The Pitfalls of CAMA 2022 Section 850

Section 850 of the Companies and Allied Matters Act 2020 empowers the Corporate Affairs Commission (CAC) to withdraw, cancel or revoke the certificate of an association at will. When this is done, it provides grounds for the subsequent dissolution of that association by court order.

Once a company is incorporated, it receives a certificate of incorporation in accordance with Section 41(6) of the CAMA. The certificate is the primary evidence that the requirements of the law relating to registration and matters precedent and incidental thereto have been complied with and that the association is a company authorized to be registered and is in fact duly registered.

However, Section 41(7) gives the CAC the power to withdraw, cancel or revoke a Certificate of Incorporation. By law, a withdrawal, cancellation or revocation of a certificate of incorporation can be carried out if it is discovered that this certificate was obtained in a fraudulent, abusive or illegal manner.

With respect to incorporated trustees, Section 850 of the Act provides for the dissolution of an association by the court upon application by the board of directors, one or more trustees, the members of the association constituting at least 50% of the total number of members of the association or the commission itself.

Furthermore, the grounds for dissolution stipulated in the law state that when the aims and objectives of the association have been fully realized or when these aims and objectives have become illegal; when the term of existence of the association has expired; where it is fair and just to do so; or where the certificate of incorporation has been withdrawn, canceled or revoked by the commission.

It provides that there will also be notice to members who may be affected by such dissolution. Also, any additional property remaining after the satisfaction of assets and liabilities must be donated either to associations with similar objects or to a charitable association and not to a trustee or member.

From the above, the grounds for dissolution of an association include the case where its certificate of incorporation has been withdrawn, canceled or revoked by the CAC at will.

However, there are no clearly stated grounds for the withdrawal, cancellation or revocation of the certificate of incorporation, unlike in the case of a company where such a certificate has been obtained fraudulently, abusively or illegally.

Consequently, I am of the opinion that the persons and entities entitled to request the dissolution of an association cannot act entirely in the common interest of its trustees. For example, the governing body or board may choose to act selfishly in association decision-making and fail to protect the public interest. One or more administrators can also decide to compromise the association. The 50 percent membership requirement is also unfair to the argument that at least 51 percent should be declared as the norm. While the ACC should rightly be empowered to carry out its duties of revoking, annulling or withdrawing the Certificate of Incorporation, to do so at will is extravagant.

In conclusion, the reason for the dissolution of the association of incorporated trustees is fair enough, except with regard to the withdrawal of the certificate at will. The positive objectives aimed by the law are also overcome by the qualified candidates indicated in the same. This is due to the possibility of conflicts of interest, damaging decisions and frustrating consequences for the association. When one part of the association believes that the association has achieved its objectives but the other half claims otherwise, there is a question of truth that must be answered.

In order to improve the state of the law in Section 850 of the 2020 CAMA, a revision of this provision is necessary. There is no doubt that there will be endless debate and chaos over the interpretation of the article. It is important to note that the commission has also been vested with sufficient power and control over the incorporated trustees, and therefore it is rather excessive that it also reserves the right to deprive an association of its certificate of incorporation at its own discretion. Any attempt to modify the provision must take into account the principles of fairness, equality of interest and justice.

Adewuyi Stella Jesuloluwa is a 500-level law student at Adeleke University, Ede, Osun State