Insolvency Law at Nigeria
Nigeria's insolvency framework is primarily governed by the Companies and Allied Matters Act (CAMA) 2020, which introduced significant reforms to modernize corporate insolvency and business rescue mechanisms. These reforms are complemented by the Insolvency Regulations 2022, issued by the Corporate Affairs Commission (CAC), providing detailed procedural guidelines for insolvency proceedings. (Analysis Of Administration As A Business Recovery Mechanism Under The Companies And Allied Matters Act 2020. - Law and Society Magazine., INSOLVENCY REGULATIONS 2022 | Corporate Affairs Commission)
🏛️ Legal Framework
Companies and Allied Matters Act (CAMA) 2020: The principal legislation governing corporate insolvency in Nigeria.
Insolvency Regulations 2022: Issued by the CAC to provide detailed procedural guidelines for insolvency proceedings under CAMA 2020. (FG approves Insolvency Regulations for 2022 - Nairametrics)
⚖️ Key Insolvency Procedures
1. Company Voluntary Arrangements (CVA)
Description: An out-of-court process allowing a company to reach a binding agreement with its creditors to pay a portion of its debts over time.
Procedure:
The company proposes a CVA to its creditors.
If creditors approve, the CVA is binding.
The company continues operations while adhering to the agreed terms. (Emerging Trends in Insolvency Matters: A Review of the Insolvency Regulations 2022 - Forvis Mazars - Nigeria)
2. Administration
Objective: To rescue a company as a going concern.
Procedure:
An administrator is appointed to manage the company's affairs.
A moratorium is placed on legal actions against the company.
The administrator develops a proposal to rescue the company, which must be approved by creditors.
If the company cannot be rescued, the administrator may proceed with liquidation. (Analysis Of Administration As A Business Recovery Mechanism Under The Companies And Allied Matters Act 2020. - Law and Society Magazine., The Companies and Allied Matters Act 2020 - what you need to know - Businessday NG)
3. Receivership/Managership
Description: A process where a receiver or manager is appointed, typically by a secured creditor, to take control of the company's assets to recover debts.
Procedure:
The receiver or manager takes control of the company's assets.
The primary goal is to recover the debt owed to the appointing creditor.
The company may continue operations under the receiver or manager's supervision. (FG Approves Insolvency Regulations for Companies - KPMG Nigeria, Analysis Of Administration As A Business Recovery Mechanism Under The Companies And Allied Matters Act 2020. - Law and Society Magazine.)
4. Winding-Up
Types:
Voluntary Winding-Up: Initiated by the company's shareholders.
Creditors’ Voluntary Winding-Up: Initiated when the company is insolvent.
Winding-Up by the Court: Ordered by the court, often upon petition by creditors.
Procedure:
A liquidator is appointed to wind up the company's affairs.
Assets are sold, and proceeds are distributed to creditors.
The company is dissolved after the winding-up process is complete.
🧾 Accreditation of Insolvency Practitioners
Requirements:
A degree in law, accountancy, or a related field.
At least five years of post-qualification experience in insolvency matters.
Membership in a professional body recognized by the CAC.
Accreditation Process:
Submit a completed application form (CAC-MISC).
Pay the prescribed application fee.
Provide evidence of qualifications and experience.
Renewal: Accreditation is renewable every two years at no cost. (HIGHLIGHT OF THE INNOVATIVE PROVISIONS IN THE COMPANIES AND ALLIED MATTERS ACT, 2020 - Asalawpractice, Corporate Insolvency Under The Companies and Allied Matters Act 2020, Nigeria - Tekedia)
📌 Conclusion
Nigeria's insolvency framework, under CAMA 2020 and the Insolvency Regulations 2022, provides a structured approach to corporate insolvency, offering various mechanisms to address financial distress. These reforms aim to balance the interests of creditors and debtors, promote business continuity, and enhance investor confidence. However, challenges such as the need for further legislative clarity and efficient implementation remain. (Emerging Trends in Insolvency Matters: A Review of the Insolvency Regulations 2022 - Forvis Mazars - Nigeria)
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