Introduction

With businesses around the world severely impacted by the Covid-19 pandemic, many may require some form of restructuring in the near future. Even before the pandemic, several sectors in the Nigerian economy were primed for reorganisation, either to meet regulatory requirements, maximise performance or stay afloat, increase economies of scale, increase market share or diversify the company’s business.

While mergers and acquisitions remain the most popular form of corporate restructuring, there are other methods of corporate reorganisations.

Introduction

Introduction

The Federal High Court Lagos ("FHC”), delivered a ruling in Suit No.: FHC/L/CP/540/2012 RRSAT Global Communications Networks Limited v Daar Communications Plc, affirming its jurisdiction to hear a petition for the winding up of a company despite a clause in the parties’ agreement to submit disputes between the parties to a foreign court.

The facts of the case

One of the challenges currently faced with Nigeria’s standing in relation to international trade is the adequacy of the country’s insolvency laws and regulations on cross-border insolvency. Trade has taken an international dimension over the decades, a corporation in one country will have interests – goods, assets, employees and claims in other countries. During the life of a company and as it continues to trade, there is the likelihood for the company to fail such that its liabilities far exceed its assets and it goes insolvent.

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Position of creditors

Forms of security

What are the main forms of security over moveable and immoveable property and how are they given legal effect?

In Nigeria, the main forms of such security are as follows:

Legal framework

Legislation

What is the primary legislation governing insolvency and restructuring proceedings in your jurisdiction?

There is no primary or standalone legislation governing insolvency and restructuring in Nigeria.

However,  legislations governing insolvency and restructuring include:

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Liquidation procedures

Eligibility

What are the eligibility criteria for initiating liquidation procedures? Are any entities explicitly barred from initiating such procedures?

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Cross-border insolvency

Recognition of foreign proceedings

Under what circumstances will the courts in your jurisdiction recognise the validity of foreign insolvency proceedings?

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Position of creditors

Forms of security

What are the main forms of security over moveable and immoveable property and how are they given legal effect?

Pledge

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Director and parent company liability

Liability

Under what circumstances can a director or parent company be held liable for a company’s insolvency?