New CBN Guidelines For Banks On The Treatment Of Dishonoured Or Dud Cheques – Bolanle Oduntan, Esq.
The Central Bank of
Nigeria has issued new guidelines to all banks on dishonoured or dud cheques.
It is instructive for individuals and businesses to understand these guidelines
which take effect from 28th June, 2016 and the consequence of issuing dud
cheques.
Nigeria has issued new guidelines to all banks on dishonoured or dud cheques.
It is instructive for individuals and businesses to understand these guidelines
which take effect from 28th June, 2016 and the consequence of issuing dud
cheques.
As reported in the media,
the CBN has installed additional regulatory measures against the issuance of
dud cheques by individuals and corporate customers in other to strengthen the
confidence and integrity of negotiable instruments issued within the country.
The key points to note in the new CBN Guidelines are that all banks are
mandated to;
the CBN has installed additional regulatory measures against the issuance of
dud cheques by individuals and corporate customers in other to strengthen the
confidence and integrity of negotiable instruments issued within the country.
The key points to note in the new CBN Guidelines are that all banks are
mandated to;
1.
Perform status check on all potential
customers to ensure they are not dud cheques issuers before granting credit
facilities to them or opening an account for them,
Perform status check on all potential
customers to ensure they are not dud cheques issuers before granting credit
facilities to them or opening an account for them,
2.
Forward the details of cheques issued by a
customers and returned “insufficient funds” whether presented over the
counter or through a licensed Credit Bureaux and the Credit Risk Management
System (CRMS) on monthly basis,
Forward the details of cheques issued by a
customers and returned “insufficient funds” whether presented over the
counter or through a licensed Credit Bureaux and the Credit Risk Management
System (CRMS) on monthly basis,
3.
Cancel all unissued cheque books of
customers who have issued dud cheques three (3) consecutive times or more
across banks, and
Cancel all unissued cheque books of
customers who have issued dud cheques three (3) consecutive times or more
across banks, and
4.
Prevent all inter-bank cheques issued by such
customer for a period of five (5) years.
Prevent all inter-bank cheques issued by such
customer for a period of five (5) years.
The guidelines also
provides that the details of offending customers will be listed in the database
for a period of five (5) years from the date of submissions after which the
name will be eligible for removal. Also subsequent default following a removal
of an offenders name from the list will attract a permanent listing of such
defaulter in the Credit Bureaux database and such defaulter can only be removed
from the listing with the approval of the Central Bank.
provides that the details of offending customers will be listed in the database
for a period of five (5) years from the date of submissions after which the
name will be eligible for removal. Also subsequent default following a removal
of an offenders name from the list will attract a permanent listing of such
defaulter in the Credit Bureaux database and such defaulter can only be removed
from the listing with the approval of the Central Bank.
It is also worth noting
that, the principal legislation criminalising the issuance of dud cheques
is the 1977 Dishonoured Cheques (Offences) Act. The rather
brief law makes it an offence for any person anywhere in Nigeria to induce
the delivery of any property or to purport to settle lawful obligations by
means of a cheque which when presented within a reasonable time is dishonoured
on the grounds that no funds or insufficient funds were standing to the credit
of the drawer of the cheque. This law has however been sparsely tested with the
sad consequence that there are professional debtors who obtain services under
the pretense that the cheques they issue will consequently be honoured by the
banks.
that, the principal legislation criminalising the issuance of dud cheques
is the 1977 Dishonoured Cheques (Offences) Act. The rather
brief law makes it an offence for any person anywhere in Nigeria to induce
the delivery of any property or to purport to settle lawful obligations by
means of a cheque which when presented within a reasonable time is dishonoured
on the grounds that no funds or insufficient funds were standing to the credit
of the drawer of the cheque. This law has however been sparsely tested with the
sad consequence that there are professional debtors who obtain services under
the pretense that the cheques they issue will consequently be honoured by the
banks.
The crux and key
provisions of the Dishonoured Cheques (Offences) Act are as follows:
provisions of the Dishonoured Cheques (Offences) Act are as follows:
1.
Section 1
of the Act makes it an offence to obtain delivery of goods or credit by means
of a cheque that, when presented for payment not later than three months
after the date of the cheque, is dishonoured on the ground that no funds or
insufficient funds were standing to the credit of the drawer of the cheque in
the bank on which the cheque was drawn;
Section 1
of the Act makes it an offence to obtain delivery of goods or credit by means
of a cheque that, when presented for payment not later than three months
after the date of the cheque, is dishonoured on the ground that no funds or
insufficient funds were standing to the credit of the drawer of the cheque in
the bank on which the cheque was drawn;
2.
An individual found guilty of this crime is
liable to imprisonment for two years, without the option of a fine;
An individual found guilty of this crime is
liable to imprisonment for two years, without the option of a fine;
3.
A body corporate found guilty of this crime
is liable to be sentenced to a fine of not less than N5,000. Note that a
minimum fine is prescribed by the law; a judge may apply discretion to increase
the fine applicable on a case by case approach; and
A body corporate found guilty of this crime
is liable to be sentenced to a fine of not less than N5,000. Note that a
minimum fine is prescribed by the law; a judge may apply discretion to increase
the fine applicable on a case by case approach; and
4.
The Act in Section 2 however
provides for the lifting of the corporate veil where the offence involves a
body corporate. It provides that “where the offence is committed by a body
corporate is proved to have been committed with the consent of or connivance
of, or to be attributable to any neglect on the part of any director, manager,
secretary or other similar officer, servant or agent of the body corporate (or
any person purporting to act in any such capacity), he, as well as the body
corporate, shall be deemed to be guilty of the offence and may be proceeded
against and punished in the same manner as an individual.”
The Act in Section 2 however
provides for the lifting of the corporate veil where the offence involves a
body corporate. It provides that “where the offence is committed by a body
corporate is proved to have been committed with the consent of or connivance
of, or to be attributable to any neglect on the part of any director, manager,
secretary or other similar officer, servant or agent of the body corporate (or
any person purporting to act in any such capacity), he, as well as the body
corporate, shall be deemed to be guilty of the offence and may be proceeded
against and punished in the same manner as an individual.”
For businesses in general,
one of the factors considered when investors seek out promising ventures to
invest in, is the creditworthiness of the business (and in some cases that of
it key principal actors such as directors and principal members). What
creditworthiness says about a company is a company’s ability to meet its
financial obligations and pay its debts and the main way to improve on
creditworthiness is to pay bills and meet financial obligations on time.
Issuing a dud cheque is certainly not a way to achieving this.
one of the factors considered when investors seek out promising ventures to
invest in, is the creditworthiness of the business (and in some cases that of
it key principal actors such as directors and principal members). What
creditworthiness says about a company is a company’s ability to meet its
financial obligations and pay its debts and the main way to improve on
creditworthiness is to pay bills and meet financial obligations on time.
Issuing a dud cheque is certainly not a way to achieving this.
At a time when direct and
foreign portfolio investment has plunged, importation of foreign capital
declined to a low of $647.1 Million in the 2nd Quarter of 2016 (according to Financial Times) and with the country officially in a
recession, it is important to note that future investments in Nigeria (when we
are able to come out of this recession) will come with even tougher scrutiny
and due diligence by investors, commercial banks and prospective business
partners.
foreign portfolio investment has plunged, importation of foreign capital
declined to a low of $647.1 Million in the 2nd Quarter of 2016 (according to Financial Times) and with the country officially in a
recession, it is important to note that future investments in Nigeria (when we
are able to come out of this recession) will come with even tougher scrutiny
and due diligence by investors, commercial banks and prospective business
partners.
The truth is that being a
serial debtor with an open display of opulence, is fast becoming an acceptable
trend. Start-ups looking to raise capital investment will among other
considerations undergo even greater scrutiny; not just the business
operations and financials but also its principal members to determine the
viability of prospective investments.
serial debtor with an open display of opulence, is fast becoming an acceptable
trend. Start-ups looking to raise capital investment will among other
considerations undergo even greater scrutiny; not just the business
operations and financials but also its principal members to determine the
viability of prospective investments.
Five years is a long time
to have an individual or a corporate entity listed as an issuer of dude
cheques, in other words, as a person or organisation that chronically does not
honour its financial and business obligations. A lot of business goodwill and
credibility can be lost within this period with deep financial consequences.
to have an individual or a corporate entity listed as an issuer of dude
cheques, in other words, as a person or organisation that chronically does not
honour its financial and business obligations. A lot of business goodwill and
credibility can be lost within this period with deep financial consequences.
Large businesses already
have internal credit rating systems, this move will go further by providing an
even larger pool of data to work with. Finally, this move by the CBN, coupled
with existing BVN infrastructure will ultimately help with a better enforcement
of existing laws as the appropriate prosecuting agencies will have a credible
list of offenders for prosecution.
have internal credit rating systems, this move will go further by providing an
even larger pool of data to work with. Finally, this move by the CBN, coupled
with existing BVN infrastructure will ultimately help with a better enforcement
of existing laws as the appropriate prosecuting agencies will have a credible
list of offenders for prosecution.
***
‘Bolanle Oduntan is a corporate lawyer, litigator and ADR
practitioner. He advises start-ups, SMEs, multinational companies and
provides legal support and expertise. He practices in Lagos the commercial
capital and business nerve center of Nigeria and indeed West Africa.
‘Bolanle Oduntan is a corporate lawyer, litigator and ADR
practitioner. He advises start-ups, SMEs, multinational companies and
provides legal support and expertise. He practices in Lagos the commercial
capital and business nerve center of Nigeria and indeed West Africa.
**
If you have any question about this post, please contact ‘Bolanle,
your solicitors or financial advisers.
If you have any question about this post, please contact ‘Bolanle,
your solicitors or financial advisers.
*
This article does not constitute legal or financial advice nor does it create a
contract between the reader and the writer.
This article does not constitute legal or financial advice nor does it create a
contract between the reader and the writer.
Ed’s Note – This article
was originally published here.
was originally published here.
Photo Credit – here
