On Friday, Aug. 7, 2020, President Muhammadu Buhari assented to the Companies and Allied Matters Bill, recently passed by the National Assembly of the Federal Republic of Nigeria. [1] The bill introduced significant insolvency reforms, including procedures for Administration and Company Voluntary Arrangements, as well as regulations for Insolvency Professionals. The reforms were introduced to align the jurisdiction with international best practices.
Administration
The Companies and Allied Matters Act (CAMA/Act) introduced the concept of administration to the jurisdiction. The Act empowers the administrator to do all such things as may be necessary for the management of the affairs, business and property of a company. The Act further acknowledges that an administration may have a cross-border element and essentially provides that where such is the case, an application needs to be made to the Court for approval.
The administrator may be appointed by the court, a holder of a floating charge, the company or its directors. Upon appointment, the administrator has 60 days to prepare a detailed schedule of the assets of the company and file a report with the court. The court may make an administration order only where it is satisfied that the company is likely to become unable to pay its debts and the administration order is likely to achieve the purpose of administration. The pioneer administration application in the country was granted by the court in Suit No: FHC/L/CS/140/2022-Imperial JV (in administration).
Company Voluntary Arrangements
Under the Act, a company’s directors may make a proposal to the company’s creditors to satisfy its debts. The proposal shall provide for a nominee who would be responsible for supervising the implementation of the proposal. Within 28 days of the appointment, the nominee shall submit a report to the court stating whether meetings of the company and its creditors should be summoned to consider the proposal. After the conclusion of the meeting, the chairman of the meeting shall report the outcome of the meeting to the court. The pioneer CVA application in the country was undertaken by Tourist Company of Nigeria in 2021 in Suit No: FHC/L/CS/1250/2021- Re Seyi Akinwunmi & Okorie Kalu.
Regulation of Insolvency Professionals
The Act introduces qualifications for insolvency professionals (IP) in Nigeria. Section 705 of the Act provides that an IP shall have a minimum of five years post qualification experience in matters relating to insolvency, authorized to act by virtue of a certificate of membership by the Business Recovery and Insolvency Practitioners Association of Nigeria (BRIPAN), must hold an authorization granted by the Corporate Affairs Commission, and must possess a degree in law, accountancy or any relevant discipline from a recognized university.
Conclusion
The insolvency reforms under CAMA have moved the jurisdiction from a creditor-friendly jurisdiction to a debtor-friendly jurisdiction. Prior to the amendment of the Act, a company could be wound up for a debt as low as NGN2,000 (approximately USD$4.50). However, the reform has now provided an opportunity for companies to restructure debt in line with international insolvency practices.
[1] Vanguardngr.com-Senate commends Buhari for assenting to the CAMA bill on Aug. 8, 2020. The law is yet to be gazetted, and by extension there is uncertainty regarding its commencement date, although it is expected that this would be done shortly. The content of this article is the view of the author and not necessarily that of the firm, and it is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
