pending the release of regulations by the Corporate Affairs Commission (the “Commission”) to aid in the interpretation of the relevant sections that have caused concern. In particular, the power of the Commission to suspend the trustees of an association and appoint an interim manager or managers to manage the affairs of an association where it reasonably believes that there is or has been any misconduct or mismanagement of the association, protection and proper application of the property of the association, public interest or where the affairs of the association are being run fraudulently.

While the practicality, application and perhaps legality of this provision remain to be seen, it is certain that the newly vested powers of the Commission are bound to affect the activities of charities, family foundations, professional associations, employment services agencies, private clubs, churches, mosques, health sector associations, patient advocacy groups and regulated health professional colleges.

The removal procedure is not as simplistic as has been widely circulated with CAMA requiring a petition to be made to court by the Commission or one-fifth of the trustees of the association, presentation of reasonable evidence by the petitioners and the consent of the Minister of Trade and Investment. The procedure and requirements for the suspension of trustees and appointment of interim managers has earned the most chagrin, with stakeholders understandably bemoaning what could be a repressive tool in a society notorious for its fragile institutions and historical religious tensions.

Given the grounds for possible suspension and removal of trustees, there will be increased scrutiny on the corporate governance of incorporated trustees to ensure they stay in compliance with the regulatory regimes. Four key areas that associations should look to focus on are accountability, structural growth, evaluation and economies of scale.

Consequently, a proactive risk management approach that identifies potential problems early and limits exposure will need to be adopted. This approach should look to address accountability concerns to ensure that budgets are effectively deployed; growth should be matched with structures for reporting, accounting and evaluation; processes and alternatives to quantitative evaluation where goals are intangible and finally utilize the provision that allows associations with similar objects to merge so as to leverage on access to funding and specialist knowledge.

Good corporate governance is based on the distinction between organizational entities (management and the governing body) and the distribution of decision-making power between them in order to help restrain and moderate the control of any one person or group, ensure the organization’s resources are well managed. In order to become compliant with regulators, associations should look to establish procedures that effectively manage the following areas:

1.      Policy Direction - Setting the organization’s mission, objectives and the overall policy agenda relating to activities.

2.      Oversight over Management - Monitoring the internal functioning of the organization and its activities. Ensuring that there are internal controls and proper decision making/communication channels.

3.      Enterprise risk Management – managing risk to set the tone and exercise oversight function over management to ensure that the relevant risks are identified and managed appropriately. From time to time, the board should check that agreed procedures are actually being followed. The board should not wait for the media or an audit report, or donor withdrawal, or a petition to the Commission.

4.      Ensuring Compliance with Laws, Regulations and Other Requirements - contractual and regulatory requirements and other obligations imposed on them by funding institutions or members and to ensure that those are adhered to.

5.      Financial Responsibility - Audit of the finances of the organization and plans for the long-term sustainability of the organization through resource mobilization, strategic planning and networking.

The aforementioned functions will go a long way to establish and improve self-regulation procedures to avoid running contrary to the new provisions of CAMA while also providing a defense in the event of vexatious and unfounded petitions.

While there remains a discussion to be had as to the independent ability of the Commission to govern the activities of incorporated trustees, organizations should approach governance in the same way as found in public and private companies. Clear and transparent internal systems of checks and balances will ensure that the objectives for which the associations are established are served and avoid the risk of running contrary to the much-maligned provisions of CAMA.

REFERENCE:

[1] Section 839 CAMA 2020.

[2] Moore, M. and Stewart, S. 2000, 'Corporate Governance for NGOs?,' in D. Eade, ed. Development, NGOs, and Civil Society, Oxfam, Oxford, pp. 80-90.

[3] Section 849 CAMA 2020.

[4] Marilyn Wyatt, ‘A Handbook on Ngo Governance,’ (2004), para 6a. http://www.dochas. ie/pages/resources/documents/Governance_Handbook.pdf (Accessed 24 August 2020)

[5] Wanyama, S. 2014, Corporate Governance in Non-Governmental Organizations.

 

WRITTEN BY: CHAMAN LAW FIRM TEAM

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