Part VII of the Investment Promotion Act 1992 contains the enforcement provisions, and they are unusually severe for a promotional statute.
Section 41 — the principal offences
(a) carries on business without a certificate under Part IV or Part IVA; or
(b) carries on business in an activity reserved for a citizen; or
(c) carries on business in an activity reserved for a national enterprise; or
(d) subject to section 36G, acquires or holds a relevant interest in a citizen or national enterprise without a certificate; or
(e) fails to comply with the terms or conditions of a certificate,
is guilty of an offence. Penalty: a fine not exceeding K100,000. Default penalty: a fine not exceeding K10,000 for each day the offence continues.
Section 41 does not create a derivative or secondary liability. The offence is committed by the foreign enterprise and an officer or owner of it.
Read with sections 28(4B) and (4C) — under which any shareholding makes a person an owner, control alone suffices, and indirect and informal arrangements count — the class of persons exposed is wide.
The default penalty is what makes the exposure serious. K10,000 a day is K3.65 million a year, and an uncertified enterprise commits a continuing offence for as long as it operates.
| Provision | Who | Conduct |
|---|---|---|
| s 41(1) | Foreign enterprise + officers + owners | The five matters (a) to (e) above |
| s 41(1A) | National enterprise + owners + officers | Selling, transferring or disposing of a relevant interest to a foreign enterprise before it obtains a Part IVA certificate |
| s 41(2) | National enterprise + officers, members, shareholders, owners | Carrying on business in an activity reserved for a citizen |
Each carries the same penalty: K100,000, with a K10,000 daily default penalty.
Sections 41(3) and (4) — the evidentiary provisions
In a prosecution under this section, the burden of proving that a foreign or national enterprise —
(a) was not carrying on business; or
(b) was lawfully carrying on business under section 27(5) and (6); or
(c) was carrying on business only for the purpose of winding-up its affairs,
is on the enterprise.
A certificate purporting to be signed by the Managing Director stating that, on a specified date or during a specified period — a term of a certificate had not been complied with; an enterprise was carrying on business; or a foreign enterprise was not certified — is prima facie evidence of that matter.
The Authority proves its case by tendering a certificate under section 41(4). The enterprise must then prove that it was not carrying on business, or was grandfathered, or was only winding up.
The practical lesson is documentary: keep records of when an activity began, of certification and any section 36(3) winding-up permission, and of the scope of operations.
Section 41A — contracts unlawful and void
Where a contract, agreement or understanding is entered into between a foreign enterprise and another enterprise and —
(a) that foreign enterprise had not been issued a certificate at the time the contract was entered into; or
(b) the subject matter relates to business activities outside the nature of the activities for which the foreign enterprise is certified,
the court may, on the application of that other enterprise or of the Authority, declare the contract unlawful and void.
The application may be made by the counterparty. So a party that no longer wishes to perform has a statutory route to escape, if the foreign enterprise was uncertified or acting outside its certified activity.
That is a strong reason to search the Register of Certificates before contracting, and to take a warranty from any foreign counterparty that it holds a current certificate covering the contract activity.
Sections 41B, 42 and 43
| Provision | Conduct | Penalty |
|---|---|---|
| s 41B | Any contravention or failure to comply with the Act for which no other penalty is provided | K25,000 or two years’ imprisonment, or both; default K2,500 per day after conviction |
| s 42(5) | Refusing or failing, without reasonable excuse, to furnish information or produce books or records required by notice; or furnishing false or misleading information | K10,000; default K1,000 |
| s 43 | Making a statement or giving information false or misleading in a material particular, without reasonable excuse | K50,000 |
It is the only provision in the Act carrying imprisonment. It captures every obligation without its own penalty — including the duty under section 28(2A) to notify an alteration within one month.
Section 42 also gives the Authority an information power: where it is of the opinion that information, books or records are relevant to its functions, it must issue a written notice specifying them and the place and time for production. Subsection (4) preserves any law requiring material to be kept confidential, and subsection (6) provides a defence that the material was not relevant or was not in the person’s possession or control.
Section 42(7) deems a notice served if delivered personally or posted to the address supplied to the Authority — which is a further reason to keep that address current.
Section 44A — prosecutions and cease orders
- The Authority may prosecute any offence against the Act — s 44A(1).
- Actions are heard by the National Court — s 44A(2).
- Costs may be awarded against any party other than the Authority, and recovered as a debt to it — s 44A(3).
- The Court may, on the Authority’s application, order an enterprise to cease the activity in the location until further order — s 44A(4).
- Such an order is made on condition that the Authority is not responsible for any loss of income or profit resulting from it — s 44A(5).
- Fines are paid to the Authority and recoverable as a debt to it — s 44A(6).
Section 44A(4) and (5) together are significant: the Authority can obtain an interlocutory order stopping the business, without exposure to a damages undertaking of the usual kind.
Section 44B requires the Authority to protect information given to it in confidence, treating as authorised any disclosure required or permitted by law or by a court, or made by staff and Board members in performing their functions. Section 44 is the general regulation-making power, permitting Regulations to prescribe fees and penalties up to K10,000 with default penalties up to K1,000.
Sources
- Investment Promotion Act 1992 — ss 27, 28, 36, 36G, 41–44B
- Companies Act 1997
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.