14th January, 2024
By Ilemona Onoja
I have largely stayed away from the conversation around the controversy around the allegations of impropriety levied against Nigeria’s Minister of Interior, Dr Olubunmi Tunji-Ojo, on the basis that a company he formerly served on its board was a beneficiary of contracts awarded under the embattled Minister of Humanitarian Affairs and Poverty Alleviation for many reasons, chiefly because the position of the law regarding these allegations is not as clear cut as it is regarding the allegations against the suspended Humanitarian Affairs Minister.
The allegations followed a leaked memo which revealed that New Planet Project Limited, founded by Tunji-Ojo and his wife, benefited from and was awarded the contract as consultancy for the verification of the National Social Register (NSR). The minister has since denied any wrongdoing or breach of public service rules, insisting he resigned as director of the firm and does not partake in its management.
This controversy has sparked a debate about the position of our laws regarding a minister, or indeed any other public officer, holding shares in a private company during their tenure in office. So, out of boredom and with an ulterior motive (I am an avowed critic of the ruling party), I have studied the provisions of the law involved here. I will assume you know the basics of company structure, so I will not bore you with explanations about shareholders, shares, etc. To buttress my points, I’ll cite a few judgments given by our courts.
WHAT THE LAW SAYS
Let me state quickly that it is a basic principle of company law that ownership of shares – even controlling shares –does not make one an alter-ego or director. This was established in Williams v. Adold/Stamm Int’l (Nig.) Ltd. (2022) 5 NWLR (Pt. 1822) 23 and Okomu Oil Palm Co. Ltd. v. Iserhienrhien (2001) 6 NWLR (Pt. 710) 660. Essentially, this means that a company is a legal person in its own right and holding shares in the company does not make one its alter-ego.
Section 87(3) & (4) of the Companies and Allied Matters Act, 2020 and Yalaju-Amaye v. A.R.E.C. Ltd. (1990) 4 NWLR (Pt. 145) 422, vests the day-to-day management of a company in the board of directors. A board is the beating heart of any company and is the organ of the company responsible for deciding what actions the company engages in, when, how and with whom.
By implication, once a person resigns as a director of a company, they cease to be part of the company’s management team. Yesufu v. Gov., Edo State (2001) 13 NWLR (Pt. 731) 517 and Ibrahim v. Abdallah (2019) 17 NWLR (Pt. 1701) 293.
Secondly, it is instructive to state that in law, a shareholder has no personal right to the property or funds of a company (N.I.B. Invest W.A. v. Omisore (2006) 4 NWLR (Pt. 969) 172). Specifically, a shareholder’s rights are limited to the right to sell or mortgage his/her shares, receive declared dividends, and attend/vote at the company’s general meetings (Kotoye v. Saraki (1994) 7 NWLR (Pt. 357) 414). For added emphasis see Okoya v. Santili (1994) 4 NWLR (Pt. 338) 256 at 289F – H. Willbros West Africa, Inc. & Ors. V. McDonnel Contract Mining Limited (2021) LPELR – 54544 (CA).
Having established these principles of law as upheld by our courts, we must now apply them to the facts. According to forms registered with the Corporate Affairs Commission (CAC), Hon. Tunji-Ojo resigned as a director of the company in 2019 upon being elected as a member of the House of Representatives. If we apply the positions espoused by our courts, then for all intents and purposes, he cannot be said to have been involved in the day-to-day administration or management of the company in question.
This then begs the question. Do our laws prohibit public servants from holding shares in companies during the duration of their tenure in office? An analysis of our laws and declarations of our courts will answer this question in the negative.
The 1999 Constitution of the Federal Republic of Nigeria (as amended) prescribes a Code of Conduct for persons serving in the public service of the Federation, i.e. public officers. With respect to participation in private business, Paragraph 2 of the 5th Schedule to the Constitution stipulates that:
“Without prejudice to the generality of the foregoing paragraph, a public officer shall not
(a) receive or be paid the emoluments of any public office at the same time as he receives or is paid the emoluments of any other public office;
(b). except where he is not employed on a full-time basis, engage or participate in the MANAGEMENT or RUNNING of any private business, profession or trade, but nothing in this sub-paragraph shall prevent a public officer from engaging in farming.”
The provision quoted above is reproduced in Section 6 of the Code of Conduct Bureau and Tribunal Act CAP. C15, LFN 2004.
We’ve already established that shareholders are not involved in the management or running of a company. In fact, the Supreme Court has also reached this conclusion as well. In Nwankwo v. Nwankwo (1994) 5 NWLR (Pt. 394) 153 at 166B – F, the Supreme Court held as follows:
“Paragraph 2(b) of the 5th Schedule as worded and enacted cannot by any stretch of imagination be said to have intended to prevent any public officer, the respondent inclusive, – from acquiring interest in a private business like a partnership. What is prohibited by paragraph 2(b) to the Fifth Schedule is for a public officer to “engage or participate in the management or running of any private business, profession or trade”. The intendment is not to prevent any person willing to serve as a public officer from merely having an interest in a private business.
“But what he cannot do is to be a public officer and at the same time hold a managerial or other position in such an undertaking or solely to run the same. This is to avoid the possibility of such an officer having a divided loyalty. If by the time the provision of paragraph 2(b) of the 5th Schedule came into force, a serving public officer was engaged or was participating in “the management or running of any private business, profession or trade”, all that was required of him was to resign from such a position and surrender its management or its running to another person or body.”
Furthermore, Section 030424(a) of the Civil Service Rules:
“Public officers are not prohibited from holding shares in both public and private companies operating in Nigeria or abroad except that they must not be directors in private companies and may only be directors in public companies if nominated by the government.”
Finally, the Explanatory Manual on The Code of Conduct for Public Officers (CCPO), published by the Technical Unit on Governance and Anti-Corruption Reforms (TUGAR) 2021, provides:
“In a situation where the shareholdings or interest in the company was in existence before the officer’s employment, election or appointment to a public office, the officer shall declare such shareholding/interest and recuse himself from participating in any decision-making process involving that company, partnership or other body where he holds shares or has an interest.”
A combined reading of the above grudgingly leads one to the inescapable conclusion that public officers are permitted by law to hold shares in companies as long as they are not involved in the day-to-day management of such companies. Consequently, the legal obligation imposed on public officials is to declare the shares as an asset in the asset declaration forms submitted to the Code of Conduct Bureau.
As it stands, there is evidence that Hon. Bunmi Tunji-Ojo resigned from his role as a director in New Planet Project Limited in 2019 after he was elected as a Member of the House of Representatives. No one has yet produced any evidence that he was involved in the company’s day-to-day management.
The Companies and Allied Matters Act, 2020 and the judicial case NWANKWO V. NWANKWO clarify the difference between ownership of shares and active participation in the management of a company. This supports the argument that his resignation as a director has effectively ended his managerial responsibilities with the company.
BEYOND THE LAW
Once we reach the conclusion above, we are left with questions that are more moral than legal. Should companies with public servants as shareholders bid for, execute and get paid for public contracts? Are the laws that seek to prevent corruption by making provisions to eliminate conflicts of interest and ensure transparent procurement processes sufficient? Do we need to review and strengthen these laws? I reckon these are the sort of debates we should be having as a country.
If there is no evidence that New Planet Project Limited violated public procurement processes, and I haven’t seen any, will we not be better served having the broader conversation about the efficacy of the current legal framework surrounding the process of bidding for and awarding lucrative public sector contracts?
I believe we must find a way to divorce companies in which public officers hold interests from bidding for and being awarded public sector contracts. Or, at the very least, make the procurement process more transparent. For instance, to assuage public fears about hidden influences, we can pursue laws that provide that all bid documents for contracts be made public before the award of the contract. This way, the public knows the basis on which contracts are awarded, who gets what, when, where and how.
To achieve this objective, we must transcend the realms of moral obligations on public officers with interests in companies and impose legal obligations that assure the Nigerian public that the public procurement process best serves them.
Ilemona Onoja, a legal practitioner, writes from Abuja.