The 123 of CAC

They say things always happen in 3s i.e., if something unexpected happens, then you can be sure 2 more ‘unexpected things’ are going to happen. So it is with the path that has led me to this particular article. I have often been asked, ‘how does the Pedestrian Lawyer decide what to write on’? The answer is - there is no particular method to arriving at a topic or issue. Sometimes a newspaper article triggers a thought, I find an angle and I am hooked; other times it might be a discussion or conversation overheard, occasionally readers make a request and sometimes the topic/story chooses you. This topic chose me. Just before the holidays, I was in a gathering of lawyers and inevitably the ‘issues’ with conducting business in Nigeria came up and someone turned to me and said, can you write about CAC (the Corporate Affairs Commission)?

Depending on how you look at it, CAC is one of the most powerful organisations in Nigeria because absolutely no one can register a company, business name or charitable organisation without CAC approval. All operating companies have to keep their records with CAC up-to-date by, amongst other things, filing annual reports on their finances and submitting new forms every time the composition of the board changes. In addition, whenever the objectives of a company are going to be changed e.g., where like NOKIA the objective of the company changed from paper, rubber, and cable manufacturing to mobile phone manufacturers, then CAC must be notified.

CAC is responsible for ensuring that for all things corporate, the correct procedure has been adhered to – the shareholders and directors are aware, have approved and the public too is aware of these changes. Think about it. If you have invested in one of the banks and the directors decide to change the objectives i.e., the core business of the company so that it becomes a publishing company, then you would like to know because for one, your projections for dividends and value for your shares might have to change. Important fact – a company can have more than one objective and most objectives, contained in the company memorandum of association, are deliberately wide and general to capture as many business opportunities as possible. However for particular types of companies, CAC expects a certain level of specificity and will look out for some key phrases.]

Back to the story. ‘What about CAC,’ I asked? ‘Well, their requirements are getting down right ridiculous. They are insisting on certificates of proficiency during incorporation especially when the objectives refer to specialties like consulting and engineering.’
‘What’s the problem with that? I reply. CAC would like to ensure that companies who represent that they provide certain services have the capacity to do so.’
‘Well, said the well schooled lawyer, a company can be created to provide certain services and may employ people capable of providing such services without the directors possessing certificates that prove their proficiency. Additionally, proficiency may be garnered from many years of experience, which may not be evidenced by any certificate. All this requirement does is increase Nigerians propensity to ‘manage’ things. A good promoter (the name in the Companies and Allied Matters Act for the person who initially sets up a company) will merely find a person with the CAC required proficiency and use them as directors for the incorporation with the agreement that the director will be ‘removed’ after the initial incorporation.’ Hmm…point. I had no argument for this so I promised to look into it.
With this on my mind, I was not surprised when a few weeks later Guardian published an interview with the Registrar General of the CAC. He shared the plans to make CAC more efficient, the challenges and how much value the CAC was already delivering to the Nigerian economy. According to him, CAC which recently obtained ISO Certification for Quality Management had gotten confirmation from experts such as the United Nations Conference on Trade and Development that CAC was performing at and meeting international standards. To quote: ‘today experts – local and international – have declared CAC as the best public organisation in service delivery in Nigeria.’
Curious. Now I had ‘heard’ two stories and I waited for a third CAC occurrence. When nothing happened and the issue continued to prey on my mind, I forced the third encounter by calling up a lawyer who specialises in incorporation matters and asked for her opinion on the ongoing changes at CAC.

For her the issues were mixed; while she was happy with some of the initiatives to reduce paper work such as a standardised 4 paged memorandum and articles of association for all companies, she felt other initiatives were negating these gains. For example, the requirement for a proficiency certificate for directors translates into more paper. The biggest issue though was one also echoed by many – that CAC filing requirements changed often with no prior notice. This was unfortunately tied to another problem – that rules seemed to be flexible so that identical documents could get different treatments – one accepted and the other rejected.
From all indications there have been some improvements to CAC: gradual computerisation of the process, electronic certificates to discourage fraud and better working conditions for employees and visitors. However, there are obviously issues regarding the incorporation of new entities and I got a clue on a contributory factor from the Registrar General’s interview and the CAC website: there is no involvement with stakeholders. Not once in the interview was there a mention of partnering with lawyers responsible for filing to partner in the review of the application process or get input on plans to improve and nothing on the web site provides opportunity for users to give feedback.

In these days where the phrase ‘public private partnership’ is bandied around more often than ‘rule of law’ this is a major deficiency for the CAC which they should look into immediately. There is no need for a large committee to sit and deliberate at an expensive retreat (the JCCR shows clearly the inefficiencies of too many cooks) - just ask stakeholders for their input in writing, call a general meeting for the few with interest and rework the processes so that the word ‘CAC’ does not conjure violently polar views.

Published February 3 2009