POWERS, AUTHORITIES AND LIABILITIES OF A COMPANY
The question here is who can be regarded as acting on behalf of a company and in what circumstances can they validly act?
Initially, acts which were authenticated by the company’s common seal were regarded as acts of the company. But there were situations where seals were affixed on acts without the company’s authority and this made the company not bound. Subsequently, the decisions of the majority of the members of the company in general meetings were regarded as the acts of the company. Because of the impossibility of taking all day-to-day decisions in general meetings, the powers were later delegated on a board of directors. Due to business expediency, the powers of the board are usually delegated to individual managing directors, officers and agents.
The Organic or the Alter Ego Theory:
The theory seeks to identify the human beings within the company structure whose actions can be attributed to the company on the basis that they are the organs of the company.
A company is owned and managed by two principal organs: “the Shareholders in general meeting” and “the Board of Directors”. These two organs are not just agents of the company but organic parts of it so that third parties can safely treat their acts as those of the company and the company will be bound. In fact, these organs have been described as the directing mind and will of the company, the very ego and centre of the personality of the corporation. In Lennard’s carrying v Asiatic Petroleum, a ship owned by Lennard’s Carrying was transporting some goods on a voyage when the ship sank and the cargo was lost. The provision of an extant law stated that a ship owner would not be liable for losses if an event happened without actual fault or privity. It was proven that Mr Lennard did know or should have known about defects in the ship, which led the boiler to catch fire, and ultimately sink the ship. An issue was whether the guilty act of a director could be imposed on the corporation. The House of Lords held that liability could be imposed on a corporation for the acts of the directors because there is a rebuttable presumption that the directors are the controlling minds of the company.
The main shortcoming of this theory is that in real life, all actions can’t be taken by these organs and a strict application of this theory would mean companies may escape liability for the actions of persons other than these two organs. According to the Privy Council in Meridian Global Funds Management Asia Ltd v Security Commission, the true question in each case was who (as a matter of construction of the statute in question, or presumably other rule of law) is to be regarded as the “controller of the company.” In this case, two senior investments managers who were not even members of the company’s board were held to be the controllers.
As welcome and more straightforward the approach may be, it makes the law uncertain as to who will be regarded as the relevant person within the corporate hierarchy for the purpose of the identification rule in any particular case.
AGENCY & VICARIOUS LIABILITY
Based on the normal rule of agency, a company will be liable for the acts of any agent or officer or employee acting within the scope of his or her authority. The company is bound if its agent acted within the scope (actual, apparent or ostensible) of authority or by subsequent ratification. But the point must be noted that it is not every shareholder that is regarded as a company’s agent since the company has a separate legal personality of its own.
By S. 66(3) CAMA, provided the servant acted within the scope of their employment, the company is liable for their acts. Even where the act was not authorised but it falls within the scope of employment, the company is still liable. But the company is not criminally liable for their acts as a general rule.
DIVISION OF CORPORATE POWERS
As noted earlier, the primary organs of a company are (a) members in general meeting (b) board of directors. S. 63 provides that a company shall act through its primary organs or through agents or officers having the members’ authority. The section further provides that the respective powers between the two principal organs shall be contained in the company’s articles. The business of the company shall be managed by the board and the latter shall not be bound to obey the instructions and directions of the members in general meeting provided they act within the power conferred by CAMA and or its articles.
S. 65 CAMA provides that acts of the General Meeting, Board of Directors and the Managing Director while carrying on in the usual way of the business of the company shall be treated as acts of the company and the latter shall be civilly and criminally liable. S. 65(a) (b) however creates exceptions: where the person had actual knowledge that the general meeting, the board of directors or of a managing director has no power to act or knows that he has acted in irregular manner.
Who controls the company: the general meeting or the board of directors?
The old view was in favour of the general meeting (Isle of Wight Railway Company v Tahourdin). There was a shift in the latter case of Automatic Self-Cleansing Filter Syndicate Co Ltd v Cuninghame where it was held that a GM cannot dictate to the board in the exercise of its management powers. See also Ladejobi v Odutola Holdings; Emesim v Nwachukwu. The latter position is affirmed in S. 63(3) CAMA. But notwithstanding the provisions in s. 63(3)-(4), s. 63(5) provides for specific instances where the general meeting may perform the functions of the board. For example: a. where the board is disqualified or unable to act b. to institute legal proceedings in the name and on behalf of the company c. to ratify or confirm any action taken by the board of directors d. to make recommendations to the board of directors regarding action to be taken by the board.
Liability of a company for the acts of the MD, officers and agents
Generally, the acts of a company’s officers and agents are not deemed to be the acts of the company. But where the company has expressly or impliedly authorised the officer or agent of act in that manner or where the company has represented the agent or officer as one having its authority to act in that manner, the act shall be deemed to be that of the company. Even where such act was not authorised initially, it will still be deemed to be the company’s act provided there was ratification.
By virtue of S. 65, a company may be criminally liable for the acts of its members, the board of directors or the managing directors as if the company were a natural person. This modern principle was established in common law in the case of DPP v Kent & Sussex Contractors. In R v ICR HAULAGE, the defendants argued that a corporation should not be convicted for an offence which requires mens rea. The court, having established that managing director was the directing mind behind the company, held that his acts were therefore clearly of the company. The company was convicted of common law conspiracy to defraud. Also, from the case of R v Hammond, it is clear that a company can now be liable for the offence of contempt of court.
EVOLUTION OF THE EXTENT TO WHICH A COMPANY CAN BE HELD CRIMINALLY LIABLE.
At one time it was felt that a corporation could not be convicted of a criminal offence because, having no mind of its own, it could not have the mens rea or "guilty intent" necessary to most crimes; however it is fairly well established today that a corporation can be convicted of a criminal offence of which mens rea is an essential element.
The dictum that paved the way for much of the subsequent doctrine on the subject was that of Viscount Haldane in the civil tort case of Lennard's Carrying Co. v. Asiatic Petroleum Co where he noted:
“My Lords, a corporation is an abstraction. It has no mind of its own any more than it has a body of its own; its active and directing will must consequently be sought in the person of somebody who for some purposes may be called an agent, but who is really the directing mind and will of the corporation, the very ego and centre of the personality of the corporation... the fault or privity of somebody who is not merely a servant or agent for whom the company is liable upon the footing respondeat superior, but somebody for whom the company is liable because his action is the very action of the company itself ”
It should be noted that in this decision, where the company was held liable in tort, Lennard, the person whose act was held to have bound the company, was an active director of the company. Viscount referred to the person in question as the directing mind of the company; the very ego and centre of the personality of the corporation.
The above remarks are the source of what has become known as the 'alter ego doctrine' of responsibility. This doctrine is based on the proposition that some officers of a company are much more than its agents or servants; they are the company itself. Their actions can bind the company not upon the basis of agency or vicarious responsibility, but because these persons are so close to the "very ego and centre" of the personality of the corporation that their actions are identified with it.
Three cases that extended the dicta in Lennard's case into the present governing doctrine were: Director of Public Prosecutions V. Kent and Sussex Contractors Limited; Rex v. I. C. R. Haulage Co. Ltd., and Moore V. L Bresler Ltd
In D.P.P. v. Kent and Sussex Contractors Ltd., a company was held criminally responsible under the Defence Regulations in that with intent to deceive it produced false documents and furnished false information for the purposes of the Motor Fuel Rationing Order of 1941. The report refers to the officer of the company who signed the misleading documents as "the transport manager of the respondent company", but gives no indication as to precisely what his relationship was to the board of directors, or as to what role the Board or any of its members played in perpetrating the offence.
In R. v. I.C.R. Haulage Ltd., an appeal by the accused corporation against a conviction for common law conspiracy to defraud was dismissed by the Court of Criminal Appeal. Here the fraudulent acts were committed by a person who was managing director of the accused company and the registered owner of all but one of the issued shares (his wife owned the one remaining share). Stable, J., who delivered the judgment of the Court, declared that a company could be indicted for a criminal offence (with the exception of offences such as bigamy, perjury and murder) and stated the Court's agreement with the decision and reasoning in D.P.P. V. Kent and Sussex Contractors Ltd.
In Moore V. I. Bresler Ltd.," the secretary of the accused company, who was also the general manager of the company's Nottingham branch, acting together with the sales manager of that branch, sold, with the object of defrauding the company, certain of the company's goods. The Secretary, who alone kept the accounts, and the Sales Manager, made certain returns concerning purchase tax on the sales which were false in material particulars and which were done with intent to deceive, contrary to section 35 of the Finance (No. 2) Act, 1940. The company and the two officers were charged with appropriate offences under the Act. The company was convicted but the conviction was dismissed by Quarter Sessions in appeal on the ground that the sales were not made by the officers on behalf of the company but rather in fraud of the company itself. On appeal to the King's Bench Division, the convictions were restored on the ground that the officers were acting within the scope of their responsibilities in making the sales and the returns, and the fact that they acted in order to defraud the company did not render the company any the less liable for their acts.
THE POSITION IN NIGERIA.
In some other jurisdictions, there have moved as far as holding companies criminally liable on a strict liability bases in the interest of the public. E.g. a company that is supposed to fix a particular bridge allows it to deteriorate to the extent that the bridge collapses and kills some people. They would now be held liable. There are a few cases in Nigeria.
In Ogbuagu v The Police, the appellant was the proprietor of a newspaper publishing house. When leaving Jos, he instructed the employee not to publish the paper while he was a way. The servant nevertheless published the seditious article. The court held that the proprietor was not liable. In R v African Press, a case with similar facts with that of Ogbuagu, the court held that both the defendant and editor were jointly liable. In Police v Adamu Yahaya, the court held that once a vehicle is being used to carry smuggled goods, the mens rea of the owner is immaterial because the statute regulating customs and excise is a strict liability one. Therefore there appears to be no consistency between the Nigerian Decisions.
There are some contemporary statutes that impose liability on companies. E.g. under the CITA, a company can be convicted for acts of tax evasion. The question is how many have been successfully convicted? In FRN v Dr, Nwoche Ojogwu and the Capital Merchant Bank, the MD (also promoter) of a company floated other fraud companies which he diverted into his personal purse. The MD was sentenced to 18years while the bank was discharged and acquitted.
In a case, a company was alleged to have undercut the tax payment by failing to declare certain taxable amount in the payroll... their explanation was that they were advised by consultants that it was not taxable. It was suggested that why would you make payment and not reflect it in the payroll. Guilty intent could then be imputed.
The area where we find most attractive is where the act can cause injury to the public. For instance, a BRT bus runs into a pedestrian due to failure of the vehicle's brakes. If as a deliberate policy, the company did not get MOT or insurance or servicing for its buses, then the topic becomes interesting. There are cases where havoc had occurred due to violation of certain regulations and they have been held liable. If you punish only the company or individuals, they would always use certain individuals as scape goat and continue to operate.