Criminal Law

Criminal and Civil Liability of a Company

By virtue of registration, a company becomes a human with a legal personality. Capable of doing everything a human can do. It can grow, become a parent, fall sick, enter into contracts and breach same, buy and sell properties, and even commits a crime.

The questions begging for answers are, what type of crime can a company commit, what happens when a crime is committed by a company and how can a company be punished for a crime? When can it be said that a company has committed a civil wrong? All these will be answered in the succeeding paragraph.

Criminal liability

Section 89 of CAMA states that acts of members in general meetings, the board of directors, or a managing director while carrying on the company’s business in the usual manner are treated as acts of the company itself, and the company is criminally and civilly liable to the same extent as if it were a natural person.

Provided that:

  1. The company shall not be liable to any person if that person had actual knowledge at the time of the transaction in question that the general meeting, board of directors, or managing director, as the case may be, lacked authority to act in the matter or acted in an irregular manner, or if, due to his position with or relationship to the company, he ought to have known of the lack of such power or the irregularity;
  2. If the company is carrying on a business, it is not immune from liability for acts carried out in connection with that business simply because the business in question was not among those authorized by the company’s memorandum.

Section 90(1) which is subject to section 89 of CAMA provides that the acts of any officer or agent of a company shall not be deemed to be acts of the company, unless

  1. the company, acting through its members in general meetings, board of directors, or managing director, shall have expressly or impliedly authorized such officer or agent to act in the matter; or
  2. the company, acting as mentioned in paragraph (a) of this subsection, shall have represented the officer or agent as having its authority to act in the mater, in which event the company shall be civilly liable to any person who has entered into the transaction in reliance on such representation unless such person had actual knowledge that the officer or agent had no shorty or unless having regard to his position with or relationship to the company, he ought to have known of such absence of authority;

90(2) The authority of an officer or agent of the company may be conferred prior to any action by subsequent ratification, and knowledge of such action by the officer of agent and acquiescence therein by all the members of the company or by the directors for the time being, or by the managing director for the time being, shall be equivalent to ratification by the members in general meeting, board of directors, or managing directors, as the case may be;

90(3) Nothing in this section shall derogate from the vicarious liability of the company for the acts of its servants while acting within the scope of their employment.

The Court of Appeal upheld the provisions of sections 89 and 90 in the case of Virgin Tech. Ltd v. Mohammed.[1] The court stated that the combined effect of sections 63 and 65 of the Companies and Allied Matters Act, 1990 are to enable the principal officers of a company to take steps to arrest and nip in the bud activities taken by persons, which may be inimical to the company. The type of conduct anticipated by the protective provisions of sections 63 and 65 of the Act is that which presents a unique situation or unusual conduct of business by a principal officer of the company. In the instant case, it was the unusual conduct of business by the 1st respondent who allegedly transferred money from the company’s account to the personal account that is within the contemplation of sections 63 and 65 of the Act. What the Chief Executive Officer of the appellant company did was to take steps to arrest an activity inimical to the appellant company.

In other words, the general principles of vicarious liability which render a private individual liable for his servants’ acts apply to render a corporate body that can only act through agents liable for its agent’s acts, provided, that such agents act within the scope of the employment.

In summary, section 89 of CAMA provides that a company may be criminally liable for the acts of its members in general meetings, the Board of Directors, or the managing director as if the company were a natural person. A company can be found guilty and committed for contempt of court as well as become criminally responsible by virtue of section 7 of the Criminal Code. Section 90, on the other hand, covers such situations where the company shall not be criminally liable except if such act has been authorized by the company or the company has represented the officer as having its authority to act in the matter. The company can also be vicariously liable for the acts of its officers and agents under section 90(3) of CAMA.

Civil Liability

A company may be civilly liable for the acts of its alter ego. Civil liability may be in form of a wrong either in tort or contractual. An example of tortuous liability can be found in section 90(3) of CAMA which provides for vicarious liability on the part of the company for the acts of its agents or officers. The civil liability of a company for a tortuous act was espoused by the Supreme Court in the case of Ayodele James v. Midmotors (Nigeria) Ltd[2] to mean that a company can be liable in these three instances:

  1. If it is a tort in respect of which an action will be brought against a private individual; or
  2. If the person by whom the tort actually committed is acting within the scope of his authority and in the course of his employment as an agent of the corporation; and
  3. If the act complained of is not one which the corporation would not, in any circumstances, be authorized by its constitution to commit unless perhaps the corporation has expressly authorized the act.

In respect of contractual liability, section 44(1) and (3) of CAMA is instructive. Section 44(1) of CAMA observed the ultra vires rule which forbids a company from partaking in a business outside its objects. The exception is stated in section 44(3) of CAMA that no act of a company and no conveyance or transfer of property to or by a company shall be rendered invalid by reason of the fact that such act, conveyance, or transfer was not done or made in furtherance of any of the authorized business of the company or that the company was otherwise going outside its objects or powers.

[1] (2009) 11 NWLR (Pt.1151) 135 CA, (p 149, paras E-F)

[2] (1978) 11 – 12 SC 31