Corporate Affairs Commission’s Poor Policy On Schools And Academies

By Olaniran Obele

The public education sector in Nigeria is in crisis. It has been for decades. It may be that a little alive public education may be in the urban and fairly rich States like Lagos, Kaduna, Rivers and some States in the West and East. The statistics shows that over ten million Nigerian kids are out of school. Approximately forty percent of Nigerians are illiterates. The highest literacy rates are in the southern parts of Nigeria while in the northern parts, the illiteracy rate and number of out of school kids are staggering. The teacher to student ratio is about 37.55 students to a teacher while the world average is 25.19 students to a teacher. This virus has hit the primary, secondary and tertiary levels. Public primary education which has been ceded to local governments, like the local government system, is a metaphor on the state of Nigeria. It is the sick man of debilitating Nigeria exhibiting protruding kwashiorkor-belly and oversized head. That malnourished state spew forth insecurity, poverty, lawlessness, underdevelopment, and a vicious cycle of distress. Many parents who want their wards to escape this harrowing fate have no option but to enroll them in private schools.

There are private schools that are truly and exclusively private. Only the children of the super-rich dare step on the paved roads leading to these exclusive coves. The facilities are world class. Kids are brought to school in exotic cars and fees are humungous. Whether the schools are residential or non-residential, they recreate the best of European, American and Asian education. The teachers are well paid and the students to teacher ratio is world class. A visit to some of these schools reminds one what education should be. Some of our best missionary and public schools were a miniature prophetic version of these exclusive private schools.

The second type of private schools are also top notch, just below the exclusive private schools. They were set up to accommodate children from ‘high to medium’ middle-class families. The facilities, faculties and fees mimic the exclusive private schools. They are competitive and doing a great job. These schools remind one what public primary and secondary education used to be in colonial Nigeria and in the first thirty years of Nigeria’s independence. While they do not belong to the ivy league, they are still good for the souls of the students and their fees are at least not too humungous. This does not suggest that they are affordable which is a relative term. The fear of this school fee is that contraceptive that is limiting the birth rate in middle class families.

The last type of private schools is that patronized by the lower middle class and the working class. Some of them are good but faculties and facilities cannot be said to be so great. The fees are however friendly and any person earning less than thrice the national minimum wage cannot dream of comfortably putting a child in such schools. The children of the mass of the people who want to go to school could patronize the public schools or simply feed the statistics of the out of school kids and become a fodder for the next cycle of poverty and insecurity.

School owners are mostly businesspersons. While some of these exclusive schools are owned by religious and charitable societies, majority are owned by sole proprietors. These may be teachers who found teaching in other people’s schools unfulfilling and desire to eke a living using their technical capability or knowledge of the education sectors. Some were established by charitable societies to advance a course and set a pattern of what education ought to be. Majority of private schools in Nigeria are owned by businesspersons. A businessperson has the option of carrying on his business using several modes. He could incorporate his business as a company limited by shares, company limited by guarantee, partnership, sole proprietorship or as an incorporated trustee. Although the company limited by guarantee and incorporated trustee mode is usually deployed for charitable purposes, there is no law that stops it for being used to run a business provided the profits are not shared to the trustees or members of the association.

This brings one to the crux of this article: a circular issued on 4^th March 2022 by the Corporate Affairs Commission (CAC). In that circular, the CAC directed that schools, academies and such institution of learning should not be approved or registered as business name. The rationale for this decision is that an educational institution “is essentially a body corporate with perpetual succession, capable of contracting and (subjecting to such restriction as may be imposed by other laws) issuing certificate in its own name, which attributes are absent in a business name.”

The basis for this prohibition is wrong and its consequences are grave. Part E of the Companies and Allied Matters Act (CAMA) regulates registration and operation of business names in Nigeria. Section 814 provides that every individual, firm, or corporation having a place of business in Nigeria and carrying on business under a business name shall be registered if the name in the case of a firm does not consist of the true surname of all partners without any addition other than the true surname of all partners or the initial of such forenames; in the case of an individual, the name does not consist of his true surname without any addition other than his true forenames or the initials thereof; or in the case of a company, whether or not registered under this Act, the name does not consist of its corporate name without any addition. The implication is that the CAMA does not preclude schools and academies from operating as business names. Indeed, statistics shows that most businesses at their infancy start as business names.

The Act recognizes that business name is a mere alias of the owner under which he carries on business. CAMA 2020 has therefore allowed individuals, firms and incorporated companies to register any type of business name as an alias to carry on business. This is in line with the decision in DOMINGO V. THE QUEEN (1963) LPELR-15448 (SC) where the Supreme Court held that the purpose of the business name law is to enable persons doing business with the business name owner under his assumed name to discover who the person or persons behind the name are, hence the requirement for registration. In that decision, the apex court agreed that business names are important to business in the modern world. It is therefore wrong to deprive school owners of the benefit of running their business under an assumed name due to the circular issued by the CAC.

Corporate Affairs Commission does not have power to regulate educational institutions. That is essentially the duty of State, Local Governments, or their agencies. The rationale that schools must have corporate personality to issue certificate is therefore not valid. School owners register with the various school boards and have licences which permit them to run the schools. Without the permits or licences, the schools have unapproved status.  It is based on the permits and licences that schools could issue certificates of attendance. The presence of CAC’s certificate conferring juristic personality is not the basis for the issuance of certificate and is not a sine qua non for the issuance of educational certificates. In any event, certificates on leaving primary and junior secondary schools are centrally issued by State Governments. On leaving secondary schools, West African Examination Council or National Examination Council certifies that students have completed their studies. For tertiary institutions, the schools, having been accredited by National University Commission, and its sister commissions or boards, certify that students have graduated. It is only when these licensing entities make incorporation a requirement for obtaining licences or permits that businesspersons could be deprived from running schools and academies under the business name regime.

The argument that schools and academies are essentially a body corporate with perpetual succession, capable of contracting and (subjecting to such restriction as may be imposed by other laws) which attributes are absent in a business name does not hold. The persons using an assumed business names can contract provided they show their faces and indicate that they are Mr. Ayuba Femi Chukwu and Mrs. Maimuna Bola Chukwu, who are trading under the name and style of Johannes International College. The question of their contracting capability should not be the concern of CAC but that of the entities and their business partners. In law therefore, the legal reasons for the circular are not correct.

The consequences of the circular by the Corporate Affairs Commission are many. It will increase the cost of operation of school owners. This circular in a way, when schools are incorporated, will bring schools that are licensed by States and Local Government under the Company Income Tax regime of the Federal Government. This will deprive States of personal income tax which should have been paid by the school owners on their incomes. While schools’ owners as directors, shareholders and managers of the schools will still pay personal income tax to State Governments when the schools are incorporated, the cost of running schools will increase since additional tax will be paid as company income tax. The implication is that the school fees and expenses must necessarily increase. This ultimately will affect the quality of education since school owners must optimize profit. The implication is that the number of out of school kids will increase, ratio of students to teachers will increase and the vicious cycle that has bedevilled the public education system may visit the private education industry.

A viable solution is for the CAC to rethink this policy, withdrawal this circular and follow the dictates of Part E of the Companies and Allied Matters Act 2020.

Olaniran Obele is a partner in the firm of Tayo Oyetibo LP and writes from Lagos