Ms. Baksh avoided main points about a conspiracy to conceal mandatory info on Berbice Bridge Company

It is good that Ms. Azeena Baksh, the Registrar of Deeds responded, even if indirectly, to my blog article Conspiracy to conceal mandatory public information in SN’s letter of May 2, `Procedure on filing of annual returns clear’.

Ms. Baksh’s claim that she was extending to me “respect” by calling on BBCI to file their annual returns shows a fundamental misunderstanding of the duties of the Registrar and of the public records function of the Registry. Section 487 (2) prescribes that the Registrar “must send to [any company in default of its filing requirement] a notice advising it of the default and stating that, unless the default is remedied within twenty-eight days after the date of the notice, the company or other body corporate will be struck off the register”.

Even if Ms. Baksh were to claim that she was exercising some legitimate discretion towards BBCI, such exercise must be reasonable. The circumstances of BBCI certainly do not justify a delay of more than two years in holding its 2012 AGM. The shareholders are all resident and the accounts are pretty straight forward.

The reality is that BBCI is experiencing difficulties meeting its financial obligations and wants to delay publication of its financial statements and report of the directors until after the May elections. My understanding is that the directors have approached the PPP/C government with a number of options, including raising the toll!

Ms. Baksh also claims by way of excuse for her inaction in relation to BBCI’s 2012 and 2013 returns that the Registry is “handling backlogs for the period 2002”. She may wish then to explain how companies #6450 incorporated in 2010 and #’s 6506, 6904 and 6951 incorporated in 2011 were struck off by the Registry. Or why the PPP controlled New Guyana Company Limited incorporated in 1959 is still listed as an active company despite its illegal conduct, and egregious breaches of the Companies Act for non-filing of annual returns, changes of directors, secretary, etc.

As an aside, Ms. Baksh has been in the job since 2012 and she is now only at 2002! At this pedestrian rate, heaven knows when the Registry will have up-to-date records, its very raison d’etre.

Now to some specifics. Contrary to what Ms. Baksh’s claims, BBCI did not respond to the Registrar’s request and ask for a 28 days extension for filing their returns. What BBCI did was write her stating that the Minister of Finance had approved an extension to June 30, 2015 for the holding of BBCI’s 2012, 2013 and 2014 annual general meetings. Surely Ms. Baksh must be aware that extensions are granted subject to conditions and directions and are not a carte blanche exemption as the registrar seems to think.

May I point out too, that Ms. Baksh contradicts herself, stating in one breath that she will not put on record any document marked “Private and Confidential” and in another that BBCI’s request was placed in its file in the Registry. There is a system in the Deeds Registry that every visit I make there and any staff I engage, is noted, regardless of the official nature of my business. The Registrar would know that I visited the Registry on Friday last. My diligent enquiry concerning any developments or updates regarding BBCI contradicts her assertion.

Ms. Baksh may wish to elaborate for the public how placing a private and confidential reply on file renders “the rule of law” chaotic. And I would be most grateful if she would direct me to the provision of the law which permits her as Registrar to withhold information from the public in relation to the failure of a company to meet its statutory obligation under the Companies Act. As a member of the public I have certain rights which by her inaction and acquiescence I am being effectively denied.

Ms. Baksh has avoided the main points in my article that led to the inescapable conclusion of a conspiracy to conceal mandatory information pertaining to BBCI. In the interest of space I summarise those points: first, Finance Minister, Dr. Ashni Singh’s purported approval for the Bridge Company to extend up to June 30, 2015 the date for BBCI to hold its 2012 AGM is unlawful and void; second, even if the Minister had such authority, the precondition was not met; and third, and perhaps worse, BBCI never made an application to the Registrar for the presentation of dated accounts to any AGM and so she could not therefore approve any extension. Even at the most charitable level, unfamiliarity with certain relevant provisions of the Companies Act cannot explain this series of grave mistakes in which Ms. Baksh persists.

The unfamiliarity goes further and has even more serious consequences as seen in the botched CLICO liquidation. Despite my drawing the relevant provision to Ms. Baksh’s attention on more than one occasion, she has failed over a period of years to carry out her duty to have the statements of the Liquidator of CLICO audited, as required by the Companies Act.

At the time of her application for the position as Registrar Ms Baksh had neither the relevant training nor experience for the position. However, as luck would have it, she was appointed to the position. A country needs to have as the keeper of its public records persons whose professional competence and impartiality are beyond reproach. Ms. Baksh as the keeper of the companies’ records has a long way to go to convince many members of the public that she possesses those qualities. She can begin with BBCI and New Guyana Company Limited.

I accept that this letter is long. However I think the exchange puts our regulators under the microscope which I think is a good thing. I believe we need more accountability and reporting from all our regulators.

Conspiracy to conceal mandatory public information

There seems mischief afoot and a conspiracy involving Ms. Azeena Baksh, Registrar of Companies, the Berbice Bridge Company Inc. (BBCI) and Dr. Ashni Singh, Minister of Finance to conceal information from the public about the Bridge Company. One year after the NIS had invested nearly one billion in preference shares in BBCI, the company wrote the NIS telling its General Manager that it would not be receiving any dividends for 2014 because “the company had not made any profits”.

One of the regulatory controls of companies is disclosure to the public, mainly through an annual return. The problem is that BBCI has not filed any returns with the Registry since 2011 and has resisted every attempt to have it comply. The reason has become clearer over the past month with the Minister of Finance giving the company cover NOT to file for some time yet, even though he has no such power under the law. Even if the Minister had such power, the company had not met the conditions set out in the Companies Act for any extension of the filing date.
Continue reading Conspiracy to conceal mandatory public information

Police should have been called in immediately over forgeries at registries

I understand from the article ‘Probe underway at Deeds, Supreme Court registries over forged documents’ carried in the Stabroek News of March 30, 2015 that the investigation referred to is an internal investigation. Apart from the seriousness of the apparent improprieties, the matters involved high profile companies with serious reputational risks at stake.

The report suggests that the relevant authorities accept that a fraud was committed but first want to determine whether any staff member may have been involved. That is troubling. I am not aware that the registries have the capacity to carry out fraud investigations and indeed whether it is proper for them to do so. Not surprisingly, such internal investigations seldom seem to produce any results or effect.

Because of the seriousness of the matters and to ensure that there is no tampering with records or potential witnesses the police ought to have been called in immediately and certainly no later than the date when the court decided that documents submitted to it should not be treated as valid.

I certainly hope there is no further delay and that the police are called in immediately.

Corporate lawlessness

Introduction
Over the past couple of weeks I have had cause to try obtaining some information on particular companies, information that those companies are required to file with the Registrar of Companies. Alas, in a number of cases, companies simply ignore the law, failing for several years to file what the Companies Act refers to as the Annual Return. Section 153 of the Act says that every company, at least once in every year, must file such a return in the prescribed form, made up to the date of the Annual General Meeting (AGM), and containing the particulars set out on the fifth schedule to the Act. The annual return must be signed by a director or the secretary of the company, must be accompanied by the company’s audited financial statements and must be submitted within forty-two days of the AGM.

My experience is that these violations are not limited to the small, family company but also involve some very prominent entities, some of which are connected with public companies. And it is not that the violation is about a period of weeks or months. Some of them have never filed any return, quite a courageous feat that has somehow managed to escape the Registrar’s attention.

The Registrar of Companies is the officer responsible for the regulation of companies and that office in turn reports to the Attorney General and Minister of Legal Affairs. During 2011 the Registrar of Companies in fact caused to be published in the Official Gazette seven Notices, striking off from the register of companies several for non-filing. That is indeed commendable, but how the Registrar has missed striking off NICIL, the 100% state-owned entity whose board of directors, chaired by the Finance Minister and dominated by senior ministers of the government, is a mystery.

Offences
The Companies Act prescribes many specific offences provisions as well as general offence provisions. It is the largest statute on the books and the offences provisions can be found throughout the Act. The general offence provision is found in section 522 and provides that contravention of a provision of the Act or regulations made under the Act for which no punishment is otherwise provided for that offence is liable on summary conviction to a fine of ten thousand dollars.

Contravention of specific provisions is an offence punishable on summary conviction to a fine of ten thousand dollars and imprisonment for six months. Here are some of the specific provision offences provided for under the Act:

1. failure to prevent falsification, loss or destruction of the records of the company, or to facilitate detection and correction of inaccuracies in those records;
2. misuse of the list of shareholders or debenture holders obtained from the company;
3. prohibited solicitation and failure to send management proxy circular to the Registrar;
4. failure to provide the information required by the Registrar in connection with insider trading, share registrants and proxies;
5. failure by a proxy holder to comply with the directions of the shareholder appointing him;
6. failure by a registrant to vote without having received instructions;
7. failure by an auditor to attend a meeting for which he was notified by a shareholder that his attendance was required to answer questions; and
8. failure by a director or officer of a company to act on information coming to his attention that a mistake has been detected in the financial statements previously reported on by the auditor.

If the offence is committed by a company, which is of course not a natural person, any director or officer of the company who either permitted or acquiesced in the act or omission to act, is liable to the same penalties as the company.

In the following cases the company is liable on summary conviction to a fine of $10,000:
1. failure by the company to send a form of proxy along to the notice sent to shareholders; and
2. failure to give proper notice to shareholders.

Other offences
The above are considered regulatory offences under the Companies Act. Other legislation which also provides for offences include the Anti-Money Laundering and Preventing the Financing of Terrorism Act, the Insurance Act, the Securities Industry Act and the Financial Institutions Act. The Criminal Law (Offences) Act and the Summary Jurisdiction (Offences) Act also provide for certain offences by officers of companies including fraudulent accounts, destruction of documents and fraudulent statements.

It is not that there are not many companies which have been complying with the requirements of the Act in relation to the filing of annual returns. But there are others who file an annual return without the audited financial statements, or with very limited financial statements. An explanation I have heard in justification of this limited submission is one of an interpretation which lawyers – grossly incorrectly in my view – put on the language of the relevant section of the Act. I have also heard criticisms of the annual filing requirement that the law is intrusive and that filing audited financial statements is giving away competitive information. That view seems very shortsighted and completely ill-informed about what being an incorporated entity means.

Benefits, but also obligations
As I said in last week’s column, a very important benefit of incorporation is that it creates an entity entirely separate from its shareholders. Even in a one-person company, the liabilities of the company are for the company alone and unless the shareholder or director has guaranteed any liability, the shareholder or director is insulated from suit for those debts. And that is not the only benefit of the company; there is perpetual succession, shares in companies are transferrable, and even the tax laws, or at least some of them, are more favourable to the corporate rather than the personal form.

But in return for those benefits, the promoters, directors and shareholders of the company implicitly recognise and agree to abide with the statutory obligations. Apart from the obligation to file returns annually, there are requirements to have audited financial statements, to maintain statutory records, to hold meetings, etc. No one denies that these carry with them both financial and non-financial costs. But having chosen the corporate form to obtain its considerable benefits, the directors cannot then elect to ignore the attendant obligations.

Our Companies Act is largely a one-size-fits-all model, based largely on the Canadian Business Corporations Act. And while subsequent to the introduction of the Act in 1995, the country passed legislation specific to banking, insurance and public companies, the 542-section Companies Act is still formidable for the small private company. They have a choice: de-incorporate or comply.

New AG
The new Attorney General Mr Anil Nandalall has brought some refreshing energy to his office. He needs to turn his attention to the Deeds Registry, the place where the annual returns are lodged and which by law are public records. I am sure that Mr Nandalall is aware of the several letters appearing in the press expressing serious concerns about the lawless state of the Deeds Registry, which I hasten to add has more to do with the political failings and hubris of his predecessor than with the staff of the Registry working under some challenging conditions.

Guyana continues to earn very poor ratings among the 183 countries in the World Bank annual assessment, the 2012 report of which has the sub-title Doing Business in a more transparent world. We need to lift ourselves from the lowly position of 114 and at least stand beside, if not ahead of, our Caribbean counterparts. To do so we need to fix a few things immediately. At this stage the Registry is without a Registrar, the position being held by an acting appointee. The entity needs to address a resource deficit including someone with the capacity to ensure that what is in fact filed meets fully the requirements of the law set out above. My experience suggests that the Registry has no accounting capability to assess whether proper financial statements have been submitted.

Mr Nandalall needs to raise his voice in Cabinet and let his colleagues know that the Deeds Registry will be applying the law without fear or favour and that NICIL, arguably the country’s most serious violator of the Companies Act, will be placed in the firing line. Neither he nor the President should accept a situation whereby a publicly-owned company that annually handles untold millions of public funds should be allowed to get away with such lawlessness.

The penalties for offences under the Companies Act are far too low and even if the law was enforced, they would hardly be a deterrent. They need to be increased substantially but also to be enforced vigorously. It seems desirable that the penalties be made automatic, like the penalties under the tax laws, without the rigmarole of court hearing which would be more costly than the fines collected. It is both an opportunity and a challenge.

Conclusion
But NICIL is only part of a wider, sicker culture. There are many other state-owned entities and statutory bodies that have consistently failed to meet their obligations under the Companies Act, or to have their annual accounts and reports laid before the National Assembly as required by law. Hopefully with a new Speaker of the National Assembly, the Clerk will find the courage to write those ministers who are required to lay reports in the National Assembly. The list of those entities is long and several ministers are guilty of non-compliance.

The violation of the country’s laws by ministers, state companies and statutory bodies tells the rest of the nation that if you can get away with non-compliance then good luck to you. Our private sector, so conditioned to anarchy, needs little encouragement to continue their lawless ways.

Sadly, I have to admit that the accounting and legal professions come close to aiding and abetting when it comes to their clients’ non-compliance with the law.