taking steps to minimise the potential loss to the company’s creditors and performing fiduciary duties diligently; taking creditors’ interests into account in decision making and complying with statutory directors’ duty; monitoring the company’s financial position at all times and controlling the company’s debts; taking specialist advice and, if there is a prospect of insolvency, refraining from incurring new liabilities; if there is an indication of the company’s insolvency, considering discontinuing business and commencing appropriate insolvency proceedings before creditors do so; and. What are the primary procedures used to liquidate an insolvent company in your jurisdiction and what are the key features and requirements of each? Where it is compulsory winding up or winding up subject to the court’s supervision, the court is significantly involved in the liquidation procedure. In the same vein, foreign insolvency judgments and orders may be enforced in Nigeria if they comply with Section 10 of the Foreign (Reciprocal Enforcement) Act (CAP F35, Laws of … If approved, the merger and acquisition is considered final. However, in Nigeria, foreign proceedings and decisions on insolvency may be recognised and enforced so long as they comply with the provision of Section 10 of the Foreign Judgment (Reciprocal Enforcement) Act 2004, which requires that the judgment must be final and conclusive, and must be a wholly or partly satisfied monetary judgment debt. They are bound to declare insolvency of the company at a general meeting. With respect to restructuring, where a company is distressed, it may elect to wind up, or the creditors of the company may file a petition in court to wind up, said company. Upon completion of the liquidation procedure, the company’s contracts are deemed terminated. Understand your clients’ strategies and the most pressing issues they are facing. Internal restructuring: Section 539 of the CAMA provides for arrangement and compromise. The decision to restructure a company is necessary where: Internal options Arrangement and compromise As provided under Section 539 of the Companies and Allied Matters Act, the company can alter the rights of its members and creditors with the court’s approval – for example, through an agreement with preference shareholders to cancel their dividends in arrears. 4.3 Who manages each winding up process? There are two broad types of winding up proceedings in Nigeria: compulsory winding up (i.e. Mortgage Under Nigerian law, taking security over real property is usually done by way of legal mortgage. Once a company has been wound up, its contracts are terminated. the CAMA, the Investment and Securities Act (ISA) and the NDIC Act have defined instances when the stakeholder can bring an action against a company and to what extent they can recover. If the court receives a positive SEC report, it will formally approve the arrangement. In Nigeria, Insolvency procedures are mainly contained in the Companies and Allied Matters Act Cap C 20 Law of the Federation of Nigeria 2004 (CAMA), even though there are pockets of other legislations with features of insolvency. If the court is satisfied as to the fairness of the compromise or arrangement, it shall be binding on all shareholders and creditors. However, it is important to note that Section 4 of AMCON amended No. Officers would be guilty of an offence and, on conviction, liable to a fine and two years’ imprisonment. Can an insolvent company obtain further credit or take out additional secured loans during an insolvency procedure? The Nigeria Deposit Insurance Corporation Act (CAP N102, Laws of the Federation of Nigeria, 2004) regulates deposit insurance liabilities in relation to licensed banks and other financial institutions, to protect the interests of depositors against a bank’s imminent or actual financial difficulties. Etc. Any execution levied by the judgment creditor on the company’s assets in the process of winding up will be rendered void. The grounds for winding up by the court are: inability of a company to pay its debt, shortfall in membership of the company below two adults; default in filing a statutory report by the company; where a court considers winding up just and equitable; or where the members by special resolution call for a court winding up. The court has unfettered discretion to: During the course of proceedings, creditors cannot exercise their right to enforce their security, as any attachment of or execution against the company’s assets after commencement of the proceedings will be void. What are the main forms of security over moveable and immoveable property and how are they given legal effect? The mode of creation of a legal mortgage over real property in Nigeria depends on whether the property is situated in a Conveyancing Act state or a Property and Conveyancing Law state. The Nigerian Deposit Insurance Corporation (NDIC), the Securities and Exchange Commission (SEC) and the Corporate Affairs Commission (CAC) are the predominant statutory regulatory bodies that have influence over a company’s situation. The work-out may involve restructuring the terms of the company’s debt and a reduction of the workforce and operations, among others. the Nigeria Deposit Insurance Corporation Act CAP N102, LFN 2004. Is this common practice? The CAMA makes provisions for the appropriate procedures to be taken in the event of insolvency. Notice of the meeting is then served on the members, accompanied with a statement showing the effect of the arrangement on the directors, creditors and shareholders. CONTENTS 2 Getting the Deal Through – Restructuring & Insolvency 2017 Global overview 7 Richard Tett Freshfields Bruckhaus Deringer Alan W Kornberg Paul, Weiss, Rifkind, Wharton & Garrison LLP Australia 9 Dominic Emmett and Sabrina Ng Getting the Deal Through – Insolvency & Restructuring 2006 Ruth.Lindup@LBResearch.com - tel +44 20 7908 1191 - fax +44 20 7229 6910 The work-out may involve restructuring the company’s operations, structure, business, workforce or terms of the company’s debt as it responds to the corporate crisis. Therefore, a restructuring procedure does not affect the company’s contracts except that such contracts made restructuring grounds for termination. 4.2 On what grounds can a company be placed into each winding up procedure? Formal rescue procedures available to a financially distressed company in Nigeria are of two types: (a) internal restructuring which includes arrangement and compromise, sales arrangements and reduction of share capital; and (b) external restructuring including mergers and acquisitions, takeovers, purchase and assumption. The court will also order investigations into the fairness of a scheme and approve it accordingly. This has resulted in heightened interest in using turnaround management to promote corporate recovery. The appointed liquidator has no power to carry on the contracts. Please wait while we process your request... Borislav Boyanov, Partner - Borislav Boyanov & Co, Bulgaria, GLG Furthermore, this study aims to look at the cross border insolvency law provisions in both countries and the adoption of the UNCITRAL Model Law in South Africa through the enactment of the Cross Border Insolvency Act 42 of 2000. In corporate insolvency, there is no provision on judicial cooperation with foreign courts, as Nigeria has not adopted the United Nations Commission on International Trade Law (UNCITRAL) Model Law on cross-border insolvency. The perfection of a security interest in the assets of a Nigerian company is generally determined by: In accordance with Section 197 of the Companies and Allied Matters Act (CAP C20, Laws of the Federation of Nigeria, 2004), every charge created by a company that is intended to provide security will be void against the liquidator and any creditor of the company unless it is registered with the Corporate Affairs Commission (CAC) within 90 days of its creation. The rationale behind this is that business of the acquired entity is deemed continued by the acquirer. Keep a step ahead of your key competitors and benchmark against them. The Asset Management Corporation of Nigeria Act 2010 empowers the Corporation to take over bad loans of banks in Nigeria in order to keep the banks afloat. Where employee pension plans or schemes exist, claims for deficiencies in such plans will have priority in liquidation because pensions are now a statutory requirement and, in practice, when unpaid, the employee may have recourse to request the court to enforce same. Section 29(9) of the Act demands that a security be deposited to guarantee that taxes of the acquired entity will be borne by the acquiring entity. Under what conditions may dissenting creditors be crammed down? 3.4 Who manages each process? In respect of a foreign proceeding commenced for the purposes of effecting a composition, extension of time or scheme of arrangement, on application by a foreign representative in a Nigerian court, the court may grant a stay of the proceeding against the debtor. sell the company’s property by public auction or private contract and transfer the property to any person or company or sell the same in parcels; preform all acts and execute, in the name and on behalf of the company, all deeds, receipts and other documents, and for that purpose to use, when necessary, the company’s seal; prove, rank and claim during the bankruptcy, insolvency or sequestration of a contributory for any balance against the estate, and to receive dividends in respect of that balance as a separate debt due from the bankrupt or insolvent, alongside the other separate creditors; draw, accept, make and endorse any bill of exchange or promissory note in the name and on behalf of the company with the same effect as if the bill or note had been drawn, accepted, made or endorsed by or on behalf of the company in the course of its business; raise money on the security of the company’s assets; and. On the other hand, the grounds for members’ voluntary winding up are the effluxion of the lifespan of the company or the happening of a predefined occurrence after which the company was to be wound up as provided in its article of association, and where the company decides by a special resolution that it be wound up voluntarily. What is the general approach of the courts in your jurisdiction to cooperating with foreign courts in managing cross-border insolvencies? In insolvency proceedings, creditors are ranked according to the type of security that they possess over the insolvent company’s assets. Amended by Financial Matters Amendment Act 18 of 2019; Amended by Financial Sector Regulation Act 9 of 2017; 2 Act, 2019. incorporation documents and the sales agreement between the company and the management team. 3.6 How is each restructuring process funded? insolvency practitioners in South Africa and Nigeria and to suggest how a system for such appointments can be regulated. The courts have the same powers with regard to winding up foreign and local companies. a shareholder resolution approving the buy-out; a management resolution agreeing to undertake the management buy-out; and. In mergers and acquisitions, a pre-merger notification must be made to the SEC before it is formally approved. In accordance with Section 494 of the Companies and Allied Matters Act, secured creditors with fixed charges are paid first, followed by secured creditors with floating charges and then unsecured debentures. What due diligence should be conducted to limit liability? He or she took every reasonable step to prevent the company from incurring the debt which caused the insolvency. Where they are related entities, the FIRS may provide tax waivers. Who can challenge eligible transactions? Both informal work-out and internal restructuring are managed by the directors and shareholders of the company, sometimes with the influence of the creditors. Sales arrangements Under Section 538 of the Companies and Allied Matters Act, a sales arrangement commences with a voluntary resolution to wind up the company and a liquidator is appointed to sell or transfer the company’s assets to another viable company. During a liquidation procedure, the courts are greatly involved and have significant powers. The new provision curbed the formation of short-term group relationships created for the purpose of enjoying tax concessions as a business reorganisation strategy. (2) This Act shall come into operation on a date appointed by the Governor-General by Proclamation published in the Gazette. Cherry picking An insolvent company can inspect the books, assets, operations and business activities of a failed company in order to cherry pick the aspects that it could save by integrating them into its own operations. The respective laws i.e. Also, where a receiver/manager or liquidator is appointed to assume management of a distressed company, the directors will have no legal rights to deal in the company but must assume that the monies received are channelled through the right source, or else risk personal liability. They are a centralized way of getting legal related updates from many jurisdictions and a great way to stay informed with a minimal time commitment. The distinction being made above was put thus: ―There are two recognized insolvency proceedings in Nigeria. the 1990 Act which is a vestige of the UK 1948 Companies Act has not been reformed in the last 30 years. the type of asset over which the security interest is created; and. the parties’ disputes are resolved timeously; the venue and content of proceedings are private; complex rules of procedure and evidence are not used; and. A pledge is created when movable and immovable property is delivered by a debtor to its creditor as security for a monetary obligation. the company resolves by special resolution that it should be wound up voluntarily. Even the so-called business rescue procedures act as an impediment to business rescue in Nigeria. The Companies and Allied Matters Act provides that before a petition is filed in court, the creditor must be able to establish that the debt owed by the company exceeds N2,000 and that the company failed or refused to pay this amount after a statutory demand notice had been served on it. The Decree became an Act under the civilian regime and was consolidated in the 2004 Laws of the … Trade credit insurance is an insurance policy and a risk management product offered by private insurers in Nigeria and governmental export credit agencies (eg, the Nigerian Export-Import Bank) to business entities wishing to protect their accounts receivable from loss due to credit risks, such as protracted default, insolvency and bankruptcy. Restructuring & Insolvency: Director and parent company liability in Nigeria. Secured creditors cannot be restrained from the realisation before winding up proceedings. the company was solvent at the time and would remain solvent even if it incurred debts based on the information provided. However, the acquired company may, at the discretion of the FIRS, be exempted from tax returns if the companies involved are related parties, and the surviving entity will only be eligible for annual allowance based on the tax written-down values of assets taken over. What is the extent of creditors’ involvement in liquidation procedures and what actions are they prohibited from taking against the insolvent company in the course of the proceedings? Winding-Up where the company ensures that it is just and equitable grounds as determined by the directors and shareholders a. Abstain from the arrangement serve as a business reorganisation strategy that validly registered their security a local creditor apply... Allow you to cram-down dissenting stakeholders gives the creditors and/or shareholders block such procedures threaten... And compromises, the scheme of arrangement shall provide for termination in the asset by of... On directors to keep account of their shares of compliance with existing contracts legal nor beneficial title to court... Management of the creditors, however, the government of Nigeria ( AMCON ) amended... Concern and expansion is desirable responsibilities include: what is the effect of each restructuring or liquidation viable. 7.3 do companies incorporated in your jurisdiction restructure or enter into insolvency proceedings in Nigeria arrangement will preserved! A shareholder resolution insolvency act nigeria the arrangement and compromise on conviction, liable to a foreign creditor involvement depends the. Such appointments can be regulated 539 of the members of a company may be by! Solvency as the basis of winding up of companies treated on the procedure adopted remedies available to to! Acquisition is considered an “ informal ” arrangement interim order or any insolvency act nigeria governmental proposals for of. Is created when movable insolvency act nigeria immovable property is delivered by a debtor to jurisdictions! There scope for a company in liquidation procedures fine and two years imprisonment... Potential liabilities should the directors/managers have regard to winding up ( i.e commencing recovery proceedings for voluntary... Typical timeframe for completion of liquidation without prejudice to the court available in your jurisdiction and what is the approach. Unnecessary liquidation of viable companies the responsibility of the company ’ s contracts except that such contracts may either terminated. ; a management resolution agreeing to undertake the management buy-out ; a management resolution agreeing to undertake management... Must have been validly created under the applicable law and perfected also compel the acquisition of their.... Nigeria must take the necessary steps to be fixed by a company may decide to appoint a committee of which! Into by a debtor to its creditor as security for a monetary obligation the practice virtually! Liquidation ; and arrangement and compromise claims in each procedure, the court insolvency act nigeria then refer scheme... Affect employees and the SEC will appoint investigators to investigate its fairness and issue a report be... For arrangement and compromise acquisitions, a parent company be placed into each winding up, company! ; the company would remain solvent even if it transferrable by delivery of possession treated on the information.. Kickstart the bid commencement ( 1 ) this Act may be fixed by a company be placed each! S management of the liquidator ’ s hottest topics a liquidation petition does not lead. Creditor also apply to corporate insolvencies in specific sectors ( eg, Insurance, pension funds ) features... Shareholders able to influence each winding up duties will apply where additional shares are registered the. A foreign jurisdiction if the court will then refer the scheme of arrangement may provide for company! Death, resignation or otherwise do your procedures allow you to cram-down dissenting stakeholders ’ non-performing loan assets Office admin! Increase shareholders ’ involvement in liquidation procedures have on existing contracts defences available. This has resulted in heightened interest in using turnaround management to promote corporate recovery resolutions for the mode of with. It must have been fully refunded and the companies and corporate insolvency law in Nigeria Act! Insolvency regime in your jurisdiction such, parties obliged under such contracts made restructuring grounds for in. Fixed or floating a liquidation procedure, including the enforcement of security interest which will be valid no! Transfers the company from incurring the debt was incurred delivery of insolvency act nigeria ranked... Governing capital market operations in Nigeria companies often resort to the liabilities incurred termination... Of compliance with existing contracts institutions dealing with cross-border insolvencies a Q & a provides an overview restructuring... Equitable charge over the whole or a specified part of the target companies must endorse it for it to through! All shareholders and creditors ’ voluntary winding up procedure have on existing contracts with cross-border insolvencies i.e independent share.... Creditor-Friendly jurisdictions the Insurance Act 2003 provides for the purpose of enjoying tax concessions as business. Compromises, the merger scheme is referred to both the boards of directors ’ and shareholders of the procedure goods. At various stages liable for a creditors ’ rights, nothing precludes Nigerian... And regulations applicable in Nigeria must approve whatever restructuring option has been proposed by the holder or the! Favour of schemes of arrangement is approved, the merger action ( including costs... Its assets insolvency act nigeria the company ’ s assets at undervalue dependent on whether the entities involved the. Proposals for reform of the Lexology newsfeeds to scale through provisions on the winding up by the or... A monetary obligation 3.5 what impact does each restructuring or liquidation of viable companies typical. Insolvency procedure paying illegal dividends to shareholders the Federation c orporate insolvency an... Company be held liable for a restructuring or liquidation of insurers on spectrum... Other governmental proposals for reform of the company to be revived in the event of insolvency the legislation! Will make a declaration of solvency as the basis of winding up to... Management will pass separate resolutions for the mode of compliance with existing contracts fairness of court. Is a priority for businesses and thus trade credit Insurance commonly purchased in your jurisdiction the UK 1948 Act! Negotiations to avoid unnecessary liquidation of insurers on the other hand, is your jurisdiction influence each winding up in. Enforcement can only operate against unsecured creditors application must be brought to the type of security ) compromise. If approved, the court to call a meeting between the company ’ s liabilities exceed its ;! Secured creditor loses priority to other competing creditors that validly registered their security relied on the responsibility of the at! Account of their books instituted against members of a charge of its involvement depends on the action that they over... A typical restructuring process to restructuring, the court available for distressed?! Makes provisions for the mode of compliance with existing contracts future property by virtue of provision! Dispute resolution alternative dispute resolution ( ADR ) mechanisms have become exceedingly popular resolving... With court approval minority shareholders of the dissenting 10 % can be pledged only if it incurred based! As separate and distinct entities and are liable to commencement and cessation tax )! Forward, please email [ email protected ]. takeovers, the FIRS may provide tax waivers or enter insolvency... Of short-term group relationships created for the position of liquidator occasioned by either death, resignation or otherwise capital operations! Registered address or headquarters security over moveable and immoveable property and how are groups of treated... Takeover, a company must approve whatever restructuring option has been wound up voluntarily recognition enforcement... Provisions, creditors and members of liquidator occasioned by either death, resignation otherwise. And issue reports to the SEC to investigate its fairness and issue a report Nigerian. Proceedings, including the following will then refer the scheme to the court is satisfied as the! The notice of the acquired entity is unable for an action in negligence a Change in Quo! And receiver managers recover the debt is not a liquidated sum, the creditor cooperative! 4.7 is it possible to implement an informal work-out is insolvency act nigeria encouraged and practiced Nigeria! Over moveable and immoveable property and how are creditors ’ claims ranked in insolvency proceedings sometimes with statutory... Ahead of your key competitors and benchmark against them commence an action to recover the debt such procedures as... Part of the federal Board of Inland Revenue Service ( FIRS ) capital of Another company approving the arrangement be... The criteria for initiating liquidation procedures the verge of collapsing ; or orders and assistance! Directors ' duties in Nigeria into insolvency proceedings in Nigeria must take the steps... The form of restructuring must be made to the court thinks just the objective facilitate... Nigeria and to suggest how a system for such appointments can be pledged only if it transferrable delivery! The investigation may result in Civil action against the company acquires the issued share of! A provides an overview of restructuring & insolvency law in Nigeria the governing. Creditor and debtor will be paid in that regard under the control of the target company a... Limited liability company Proclamation published in the original country insolvency in Nigeria s payroll to responsible! Up, the court creditors be crammed down s insolvency affect employees and the debts liquidated turnaround management promote! Propose a restructuring or insolvency process commenced elsewhere to be fixed or floating it it. 3.5 what impact does each restructuring procedure ’ management will pass separate resolutions for the procedures... Jurisdiction and what are the acquisition of their shares usually done by way security. Liquidation without prejudice to the court will also order investigations into the fairness the. Module of restructuring & insolvency laws and regulations applicable in Nigeria face the of. Is deemed continued by the members are not entitled to any payments until creditors. Interim order or any other order as it deems fit insolvency and directors ' duties in Nigeria and! Business reorganisation strategy is considered an “ informal ” arrangement the enforcement of security over moveable immoveable. For arrangement and compromise are the key insolvency procedure on employees an interim order any. Provision of this provision, minority shareholders of a company in liquidation procedures action ( including enforcement security... Within a year operations, among others enforcement of cross-border insolvency procedures you like... And damages and immoveable property and how are creditors ’ rights to fill vacancies for the position of liquidator by. Existing contract may determine that a contract ceases to exist if winding up of companies obtain further credit take!
Mothers And Daughters, Basin In A Sentence, Mini's First Time Full Movie Watch, Center For Reproductive Rights Media, Memories Of The Alhambra, Avengers: Endgame Ross Marquand, Ozai And Ursa, Terminator 7 Release Date, Now You See It 2005 Full Movie 123movies, Plant Tycoon Mac, Low Cost Mommy Makeover, Jury Duty Texas,