Section 28(4A) of the Investment Promotion Act 1992 is drafted as a presumption in favour of granting. That is significant for an applicant.
Section 28(4) — what the Authority must do
(a) verify to its satisfaction the correctness of any statement made or information given in the application or supporting documents; and
(b) review the merits of the application to ascertain whether the proposed activity is likely to achieve all or any of the purposes of this Act; and
(c) review the merits to verify the applicant’s ability to finance, establish and operate the enterprise in the proposed activity; and
(d) review the merits of the applicant and any other person or enterprise who is, or is proposed to be, an owner, officer, partner or is otherwise associated with the applicant.
Section 28(4A) — grant unless
Subject to subsection (7), the Authority shall, following verification and review, grant the application on such terms and conditions it considers appropriate, unless —
(a) in the opinion of the Authority, the application is incorrect, misleading or does not otherwise comply with the Act; or
(b) in its opinion the proposed activity is unlikely to achieve all or any of the purposes of this Act; or
(c) in its opinion the applicant does not possess the ability to finance, establish, operate or otherwise carry out the activity; or
(d) the applicant, or an enterprise that is or is proposed to be an owner, officer or partner of it or is otherwise associated with it, fails the character test below.
The obligation to grant is mandatory once the grounds of refusal are absent. That is materially different from a discretion to grant.
What remains discretionary is the terms and conditions, which the Authority may set as it considers appropriate — and a certificate granted in terms other than those applied for requires reasons under section 28(6) and is appellable under section 40(1)(b).
Note also that each of grounds (a) to (c) turns on the opinion of the Authority. On judicial review the question is not whether the court agrees, but whether the opinion was one reasonably open on the material.
Section 28(4A)(d) — the character test
Refusal is available where the applicant or an associated enterprise has —
(i) a civil judgment registered against it in the country or elsewhere, that is proper and remains unsatisfied; or
(ii) been convicted of any offence punishable by imprisonment of one year or longer, or a fine of K10,000 or equivalent, whether in the country or elsewhere; or
(iii) been adjudicated bankrupt or insolvent, or been wound up, or had a receiver or receiver and manager appointed, within the ten years prior to the application.
It is worldwide. Judgments and convictions “whether in the country or elsewhere” count.
The conviction threshold is low. Any offence punishable by one year, or a fine of K10,000 or equivalent, qualifies — measured by the available penalty, not the sentence imposed. That reaches many regulatory offences in other jurisdictions.
Insolvency history reaches back ten years, and includes not only bankruptcy but winding up and the appointment of a receiver.
It reaches associates. Not just the applicant — any proposed owner, officer or partner, or anyone otherwise associated with the applicant.
An unsatisfied civil judgment is the ground most easily cured: satisfy it, and the ground falls away.
Sections 28(4B) and (4C) — who is an “owner”
A person is deemed to be an owner of an enterprise if that person has —
(a) ownership of any shares in, or any part of, the enterprise; or
(b) the power to control or otherwise direct the actions or activities of the enterprise; or
(c) ownership of any shares in, or any part of, an enterprise which owns shares in, or owns any part of, the enterprise.
It is immaterial whether ownership or control —
(a) is direct or indirect, express or implied, or formal or informal; or
(b) is capable of being acquired or exercised only as a result of an agreement, arrangement, understanding or practice, whether conditional or unconditional.
Paragraph (a) has no minimum threshold: any shares makes a person an owner. Paragraph (b) makes control alone sufficient without any shareholding. Paragraph (c) follows the chain up through parent companies.
Section 28(4C) then removes every way of avoiding it: indirect, implied and informal arrangements all count, as does control available only under an agreement or understanding.
The consequence for an applicant is that the character test applies to a wide group. Every shareholder, every entity up the chain, and every person with practical control must be identified — and each must pass.
The same definition of relevant interest appears in section 36B for Part IVA.
In practice
- Map the ownership chain before applying. Sections 28(4B) and (4C) reach further than most corporate groups expect.
- Run the character checks on every associate, in every jurisdiction where they have operated.
- Clear unsatisfied judgments before filing.
- Address the section 1(e) benefits expressly. Ground (b) is an opinion about whether the activity is likely to achieve all or any of the purposes — one is enough, but it must be shown.
- Be accurate. Ground (a) turns on the application being incorrect or misleading — and section 43 makes a false statement an offence, while section 36(1)(a)(i) allows cancellation of a certificate obtained by misrepresentation.
Sources
- Investment Promotion Act 1992 — ss 1, 28, 29, 36, 36B, 40, 41, 43
- Companies Act 1997; Insolvency Act (Chapter 253)
Before relying on anything here, read the current text of the Companies Act 1997 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.