CAMA 2020: New Governance Rules for Nigerian NGOs and Charities

How are trustees appointed and removed under CAMA 2020?

The appointment and removal of trustees in a Nigerian NGO are governed by the organization's constitution and must be formally regularized by the Corporate Affairs Commission (CAC). While the board typically handles internal selection, the CAC acts as the final gatekeeper, ensuring that all trustees meet the statutory requirements of being of sound mind, legal age, and having no criminal record involving fraud.

The Appointment Process

To appoint a new trustee, the organization must hold a general meeting where the members pass a resolution. The following steps are required for CAC regularization:

1. Newspaper Publication: A notice of the appointment must be published in two daily newspapers (one national and one local) to allow for public objections within 28 days.
2. Documentation: Submit the minutes of the meeting, the updated list of trustees, and the prescribed CAC forms.
3. Vetting: The CAC reviews the application to ensure the individual is not disqualified under Section 826 of the Act.

The Removal Process

Trustees can be removed due to expiration of tenure, resignation, death, or misconduct. The removal process mirrors the appointment process regarding newspaper publications and filing resolutions with the CAC. If a trustee is removed against their will, the organization must demonstrate that the removal followed the procedures laid out in its own constitution and the CAMA 2020 guidelines.

What are the rules for mandatory filing of annual returns?

Every non-profit organization in Nigeria is legally required to file annual returns with the CAC between June 30 and December 31 of each year. This filing is not a tax payment but a notification to the government that the organization is still active and is complying with its financial transparency obligations.

Filing Requirements and Timeline

The first annual return for a new NGO is due within one year of registration. For established organizations, the return must include:

• A completed CAC Form for Annual Returns.
• A copy of the audited financial statements signed by two trustees and an external auditor.
• Payment of the prescribed filing fee (currently starting at approximately 5,000 NGN, though late fees apply).

Consequences of Non-Compliance

Failure to file annual returns carries severe risks:

• Status Issues: The CAC website will flag the organization as "Inactive," which prevents the group from obtaining government contracts or grants.
• Penalties: Daily default fees accrue for every day the organization remains in breach.
• Striking Off: If an NGO fails to file for several consecutive years, the CAC has the power to strike the organization off the register, effectively dissolving its legal existence.

What is the power to suspend trustees under Section 839?

Section 839 of CAMA 2020 allows the CAC to suspend the trustees of an association and appoint an interim manager to run its affairs. This power is triggered if the Commission reasonably believes there has been misconduct, mismanagement, or if it is necessary to protect the property of the association or the public interest.

Grounds for Suspension

The CAC can exercise this power in several specific scenarios:

• Evidence of financial fraud or misappropriation of charitable funds.
• Failure to use the organization's assets for its stated objectives.
• Serious internal disputes that paralyze the organization's ability to function.

The Role of the Interim Manager

Once a trustee is suspended, the CAC may appoint an "Interim Manager" or managers. These individuals step into the shoes of the board to oversee operations, secure the organization's bank accounts, and ensure the non-profit continues its work while an investigation is conducted. While controversial, this provision is designed to prevent "rogue" boards from draining an organization's resources.

How do mergers and dissolutions work for Nigerian NGOs?

Under CAMA 2020, Nigerian NGOs and charities now have a clear legal framework for merging with other organizations or voluntarily dissolving. Previously, the law was silent on the mechanics of NGO mergers, but Section 849 now allows two or more associations with similar aims to combine their assets and operations.

The Merger Process

Merging is often a strategic move for smaller NGOs to increase their impact. The process involves:

1. Alignment of Objectives: The organizations must have similar charitable or social goals.
2. Resolution: Boards of both organizations must pass a special resolution approving the merger.
3. CAC Approval: An application must be made to the CAC, accompanied by a scheme of merger and the new constitution of the combined entity.

Dissolving an Association

If an organization chooses to wind up its affairs, it cannot simply stop operating. It must:

• Pass a resolution for dissolution.
• Petition the High Court for an order to dissolve.
• Ensure all debts are paid.
• Asset Distribution: Any remaining assets cannot be shared among members; they must be transferred to another institution with similar charitable objectives.

What is SCUML registration and why is it mandatory?

The Special Control Unit Against Money Laundering (SCUML) registration is a mandatory compliance requirement for all "Designated Non-Financial Businesses and Professions," which includes NGOs and charities. This regulation is enforced by the Economic and Financial Crimes Commission (EFCC) to prevent non-profits from being used as vehicles for money laundering or terrorism financing.

SCUML Compliance Checklist

Without a SCUML certificate, a Nigerian NGO cannot open a corporate bank account or perform transactions over certain thresholds. To register, an organization must provide:

• Certificate of Incorporation from the CAC.
• The Constitution of the organization.
• Tax Identification Number (TIN) or a Tax Exemption Certificate.
• A clear profile of the organization's activities and sources of funding.

Ongoing Monitoring

Registration is only the first step. Registered NGOs must file "Currency Transaction Reports" and "Suspicious Transaction Reports" with the SCUML office whenever they receive or move large sums of money. This ensures that every Naira donated to a charity is traceable and used for its intended purpose.

Common Misconceptions About Nigerian NGOs

"NGOs are completely tax-exempt."

While charities are exempt from Companies Income Tax (CIT) on their primary charitable activities, they are not exempt from all taxes. They must still pay Value Added Tax (VAT) on goods and services, deduct Withholding Tax (WHT) from contractors, and remit Pay-As-You-Earn (PAYE) taxes for their employees.

"Trustees own the assets of the NGO."

Trustees are legal custodians, not owners. Unlike shareholders in a private company, trustees cannot take dividends or share the profits of the organization. All assets must be used solely for the achievement of the organization's goals as stated in its constitution.

"The CAC cannot interfere in our internal management."

Prior to CAMA 2020, this was largely true. However, the new law grants the CAC broad powers to intervene, audit, and even replace leadership if there is evidence of mismanagement. NGOs are now subject to much higher levels of state scrutiny.

NGO Compliance Cost Breakdown (Estimates)

FAQ

Can a foreigner be a trustee of a Nigerian NGO?

Yes, a foreigner can be a trustee. However, they must possess a valid work permit or residence permit (CERPAC) if they are living in Nigeria, and the organization must still have a local presence and address.

What happens if our NGO is labeled "Inactive" by the CAC?

An "Inactive" status means you have failed to file annual returns for two or more years. To fix this, you must pay all outstanding filing fees and penalties, and submit audited accounts for the missing years to the Corporate Affairs Commission.

Can an NGO engage in commercial business?

An NGO can engage in trade or business provided the profits are used exclusively for the organization's charitable purposes. If the business is substantial, it is often better to register a separate limited liability company that is owned by the NGO.

When to Hire a Lawyer

Navigating the CAMA 2020 landscape requires more than just good intentions; it requires precise legal adherence. You should consult a lawyer if:

• You are setting up a new NGO and need a constitution that complies with current CAC standards.
• You are facing an investigation or a potential trustee suspension under Section 839.
• You want to merge with another organization and need to handle the complex asset transfer and legal filings.
• Your organization has been marked as "Inactive" and you need to navigate the reinstatement process.

Next Steps

1. Audit Your Records: Check your CAC status online to see if your organization is "Active" or "Inactive."
2. Update Your Postings: Ensure all changes to your board or constitution over the last year have been formally filed with the CAC.
3. Review Your Constitution: Ensure your internal rules align with the mandatory provisions of CAMA 2020, particularly regarding financial reporting.
4. Register with SCUML: If you haven't already, begin the SCUML registration process to ensure your banking operations remain uninterrupted.