By Chukwuma Onyekwelu[1]
INTRODUCTION
“It would be a good thing if privacy could be protected, but the war and way of technology and the needs of security have de facto made the right to privacy a dead letter.”[2]
In a decision that could have far-reaching implications for corporate transparency within the European Union and around the world, the Court of Justice of the EU ruled, on Tuesday 22nd November 2022, that un fettered public access to Beneficial Ownership Register is not compatible with “fundamental rights.”[3] Details of the judgment are in the body of this article.
The same Tuesday 22nd November 2022 (coincidence?), in a bid to constantly and constructively engage with its stakeholders, industry practitioners and the general public, the Corporate Affairs Commission (CAC) made a demonstration of its Beneficial Ownership Register at a forum held in Abuja. The commission repeated this public engagement in Lagos, on Thursday 24th November 2022.
BENEFICIAL OWNERSHIP REGISTER IN NIGERIA
Beneficial Ownership Register was launched by Nigeria Extractive Industries Transparency Initiative (NEITI) in December 2019. According to Orji[4], Nigeria’s journey into Beneficial Ownership disclosures did not happen, it was caused. Increasing citizens’ desire to push the boundaries of oil, gas and mining industry reforms beyond disclosure of company payments and government revenue receipts led to the need for more specific information and data on who owns what. The public demands for this challenging disclosure were also based on the increasing public trust in the Extractive Industries Transparency Initiative process in Nigeria. The public demand for information and data on beneficial ownership was also considered key in shaping the direction of resource governance reforms in a transitional economy like Nigeria.[5]
Flowing from the above premise, Beneficial Ownership Register (BOR)[6] is a means for Public Disclosure of Beneficial Owners of Corporate Entities (Companies, Incorporated Trustees, and Business Names). This article seeks to interrogate the propriety of the approach adopted towards implementation of BOR in Nigeria. It is a quest for clarity as BOR appears to be against the spirit and the letters of the Constitution of the Federal Republic of Nigeria, 1999 (As Altered).
EU COURT DECLEARS BOR INVALID
While CAC was making its demonstration, a landmark judgment was being delivered at the same time, dealing a major blow on the concept of Beneficial Ownership Register, albeit in another clime. The Luxembourg-based Supreme Court in matters of European Union laws, concluded, that provisions contained in the EU’s Fifth Anti-Money Laundering Directive that require EU nations to establish public registers showing the true owners of companies domiciled in their jurisdictions are not compatible with the rights to respect for private life and the protection of personal data.[7]
The EU court declares further that public beneficial ownership registers amount to a “considerably more serious interference” with fundamental rights than centralized ownership registers accessible only to competent authorities capable of demonstrating legitimate interest[8], in terms of combating money laundering and terrorist financing.
It is germane to note that the European Union court ruling does not have any binding legal implications in Nigeria, though it is equally relevant to state that it may obviously serve as a persuasive reference should there be any issue of challenging the concept in the country. At the least, the ruling has provoked this article!
COMPANY LAW PRACTICE
One universal fundamental principle of company law practice is that an incorporated body is a separate legal entity (artificial person) liable for its own actions. This principle suggests that a corporation should take responsibility and be liable for its corporate wrong rather than the individuals who run it. Is this not the practice in Nigeria? Why does the CAC’s approach to BOR[9] implementation seem to be in direct negation of the fundamentals of company law practice? Against this backdrop, let the following factors be considered.
RELEVANT PROVISIONS OF CAMA 2020[10]
The CAMA in section 119 extends disclosure obligation to persons with significant control in all companies to notify such concerned companies of their shareholding. Similarly, as provided in section 120 of CAMA, a person who is a substantial shareholder in a public company and holding (either by himself or by his nominee/proxy) shares in the company which entitle him to exercise at least five per cent (5%) of the unrestricted voting rights at any general meeting of the company, is required to disclose such holding by notifying the company within a stipulated time.
Specifically, the commission shall maintain a register of persons with significant control in which it shall enter the information received from the company or any change therein[11] (bold italics for emphasis). As observed by Uche[12], these new disclosure provisions are poised to enhance transparency and prevent asset shielding as well as combat money laundering, terrorism financing and all forms of illicit financial flows by legal entities having limited liability. But, is there anything in the above provisions of CAMA suggesting public disclosure of the Beneficial Ownership Register? What does the CAC derive from the online open access of the BOR with the negative potentials of discouraging investors and business owners? Should transparency not have control?
CAC REGISTRAR’S POSITION
Among other things, the Registrar General of the Corporate Affairs Commission informed the gathering of stakeholders that “going forward, NIN would be the major means for the commission to access and disclose beneficial owners of corporate entities”. Part of the requirements for incorporation of business entities is submission of the National Identification Number of the concerned persons to the commission. The Registrar General explained that the commission uses the NIN to obtain information about the Beneficial Owners and thereby upload such on the register. Is this practice not manifest abuse of the NIN? What happens to the guarantee of confidentiality, and the supposed privacy and data protection as provided in the constitution?
NIGERIAN CONSTITUTION ON PRIVACY AND DATA PROTECTION
If any other law is inconsistent with the provisions of this constitution…void.[13] (italics for emphasis). While section 37 provides that the privacy of citizens, their homes, correspondence, telephone conversations and telegraphic communications is hereby guaranteed and protected, section 45 permits these rights to be restricted in the interests of defence, public safety, public order, public morality or public health, or to protect the rights or freedoms of others.[14]
LIFTING THE VEIL OF INCORPORATION
The “corporate veil” metaphorically signifies the distinction between the company as a separate legal entity and the shareholders who own the shares in the company. The effect of ‘lifting’ or ‘piercing’ the corporate veil is that the shareholders, rather than the company, are regarded as the relevant actors on whom liability of the obligations of the company are placed. Lifting the veil can be used to impose liability or sanction upon the shareholders where wrongdoing is established.
It takes judicial intervention to lift the corporate veil. But CAC, through the Beneficial Ownership Register, seems to be working towards ensuring that there is no such veil at all. There is a general judicial reluctance to lift the corporate veil because the company law principle that a company is distinct from its shareholders is almost sacrosanct. The BOR gives access to members of the public to easily search and obtain full information concerning ownership of companies. This is what the Court of Justice of the EU has declared invalid. In compliance, EU countries are already blocking their public registers from being accessible on the internet[15].
It is hard to fathom the jurisprudence justifying CAC’s public display of the Beneficial Ownership Register with claims it is built in accordance with international standard under the guidance of World Bank. Is this in compliance with the Freedom of Information Act, 2015? Making the register public is clearly ultra vires the powers of the commission as provided in the CAMA cited above, and where it appears there is any reliance on CAMA at all, that would equally be against to the constitutional provisions. These noted, this article has been written to raise awareness, for further stakeholders’ engagements on the subject, in order to yield a better business environment in Nigeria. May those who have correct answers to the questions find the right avenues to proffer the required solutions.
CHUKWUMA ONYEKWELU is the Founder/Managing Attorney at WUNDERBAR GLP. He is a Fellow of the Society for Advanced Legal Studies (UK). Contact: conyekwelu@nigerianbar.ng
[1] Member, NBA-SBL
[2]Jeremy M. Miller. “Dignity As A New Framework, Replacing the Right to Privacy” 30 T. Jefferson L. Rev. 1 [2007- 2008]
[3] https://www.moneylaundering.com/news/eus-top-court-declares-public-beneficial-ownership-registers-invalid/?type=free. Accessed on 22nd November, 2022.
[4] Dr. Ogbonaya Orji is the Executive Secretary of Nigeria Extractive Industries Transparency Initiative.
[5] Ogbonaya Orji: https://punchng.com/nigerias-journey-into-beneficial-ownership-disclosures/.
[6] https://bor.cac.gov.ng/standards
[7] https://curia.europa.eu/jcms/upload/docs/application/pdf/2022-11/cp220188en.pdf
[8] Press Release No 188/22 from the EU Court of Justice.
[9] https://bor.cac.gov.ng/about-page
[10] Companies and Allied Matters Act, 2020.
[11] See s.119(1)(3). Is it proper for CAC to hang on this provision for Public Disclosure of the BOR?
[12] Charles Uche Esq: https://www.connecteddevelopment.org/the-2020-cama-and-beneficial-ownership-in-the-extractive-industry/. Accessed on 25th November, 2022.
[13] Supremacy of the Constitution. See S.1 (3) CFRN.
[14] See Chapter 4 of the Constitution of the Federal Republic of Nigeria, 1999 (As Altered)
[15] https://www.transparency.org/en/blog/cjeu-ruling-eu-public-beneficial-ownership-registers-what-next-for-corporate-transparency