NICIL not duty-bound to deposit revenue in Consolidated Fund

– attorney advises holding company

Government’s holding company NICIL is under no duty to deposit its revenue into the Consolidated Fund and Article 216 of the Constitution does not apply to it, according to advice given to NICIL last year as the public corporation faced a forensic audit.

The forensic auditor, Anand Goolsarran had cited NICIL’s “violation” of Article 216 in recommending the filing of criminal and/or disciplinary actions. Others had previously also argued that NICIL had violated Article 216. However, according to documents obtained by Stabroek News, as NICIL was being audited, its Executive Director Winston Brassington sought legal advice and was told that Article 216 does not apply to the entity.

“Section 216 applies specifically to revenues raised by the State. NICIL is not the State, but rather has a separate legal personality. The fact that the State is the sole shareholder of NICIL does not render its corporate form defunct, and accordingly, the automatic transfer provision contained in 216 does not apply,” the advice by attorney, Devindra Kissoon of London House Chambers said.

“Moreover, even deemed to be a public corporation, absent Ministerial direction, NICIL is under no duty to deposit revenue into the Consolidated Fund. If NICIL is a private corporation, not only is it under no duty to deposit monies into the consolidated fund, but from a plain reading of the byelaws, there is no Ministerial power to direct NICIL how to allocate its revenue. Only a director resolution or a change to the byelaws or similar action can mandate payment into the Consolidated Fund,” Kissoon wrote in his advice dated September 17, 2015.

In his audit report on NICIL, Goolsarran urged that criminal and/or disciplinary actions be instituted against all those responsible for the interception of State revenues totalling $26.858 billion in violation of Articles 216 of the Constitution and the related sections of the Fiscal Management and Accountability (FMA) Act. He also urged criminal and/or disciplinary actions against all those responsible for violating Article 217 of the Constitution by causing expenditure to be incurred out of State resources without parliamentary approval.

Article 216 of the Constitution states that “All revenues or other moneys raised or received by Guyana (not being revenues or other moneys that are payable, by or under an Act of Parliament, into some other fund established for any specific purpose or that may, by or under such an Act, be retained by the authority that received them for the purpose of defraying the expenses of that authority) shall be paid into and form one Consolidated Fund.”

The relevant parts of Article 217 states “(2) Where any moneys are charged by this Constitution or any Act of Parliament upon the Consolidated Fund or any other public fund, they shall be paid out of that fund by the Government of Guyana to the person or authority to whom payment is due.

(3) No moneys shall be withdrawn from any public fund other than the Consolidated Fund unless the issue of those moneys has been authorised by or under an Act of Parliament.”

According to Kissoon’s advice, since NICIL is a company formed under the Company’s Act, it cannot be considered to be an arm of the State or to raising or receiving moneys by Guyana, and accordingly Section 216 does not apply to NICIL.

Definition

“Moreover, none of the revenue NICIL generates fits the definition of public moneys as defined by Sections 2 and 37 of the Fiscal Management and Accountability Act Cap 73:02….NICIL is (a) body corporate separate and apart from the State, the term State referring to Guyana and the Government generally, and accordingly, Parliamentary approval is not required for NICIL’s expenditures,” he argued.

Kissoon also said that NICIL’s articles allow for it to retain money.

He cited NICIL’s articles 18 (1) and 19 in this regard which states that “The holders of ordinary shares be entitled to be paid out of the profits in each year a dividend at such rate per annum as the Directors may determine” and “The Directors may, before recommending any dividends, set aside out of the profits of the Company as they think proper as a reserve which shall, at the discretion or the Directors, be applicable for any other purpose to which the profits or the Company may be applied. The Directors may, whether or not they place any sum to reserve, carry forward any profits which they may think prudent not to distribute.”

Kissoon also cited Section 96 (4) of the Companies Act (duty of care) which states that “Every director and officer of a company must comply with this Act and the regulations and with the articles and by-laws of the company.”

These provisions, Kissoon argued, allows NICIL to retain revenue. “…not only are NICIL’s articles clear on their face that NICIL may retain its revenue as it sees fit, but in any event, even if it were later found that Article 216 somehow applies, NICIL’s board is under a legal duty to adhere to the articles and properly exercise its duty of care, and in so doing retain monies for investment,” he wrote.

“Therefore, in the absence of a Court order or otherwise, NICIL has no duty to deposit monies into the Consolidated Fund,” he said.

The attorney argued that the proper procedure for the deposit of monies into the Consolidated Fund would be in accordance with NICIL’s articles, paying dividends on profits as the directors see fit. “Unless authorized by resolution or in accordance with NICIL’s byelaws, NICIL cannot simply transfer all collected revenue into the Consolidated Fund,” he said.

He also argued that a mandate is generally required for public corporations to deposit revenue into the Consolidated Fund. “…unless specifically directed, public corporations are not required to put monies into the Consolidated Fund, absent specific direction by the Minister or an Act. Even if NICIL is deemed to be a public corporation, it too does not have a duty to put funds into the Consolidated Fund absent Ministerial mandate,” he wrote.

In terms of NICIL’s legal status, Kissoon had argued that it was created under the Companies Act and it was not created pursuant to specialised Statute or an Act of Parliament like an autonomous or semi-autonomous corporation or body corporate entities. The Government of Guyana through the Ministry of Finance owns 100% of the shares issued by NICIL.

“NICIL is therefore bound to follow only its byelaws and the applicable provisions of the Companies Act,” Kissoon wrote.

In terms of the applicability of the Public Corporations Act (PCA), Kissoon argued that “since NICIL was not formed under the PCA, and by the Companies Act, there being no Ministerial order mandating its formation, we are of the view that, save for sections that apply to non-public corporations, the provisions of the PCS do not apply to NICIL. In that vein, it is important to note that the PCA came into force in or about 1988, prior to the incorporation of NICIL, and accordingly, it was open to the administration to incorporate NICIL as a public company, which was not done.”

In terms of the applicability of the Procurement Act, Kissoon said since NICIL is a body corporate and not a subdivision of the Government, Section 3 of the Procurement Act makes it clear that the Act does not apply to NICIL. Section 24(2) similarly does not apply to NICIL since NICIL is not using funds from the treasury.

“However, Section 24(1) appears to bring NICIL within the ambit of the Act since the Government of Guyana has the controlling interest in NICIL. The relationship between Section 3 and Section 24(1) of the Act seemingly conflict, and ultimately … the applicability of the Act to NICIL will depend on the interpretation of these sections by the Courts,” he wrote.

When in opposition, APNU and the AFC had charged that NICIL was being run by the former PPP/C government as a parallel treasury and charged that it was operating in violation of several laws. Following the forensic audit, Brassington and his deputy Marcia Nadir-Sharma were last month sent on leave and files turned over to the police. Brassington has denied breaking any laws.

Brassington had also sought a legal opinion on a contentious December 2012 motion in the National Assembly in the name of AFC leader Khemraj Ramjattan that had resolved that no further expenditure be incurred by the NICIL or its subsidiary Atlantic Hotels Incorporated on the Marriott Hotel project without the authorisation and approval of the National Assembly.

The motion also sought to require NICIL to pay over to the Consolidated Fund “all revenues and proceeds from the sale of all State properties, except for those necessary administrative costs for maintaining and running its operations annually.”

Attorney Ronald Burch-Smith in his advice had said that barring the passage of a law, the National Assembly had no legal basis to direct NICIL and the motion approved by the opposition-controlled House in 2012 was not legally enforceable.