Case Review: SEC V. Big Treat Plc & Ors (2019) LPELR-46520 (CA) | Ayodeji Ayolola
PLC & ORS (2019) LPELR-46520 (CA) ON THE POWER OF THE SECURITIES AND EXCHANGE COMMISSION TO INTERVENE
IN THE MANAGEMENT AND CONTROL OF FAILING CAPITAL MARKET OPERATORS
Exchange Commission (SEC) is statutorily mandated as the apex regulator of the
Nigerian capital market to ensure the protection of investors, and to maintain
a fair, efficient and transparent market. One of the ways in which the
commission carries out this function is intervening in the management and
control of public companies which are ‘failing’, ‘failed’ or ‘in cirsis’.
judicial precedent that affirms the powers of the commission in this respect is
the case of SEC v. BIG TREAT PLC & ORS (2019) LPELR-46520 (CA). On 31st January, 2019, the Court of
Appeal, in overruling the decision of the trial court, held that the Securities
and Exchange Commission, being the ‘beacon light of the powers of the Appellant
under the Investment and Securities Act’ had the power to intervene the
management and control of Big Treat Plc, a public listed company.
the 2008 audited accounts of Big Treat Plc (1st respondent), the Securities and
Exchange Commission (appellant) discovered that the 1st respondent was drifting
into deplorable financial state, and therefore decided to intervene in the
affairs of the 1st respondent to ascertain its true financial position and prevent
further depletion of the company’s assets, thereby protecting the interest of the
investors.
the appellant instituted an action at the Federal High Court in the course of
which it applied ex-parte for a preservatory order of injunction to restrain
the 2nd – 6th respondents from obstructing the appellant in the appointment of
an interim management to take charge of the day-to-day administration of the
1st respondent, with a view to preserving its assets and the interests of its
stakeholders. The trial court however refused to grant the application on the
ground that the 1st respondent was not a capital market operator and could
therefore not be under the control and management of the appellant in times of
financial distress. The appellant being dissatisfied with the order of the
trial court appealed to the Court of Appeal.
Appeal’s Decision:
appeal, the Court of Appeal held in favour of the appellant that the 1st
Respondent was a capital market operator having registered itself with the
appellant as an operator in the Nigerian capital market. The learned justices
maintained this position by relying heavily on section 315 of the Investment
and Securities Act (ISA) which defines a capital market operator as any person,
individual or corporate, duly registered by the Securities and Exchange
Commission to perform specific functions in the capital market. The court also held
in favour of the appellant that it (the appellant) had the statutory power to
intervene in the management and control of the 1st Respondent, if in
the appellant’s opinion; the company had failed, was failing or was in crisis
by doing whatsoever it considered necessary to protect the interest of the
investors. The court reached this decision by relying on Section 13(v) of the
Investment and Securities Act which states that the Commission shall
“…intervene in the management and control of capital market operators which it
considers has failed, is failing or in crisis including entering into the
premises and doing whatsoever the Commission deems necessary for the protection
of investors”.
Appeal held thus:
having been duly registered with the Appellants and was at all material times
performing the specific function of issuing securities in the capital market
was subject to the intervention of the statutory powers of the Appellant as the
pinnacle regulatory authority for the Nigerian capital market whose sole
purpose is to ensure the protection of investors and to maintain fair,
efficient and transparent capital market as well as reduction of systemic risk
as stated in the preamble of the ISA- the beacon light to the powers of the
Appellant under the ISA.”
decision in this case reveals the extent of interpretation of the provisions of
the Investment and Securities Act on the definition of capital market operators
and the responsibilities of the Securities and Exchange Commission in relation
to the control and management of failing capital market operators.
judgment of the Court of Appeal therefore serves as a warning signal to many
public companies in the capital market. Every capital market operator owes its
investors a duty to thrive trade wisely in the capital market, and to continue
to operate as a going concern by all means legally possible. Accordingly, as
required by section 61 of the Investment and Securities Act, capital market
operators need to take more practical steps to establish a system of internal
controls over their financial reporting and security of their assets to ensure
the integrity of their companies’ financial controls and reporting by means of
policies, procedures and practices to ensure safety of assets, accuracy of
financial records and reports, achievement of corporate objectives and compliance
with laws and regulations.
also serves as a great beacon light of hope to millions of investors in
Nigeria. Investors can feel safer to invest in the capital market, knowing full
well that there is a watchdog commission which constantly monitors market
activities to forestall manipulative, illegal or unfavourable practices.
Law Practice at the Nigerian Law School, Lagos campus; and an Associate Counsel
at Wole Olanipekun & Co., Lagos, Nigeria. Email:ayolola@lawschoollagos.org,
ayodeji.a@woleolanipekun.com
Case Review: Raji v. Truck Sabinos (NIG) Ltd (2018) LPELR-45011 (CA) | Ayodeji Ayolola
(2018) LPELR-45011(ca) on the jurisdiction of the Federal High Court over the
removal of Company Secretaries; a shift in Corporate Law Practice?
interesting court decisions which have the potential of shifting long-standing
jurisprudence of certain issues in corporate law practice in Nigeria. One of
such developments is the issue of the jurisdiction of the Federal High Court
over the removal of a company secretary. A legal practitioner of few years
post-call or even almost every Nigerian corporate lawyer would reason that
there is no legal argument worthy of contesting the jurisdiction of the Federal
High Court over the removal of a company secretary, as such jurisdiction is statutorily
vested on the Federal High Court under Section 251(e) of the 1999
Constitution which states thus:
in this Constitution and in addition to such other jurisdiction as may be
conferred upon it by an Act of the National Assembly, the Federal High Court
shall have and exercise jurisdiction to the exclusion of any other court in
civil causes and matters:
of the Companies and Allied Matters Act or any other enactment replacing the
Act or regulating the operation of companies incorporated under the Companies
and Allied Matters Act;
interpretation of the foregoing provision is that the Federal High Court has
exclusive jurisdiction over every matter that arises from the operation of the
Companies and Allied Matters Act, and that should obviously include matters
bordering on the removal of company secretaries. However, the Court of Appeal in
RAJI v. TRUCK SABINOS (NIG) LTD (2018)
LPELR-45011(CA) has adopted a more constructive interpretation which is to
the effect that the Federal High Court does not have jurisdiction over the
removal of the company secretary of a private company. The foregoing
interpretation is supported by the finding of the Court that the Companies and
Allied Matters Act (CAMA) does not have any provisions on the removal of the
company secretary of a private company; as section 296(2) of CAMA, which
only provides for the removal of the company secretary of a public company, states
thus:
LPELR-45011(CA) in order to fully
understand the reasoning of the Court.
was the company secretary of the Defendant under a solicitor’s retainer
agreement between the Plaintiff and the Defendant. The agreed fee for the
retainer was
Thousand Naira) per annum payable on a quarterly installment of
each). The said Agreement dated 1st July, 2003 was executed between the parties
to ratify the appointment of the Plaintiff as Company Secretary/Legal Adviser.
The Defendant had been paying the amount due under the agreement until the last
quarter of the year 2006 when it refused to pay as agreed by both parties in
the retainer agreement. The Plaintiff thereafter sent several demand letters
requesting for the payment of the sum due. When no response was received from
the Defendant, a final demand letter dated 21st November, 2006 was sent to the
Defendant in respect of the quarterly fee due. The Defendant, in a reply letter,
stated that the Plaintiff was not entitled to the demanded fees having not
performed its part of the agreement.
consequently brought an action before the Federal High Court claiming a
declaration that the unilateral termination of the retainership agreement
between the appellant and the respondent, as solicitor and client respectively,
in the running of the corporate affairs/engagements of the respondent was
wrongful and occasioned pecuniary damages of
annual retainer fee;
4th quarter 2006 retainer fee; and
being general damages for the breach of the retainership agreement together
with
Decision of the Lower Court
Court held that it had no jurisdiction to entertain the action. The court also
refused to transfer the action to the High Court of Lagos State on the ground
that it (High Court of Lagos State) had also struck out the matter believing it
lacked the jurisdiction to entertain same. The Federal High Court therefore
struck out the matter for lack of jurisdiction. The counter claim which the
Court below held was in negligence was also struck out for lack of
jurisdiction. The appellant, dissatisfied with the decision of the Court below
appealed to the Court of Appeal.
Appellant’s Argument
was dissatisfied with the decision of the Court below and filed a notice of
appeal with three grounds of appeal and subsequently filed a brief of argument
in which it contended that, considering the claim in the writ of summons and
the statement of claim which was on the duties of the appellant as the company
secretary, the Court below had the exclusive jurisdiction to entertain the
action and should not have struck it out.
Respondent’s Argument
the other hand, contended that there is no provision in Section 22(2) of the
Federal High Court Act empowering it to transfer any matter which ordinarily
ought to have been commenced in the High Court of a State to that Court where
the case had already been struck out by the High Court for want of jurisdiction.
The respondent relied on the case of Adetayo v. Ademola (2010) 15 NWLR
(pt.1215) 169 at 195. The respondent therefore urged that the appeal be
dismissed for lacking in merit.
the Court of Appeal relied on the fact that here was no indication in the processes
filed in the action indicating that the Respondent is a public company.
Following the fact that the respondent is a private company which is outside
the purview of 296(2) of CAMA, the court held that the matter could be decided
without recourse to CAMA or any enactment regulating operation of companies
under CAMA; which further removes the matter from under the purview of section
251(e) of the 1999 Constitution. The court held that actions founded on a
contractual relationship between a company and its employees as well as claims
for recovery of debts though concerning a company are not matters arising from
the operation of CAMA or any other enactment relating to CAMA or regulating the
operation of companies incorporated under CAMA which is outside the
jurisdiction of the Federal High Court as enshrined in Section 251(e) of the
1999 Constitution. The appellate court therefore affirmed the decision of the
lower court that the Federal High Court does not have the jurisdiction to
entertain the suit, having regard to the fact that it is a matter of simple
contract of employment and a claim for damages arising from alleged wrongful
termination of the contract. The appeal was therefore dismissed.
The Court of Appeal however noted in its decision that the matter was a pending
action in 2010 when Section 254C of the Third Alteration Act amending the 1999
Constitution (which provides for the exclusive jurisdiction of the National
Industrial Court) was made by the National Assembly in 2010. Consequently,
section 24(3) of the National Industrial Court Act would still apply to save
the action for its transfer to the National Industrial Court. The order
striking out the action was therefore varied to an order transferring the
action to the National Industrial Court Lagos for determination.
Comments:
The decision of the Court of Appeal in this matter is indeed a welcome
precedent. The courts have always transcended from giving only literal judicial
interpretation of the Constitution to embarking on more constructive
interpretations and holistic interpretations. Section 251(e) of the 1999
Constitution which is germane to the present case states that the Federal High
Court shall have exclusive jurisdiction in civil causes or matters arising from
the operation of CAMA and any other enactment replacing that Act or regulating
the operation of companies incorporated under the CAMA. It is therefore
axiomatic that the removal of the company secretary of a private company does
not fall under the jurisdiction of the Federal High Court as CAMA has no
provisions for such procedure. Accordingly, the matter should be treated as a
simple employment matter which under the exclusive original jurisdiction of the
National Industrial Court.
precedent created by the Court of Appeal in this matter will be difficult to
enforce due to the fact that section 22 of the Federal High Court Act does not
provide for the transfer of cases from the Federal High Court to the National
Industrial Court. The problem caused by the lacuna is that labour/employment
matters of this nature which are filed at the Federal High Court after the
coming into force of Section 254C of the (Third Alteration) Act, 2010 cannot be
transferred by the Federal High Court to the National Industrial Court which
now has the exclusive original jurisdiction over such matters. It is therefore
important that the National Assembly fills the lacuna by an amendment of
Section 22 of the Federal High Court Act to accommodate the transfer of cases
of this nature by the Federal High Court to the National Industrial Court which
has exclusive original jurisdiction to determine such cases.
Lecturer of Corporate Law Practice at the Nigerian Law School, Lagos campus;
and an Associate Counsel at Wole Olanipekun & Co., Lagos, Nigeria. Email:ayolola@lawschoollagos.org, ayodeji.a@woleolanipekun.com
Paul Usoro SAN pays fine for convicted Defendant in court
Implementing The Child Rights Act In Nigeria: Alternative Strategies | Fifehan Ogunde
The Nigerian Child Rights Act (CRA) was eventually enacted in 2003 further to the recommendation by the UN Committee on the Rights of the Child in 1996 to enact legislation in this respect. Nearly 16 years after however, it is yet to be universally implemented in Nigeria. About 24 states have implemented the Child Rights Act with 12 states refusing to implement the Act. Of the 12 states, nine are in the North-East region of Nigeria which has the lowest literacy rates and highest number of child-brides . Many of these states oppose the CRA on grounds of the incompatibility of its provisions with Islamic law.
Oluwafifehan Ogunde is an research specialist and consultant with research interests in human rights law, criminal law and constitutional law. He has a Master’s degree in Human Rights Law from the University of Nottingham and a Bachelor’s degree from the University of Sheffield. He is also a barrister and solicitor of the Federal Republic of Nigeria, having been called to the Nigerian Bar in February 2012.
Protecting Electricity Consumers In Nigeria | Jafar Atiku Muhammad
Credit – www.cfr.org |
credit- energymixreport.com |
Credit – www.pscsolaruk.com |
Reviewing Nigeria’s Constitutional Arrangement: A Few Considerations (2) | Fifehan Ogunde
This will greatly cut expenditure in this regard and increase the availability of funds for relevant sectors of the economy. It is worth noting that members of the Senate and House of Representatives are the highest paid legislators in the world bearing in mind their salaries and allowances. There is little evidence to show that the current number is necessary to effectively exercise the law-making function of the legislative House.
Oluwafifehan Ogunde is an research specialist and consultant with research interests in human rights law, criminal law and constitutional law. He has a Master’s degree in Human Rights Law from the University of Nottingham and a Bachelor’s degree from the University of Sheffield. He is also a barrister and solicitor of the Federal Republic of Nigeria, having been called to the Nigerian Bar in February 2012.
Kidnap of Honourable Justice Chioma Iheme – Nwosu, Ph.D, Justice of the Court of Appeal and Murder of His Lordship’s Orderly
NBA WOMEN’S FORUM HOLDS INAUGURAL MEETING IN ABUJA.
About Outsourcing and Offshoring your Legal Services ! Kelechi Achinonu
A bit of curiosity got me thinking
and trying to understand the difference between Legal Process Outsourcing and
Legal Service Offshoring. I did a bit of research and then thought to share my
now better grasp of both concepts.
law-related tasks to an external firm (locally or globally) that is able to
handle those tasks efficiently. Legal Services Offshoring refers to getting
your legal work done in a different country, usually to leverage cost
advantages.
one differentiating element turns out to be LOCATION.
company in Nigeria decides to contract a law firm in Nigeria to carry out all
law-ish activities, now that’s outsourcing. But in the case where the same tech
company contracts a law firm in India to carry out the law-related tasks,
that’s offshoring.
somehow….
let’s look at some of the benefits and challenges for both concepts.
is what I think. Whether you decide to outsource or offshore your legal tasks,
you should really consider the following:
efficiency of the contracting firm
communication between both parties (to what extent would technology be
leveraged to enhance communication)
availability for both parties (for instance, in the case of emergency sit-down
talks)
Information security ( your data should be really important to you)
that would guide such contractual relationship
for reading!