NSSF arrears: Is it Sudhir’s liability or Crane Bank’s?

By Lawrence Kazooba

Reports that businessman Sudhir Ruparelia should personally pay up Sh52 billion for standard contributions of Crane Bank workers as well as penalties associated with not remitting the money is making a mockery of company law.

Uganda is experiencing unprecedented foolery as Crane Bank skeletons are getting back at the door steps of several offices in the small city of Kampala.

The head offices of the National Social Security Fund and Crane Bank in Kampala are technically on different streets, but, actually, they are a stone throw away from each other. Actually they are less than a kilometer from each other.
However, documents presented to the commercial court indicate NSSF failed to collect up to Sh7.5 billion from Crane Bank over the years and now want the bank’s former owner, Sudhir Ruparelia to personally pay, albeit with unprecedented penalty that would give any business person a heart attack if it was slapped on them.

Watchdog understands, although NSSF was mandated by law to collect benefits for employees, there was no whistleblower that Crane Bank was not paying its fair share for its workers and neither did NSSF ever take Crane Bank to court for failing to remit money owed to the Fund.

Now NSSF, under Bank of Uganda suit, claims that for not paying Sh7.5 billion, Sudhir should personally pay a penalty of Sh39.8 billion, with an interest of sh4.5 billion, which brings the total amount to Sh52 billion NSSF wants from the businessman.

The move makes a mockery of company law which separates human persons from companies, and so are their liabilities, according to company lawyers.

NSSF should as a matter of fact pay its workers obligations but the bank which reportedly was given to DfCU at no cost, should be facing up to this obligation.

According to respected law website, www.lawteacher.net, “a company is a separate legal entity as distinct from its members.”

It explains that, “A company is a separate legal entity as distinct from its members, therefore it is separate at law from its shareholders , directors , promoters etc and as such is conferred with rights and is subject to certain duties and obligations.

“These central principles of company law were first laid down in very clear terms by the House of Lords in the case Salomon v Salomon & Company Ltd [1897] AC 2 .

“The ruling outlined in part in the quoted text of the assignment from Lord Macnaghten’s ruling has several important consequences, not least that where the liability of the members is limited, they cannot, only in exceptional circumstances be held liable for the companies debts.

“Under the concept of Limited liability the owners of the company under normal circumstances, are not answerable or responsible for the obligations of the company therefore making the owners/ shareholders liable only for the amount of their unpaid shares and not the obligations of the company.

“The principle from the Salamons case firmly established that a company has a separate legal identity to that of its shareholders and has been applied over a wide range of cases.”