Second revisit of the NICIL controversy (Part I)

Accountability Watch

I do not care to know your various theories about God. What is the use of discussing all the subtle doctrines about the soul? Do good and be good.  And this will take you to freedom and to whatever truth there is.

Buddha

Introduction
In last week’s column, I mentioned that I had done an analysis of the operations of NICIL and had concluded that NICIL is not a public corporation as there was no evidence that an order was issued under the Public Corporations Act 1988 deeming it as such.

A few days ago, a professional colleague gave me a photocopy of a notification dated 18 July 2000 in which Section 5 of the Act, dealing with the vesting of movable and immovable property of the State, was deemed to apply to NICIL. Today, we assess the implications of this new information on my original analysis.

Background to the Public Corporations Act
Accountability WatchDuring the 1970s and the early 1980s, there had been a proliferation of public corporations in almost every area of economic activity. These corporations had a dual reporting relationship in that they reported to the Vice-President of the Guyana State Corporation (GUYSTAC), the umbrella body that provided policy directives and to some extent supervision. At the same time, they reported to their respective subject Ministers. This arrangement would have created some degree of tension in the management of these corporations.

The Public Corporations Act 1988 dissolved GUYSTAC mainly to remove centralized control and to provide corporations with greater autonomy and flexibility to manage their affairs under policy directives from the concerned Ministers. All of GUYSTAC’s assets at the time of its dissolution were transferred to and vested in the State. At the same time, individual corporations were provided with updated and specific legislation in relation to their establishment and management.

Establishment of a public corporation and vesting of State assets
Sections 3 to 5 of the Act provide for procedures to be followed in the establishment of a public corporation and the vesting of assets in its name. The Minister may, by order, establish such a corporation. Where there is no Minister, the President assumes that responsibility. The order is subject to negative resolution of the National Assembly. Once a public corporation comes into being, Section 5(1) provides for the vesting in the said corporation movable and immovable property of the State. The order vesting immovable property is treated as if it were a transport or other document effecting conveyance, as provided for by Section 5(2).

A new corporation is unlikely to have any resources to acquire its own assets. It is therefore necessary for it to be provided with the minimum amount of movable and immovable property to assist with its start-up operations, bearing in mind that with the dissolution of GUYSTAC there would have been surplus assets, not to mention numerous other State assets, some of which could be beneficially used by the new corporation. As the corporation progresses in life, it will generate its own revenue, in which case it can acquire assets of its own. Section 5 does not provide for the vesting of assets in an existing corporation nor is there an intention to vest assets in a new corporation that are surplus to its requirement.

Transfers to a corporation
This is provided for under Section 8 whereby the Minister by order may transfer to a corporation, or place under its control the whole or part of:
(a) any undertaking of any other corporation or other body corporate owned by the State or in which controlling interest is vested in the State or any agency on behalf of the State; or
(b) any commercial, manufacturing or research undertaking of the State.

Disposal of assets
It is recognized that over time a corporation may be accumulating assets that are surplus to its requirement. It may also have surplus assets if its operations are scaled down, or if it acquires new assets to replace those that are not economically feasible to retain. In these situations, Section 23 (6) provides for the concerned Minister to give specific directives for the disposal of capital assets and for the whole or part of the proceeds to be paid into the Consolidated Fund.

If by chance, a new corporation disposes within a short time of an asset acquired from the State, it would be reasonable for the Minister to direct that the entire proceeds, net of expenses, be paid over to the Consolidated Fund. It would be inappropriate for the corporation to retain such proceeds, as this will result in a windfall gain at the expense of the State.

The disposal of assets that have been used for some time is a different matter, and the Minister will have to make a judgment as to what amount should be paid over to the Consolidated Fund. If a large surplus is made from the disposal, it would be reasonable for that surplus to be paid over to the Fund. The Act does not envisage that assets will be vested in a new corporation for the sole purpose of disposal and for the corporation to retain the proceeds. Indeed, there are other mechanisms for the disposal of State assets and for the proceeds to be paid over to the Consolidated. In particular, there is a standard line item in the National Budget entitled “Sale of assets” to ensure not only Parliamentary approval of the sale but also proper accountability for the proceeds.

Deemed public corporation
Section 6(2) provides for any State-owned/controlled corporate entity to be reconstituted under the Act, and thereupon the reconstituted entity shall be deemed to have been established as a public corporation.  All the provisions of the Act are then applicable to it, except as provided for by Section 3(3) where the Minister has the authority to exclude or modify any of the provisions of the Act. The rationale for Section 6(2) is that a State-owned/controlled entity, other than a corporation, could enjoy some or all of the benefits of a corporation, which are otherwise not available under, say, the Companies Act.

Application of provisions of the Act to certain bodies corporate
By Section 66(1), the Minister may, by notification in the Gazette, apply any of the provisions of the Act, without modifications or with such modifications as may be specified therein, to any State-owned/controlled entity, other than a corporation. Unlike Section 6(2), any such notification does not confer upon the entity the status of a deemed corporation, and therefore the entity cannot apply any of the provisions of the Act, save and except those specifically stated in the notification.

Application of the above requirements of the Act to NICIL
NICIL has not been deemed a public corporation as no order has been issued under Section 6(2) deeming it as such. However, on 18 July 2000, the then President issued the following notification:

In the exercise of the powers conferred upon me by section 66(1) of the Public Corporations Act 1988 (No. 21 of 1988) (“the Act”) it is hereby notified that section 5 of the Act shall, with effect from July 10, 2000, be deemed to apply to the National Industrial and Commercial Investments Limited, being a company incorporated under the Companies Act with registered offices at 126 Barrack & Parrade Streets, Kingston, Georgetown, Demerara and wholly by the Government on behalf of the State: with the following modifications:

(1) that the reference in section 5(1) to any corporation, including an existing corporation shall be deemed to be reference to National Industrial & Commercial Investments Ltd.

(2) That the reference in section 5(2) to a corporation shall be deemed to be a reference to National and Industrial commercial Investments Ltd.
Although Section 5 relates to a new corporation, the above-mentioned notification extends its applicability to NICIL which was incorporated on 18 July 1990. NICIL is therefore not a new State-owned entity in need of movable and immovable property for start-up operations.

In addition, the Minister has been referring to section 8 as his authority for the disposal of assets vested in NICIL to entities or individuals, whereas Section 8 is only applicable to transfers to corporations. As mentioned above also, the Minister cannot apply any of the provisions of the Act other than Section 5 since NICIL has not been deemed a public corporation.

Further, the notification of 18 July 2000 took effect from 10 July 2000. However, there is evidence that orders were issued prior to this date, vesting assets in NICIL or transferring them to third parties. For example, Tract ‘X’ and sublot ‘A’ of mudlot 16 Kingston, Georgetown;  and Plots 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12 & ‘X’ Plantation Ruimveldt, were shown as having been vested in December 1999 via orders 48 and 50 of 1999 respectively.  Similarly, Plot 7 Plantation Ruimveldt was transferred to a private company also in December 1999 via order 23 of 1999.

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