The Stabroek News recently carried an article which centred around a legal opinion that was given on the applicability of Article 216 of the Constitution to the National Industrial and Commercial Investments Ltd. (NICIL). The opinion argued that this article does not apply to NICIL since it is a company separate and distinct from the Government. As such, NICIL has no duty to pay over moneys into to the Consolidated Fund. It further 
argued that “…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.”
Today, we offer some clarifications vis-a-vis the opinion issued some 16 days after the submission of the draft forensic audit report to NICIL for comments. In that report, it was stated that during the period 2002-2014 NICIL violated Article 216 of the Constitution by retaining and treating as its revenue amounts totalling $26.858 billion representing mainly proceeds from dividends from public corporations/companies and the sale of State assets. It is unclear why such an opinion was not sought 14 years earlier when NICIL chose to effect a changed arrangement in relation to such proceeds which, for the first 11 years of NICIL’s its operations, were paid over to the Consolidated Fund.
Legal status of NICIL
NICIL was incorporated under the Companies Act 1991 on 18 July 1990 as a private limited liability company. The word “private” in this context does not suggest that NICIL is in no way connected with the Government. It simply means that there are restrictions on the transferability of shares, unlike public companies, such as Banks DIH Ltd., where shares are freely transferrable. Section 344 of the Companies Act defines a Government company as one in which not less than 51% of the paid-up share capital is held by the Government and includes a company which is a subsidiary of a Government company. Since the Government owns 100% of the shares in the company, NICIL is a Government company.
NICIL is not a public corporation. However, by Section 66(1) of the Public Corporations Act 1988, the President has issued an order dated 18 July 2000 making Section 5 of the Act applicable to NICIL. That section provides for the vesting in a public corporation movable and immovable property. The Act does not define “property”. Therefore, we must seek guidance from the Fiscal Management and Accountability (FMA) Act which defines public property as “all property, other than moneys: (a) belonging to or under the control of the State; and (b) in the custody of or under the control of any person acting for or on behalf of the State in respect of that property, including all property that is held by the State in trust for, or otherwise for the benefit of, any other person”. As discussed below, State assets vested in NICIL fall in category (b).
NICIL’s interpretation of its mandate: 1991-2001
According to its incorporation documents, NICIL’s main objective is “subscribing for, taking or otherwise acquiring and holding shares, stocks, debentures or other securities of any company, co-operative society or body corporate. At NICIL’s second board meeting of 25 July 1991, the authority of NICIL was clarified as follows: (a) to advise the Government on the disposition of shares it holds in corporations/companies; (b) to establish a communication link with all corporations/companies in which Government has shares; and (c) to act as “watchdog” on what is happening to shares owned by Government and recommend to it steps to be taken. NICIL’s holding of shares in public corporations/companies is one that reflects an agency or custodial relationship on behalf of the Government within the meaning of the FMA Act. It does not connote ownership, considering that there was no exchange of value, and the Government’s vesting orders must be viewed in the nature of a Power of Attorney (POA). In the same way that the proceeds from the disposal of an asset via a POA belong to the real owners and not the holder of a POA, so it is with the Government’s interest in public corporations/companies.
NICIL’s authority was further articulated in a correspondence dated 25 October 1995 from the Executive Secretary of NICIL in which he stated that: (a) the mandate of NICIL was one of facilitating a unified and systematic management of Government shareholdings; and (b) with the establishment of the Privatisation Unit in 1993, NICIL’s role was confined to supplying available information on state-owned Enterprises to the Privatisation Unit, and to the collection of dividends from Corporations/Companies in which the Government held shares and paying same over to the Accountant General.
During the period 1991 to 2001, NICIL collected $3.415 billion in the form of dividends from public corporations/companies, disposal of State assets and special transfers from public corporations. These were transferred to the Consolidated Fund, and NICIL met its cost of operations from annual subventions received through the National Budget. This practice was consistent with the NICIL’s board interpretation of its mandate, as articulated by its Executive Secretary. It also attracted no adverse comments from the then Auditor General in his reports on the accounts of NICIL during this period.
Mr. Carl Greenidge, the Minister of Finance at the time NICIL was incorporated, confirmed that the intention behind the establishment of NICIL was consistent with the Board’s and the Auditor General’s understanding of NICIL’s mandate. He explained that NICIL was formed to take over some of the responsibilities of the Public Corporations Secretariat, since the Public Corporations Act of 1988 had dissolved the Guyana State Corporation of which the Secretariat was part. Those responsibilities were essentially to monitor the performance of public corporations and to ensure that all dividends received, divestment proceeds and other returns were paid over to the Consolidated Fund.
NICIL’s interpretation of its mandate: post 2001
On 28 December 2001, a Management Cooperation Agreement between NICIL, the Privatisation Unit and the Government was entered into for: (a) the Privatisation Unit to provide management and administrative services to NICIL; and (b) the Head of the Privatisation Unit to assume the position of Executive Director of NICIL. At its first meeting held on 11 July 2002 after the Agreement was entered into, NICIL’s Board discussed the issue of matching costs with revenue and took note of the following:
Dividends by any equity holding should be paid over directly to the Treasury;
Privatisation funds should be held by NICIL, and out of these proceeds all privatization-related expenses could be met, including repairs and upgrades to buildings, and the balance transferred to the treasury; and
All administrative costs relating to the operations of NICIL should be met by way of subvention.
At the said meeting, the Executive Director stated that at his last meeting with the then President, the President had expressed an interest in NICIL continuing to receive subvention from the Treasury and for all dividends received from public corporations to be paid over in full to the Treasury. The former Minister of Finance and the then Budget Director, indicated his agreement with the President and stated that “dividends stated in the reports by Public Enterprises should equal to dividends received by NICIL and paid over to the Treasury”. This he said, would assist in the IMF stipulation which states that the dividends received should match the amount shown as going to the Treasury. He went on to state that “along with dividends received lease payments should also be paid over fully to the Treasury”.
At NICIL’s board meeting of 2 June 2003, the Executive Director reported that all dividends received were being paid over to the Treasury. He stated that: (a) prior to 2002, the company was acting as a “post office”; (b) the objective was to make NICIL a properly functioning holding company; and (c) there would be consolidated accounts with effect from 2002. The Board did not take a position with regard to Executive Director’s statement. NICIL, however, argued that since the financial statements were signed by three directors, this was evidence of board approval. Would such a major transformation of the operations of NICIL not require a specific board approval?
At NICIL’s Board meeting of 21 July 2003, the Executive Director stated that based on a suggestion from the Director of Budget to cut the expense of the Treasury, NICIL would continue to have its budget but could have money from proceeds of NICIL to finance day-to-day operations of the Office. In addition, at its board meeting of 28 August 2003, Executive Director stated that as dividends were received, they were paid over to the Government. He drew attention to the high cash balances NICIL was carrying and further stated that NICIL “needs to identify at what point transfer should be made to the Government… if strategic objectives for NICIL were developed that included facilitating investment, by leveraging the use of NICIL assets, in say the Berbice Bridge, then this would affect what NICIL did with said funds”.
At its 23rd meeting of 12 March 2010, the question was raised whether the audited accounts of NICIL could be tabled in the National Assembly without annual reports. Section 346 of the Companies Act 1991 was referred to, which states that the Minister may prescribe the level of detail in which financial statements of Government companies can be presented. The minutes recorded the then Head of the Presidential Secretariat (HPS) as having expressed concern about whether this provision might be in conflict with budget laws. He advised that budgetary laws should be made applicable.
Despite the Board’s view on the matter and the assurances given by the Executive Director, for the period 2002-2014, NICIL received amounts totalling $26.858 billion representing dividends from public corporations as well as privatization proceeds which it retained and treated as its revenue.
NICIL and Article 216 of the Constitution
Article 216 of the Constitution (renumbered as 217) states that “All revenues or other moneys raised or received by Guyana …shall be paid into and form one Consolidated Fund”. Section 38 of the FMA Act repeats this requirement and defines “Government receipts” as “moneys and other assets received by or owing to the State, including, among others: (a) dividends and profit-sharing paid to the State by public enterprises, statutory bodies and the Bank of Guyana; (b) proceeds from the sale or lease of any public property; and (c) interest earned on the investment of assets of the State”.
The National Budget reflects two revenue standard line items: (a) dividends and transfers from non-financial institutions, equity holdings and Bank of Guyana profits; and (b) sale of assets. This, along with Article 216 and the FMA Act’s definition of “public property”, clearly suggest that proceeds from dividends from public corporations/companies and the sale of State assets are “revenues and other moneys raised or received by Guyana” as well as “Government receipts”. Notwithstanding that NICIL is a company separate and distinct from the State, it nevertheless acts as an agent of the State in respect of all property vested in it. There is no question of ownership but rather one of a custodial relationship for such property. This is why both Cabinet and the Minister of Finance have to approve of the vesting of property in NICIL as well as their disposal within the framework of the Privatisation Policy Framework Paper. Accordingly, such proceeds are required to be paid into the Consolidated Fund, and the failure to do so constitutes a serious breach of Article 216 of the Constitution and Section 38 of the FMA Act.
