1. INTRODUCTION
Corporate rescue, in the context of insolvency law, refers to the legal and procedural measures through which a financially distressed company or its undertaking may be reorganized, restructured or otherwise preserved where there remains a reasonable prospect of achieving a better outcome than immediate liquidation of the company. It is also concerned not merely with keeping a company alive, but with preserving the value of a viable business for the benefit of creditors, employees, shareholders and other stakeholders. Insolvency, on the other hand, describes the financial condition or legal situation in which a company is unable, or is likely to become unable, to meet its financial obligations. While insolvency may ultimately lead to liquidation, it does not necessarily mean that liquidation is the only or most desirable response.
The distinction is important because financial difficulty does not invariably destroy the underlying value of a business. A company may be unable to meet its obligations as they fall due while its assets, contracts, goodwill, workforce or income generating capacity remain capable of producing value. In such circumstances, an immediate break up and sale of the company’s assets may yield less for creditors and other stakeholders than preserving the business as a going concern. Corporate rescue therefore represents an important aspect of modern insolvency law. It provides an opportunity to determine whether financial failure can be addressed through restructuring or reorganization before liquidation of the company becomes inevitable.
The Nigeria’s legal framework has increasingly recognized this approach. The Companies and Allied Matters Act 2020 (CAMA) has introduced formal rescue mechanisms, particularly Company Voluntary Arrangements (CVAs) and Administration, while retaining arrangements and compromises, receivership and winding up as part of the wider insolvency regime. The Insolvency Regulations 2022 subsequently supplemented the statutory framework with detailed procedural provisions governing various aspects of insolvency proceedings.[1] These, however, do not constitute the entirety of the legal framework applicable to corporate rescue and insolvency in Nigeria. Other legislation and regulatory frameworks, including sector specific laws governing particular classes of companies, also contain provisions relevant to the restructuring and resolution of financially distressed companies.
This article therefore undertakes a critical review of the legal regime governing corporate rescue and insolvency procedure in Nigeria. It examines the principal statutory mechanisms and the wider legislative and regulatory framework applicable to corporate insolvency, considers their practical operation and the role of the courts and insolvency practitioners, and even evaluates the challenges affecting their effectiveness.
2. THE LEGAL FRAMEWORK AND OPERATION OF CORPORATE RESCUE AND INSOLVENCY PROCEDURE IN NIGERIA
The development of Nigerian insolvency law reflects a gradual movement away from treating corporate failure primarily as a matter of liquidation. The central consideration just like we have earlier mentioned is increasingly whether value can be preserved before a company reaches the point at which liquidation becomes unavoidable. The Companies and Allied Matters Act (2020) is central to this development, providing formal rescue mechanisms while retaining traditional insolvency procedures. The Insolvency Regulations 2022 complement this framework by providing detailed procedural rules for the operation of insolvency processes and we shall briefly consider some of this procedures.
A. Company Voluntary Arrangements
The Companies and Allied Matters Act (2020) provides for Company Voluntary Arrangements which enables a company to make a proposal to its creditors for a composition in satisfaction of its debts or an arrangement in respect of its affairs.[2] The significant attraction of this procedure lies principally in its flexibility. A company whose underlying business remains viable may negotiate revised terms with its creditors without necessarily placing the entire undertaking under the more extensive control associated with administration. It can therefore provide a relatively consensual route to restructuring financial obligations.
Its effectiveness, however, depends upon creditor participation and confidence. Creditors must have sufficient information to determine whether the proposal offers a realistic prospect of recovery. A proposal that merely postpones payment without addressing the company’s underlying financial position may provide temporary relief without achieving meaningful rescue. The Nigerian experience with Company Voluntary Arrangements remains relatively limited, but their statutory recognition is nevertheless significant. It has demonstrated a deliberate move towards providing companies and creditors with alternatives to immediate liquidation where restructuring may produce a better outcome. Considering the special status of secured creditors, the law made provisions for their protection by forbidding a proposal or modification that affects the rights of a secured creditor to enforce his security unless the concerned creditor concurs with the arrangement or proposal.[3]
B. Administration
Administration is arguably the most comprehensive corporate rescue mechanism under Companies and Allied Matters Act. Sections 443–536 establish the legal framework governing administration, including the appointment, functions and powers of administrators.[4] Section 444 is particularly significant because it establishes the objectives of administration. The primary objective is to rescue the company, or the whole or any part of its undertaking, as a going concern. Where that is not reasonably practicable, the administrator is required or appointed to achieve a better result for the company’s creditors as a whole than would be likely if the company were wound up. Where appropriate, the administrator may also realize property in order to make a distribution to secured or preferential creditors.[5]
Administration is not simply another form of debt recovery. It is a collective insolvency procedure in which the preservation of the business of the company is given priority where rescue is reasonably possible. The law further requires the Court, before making an administration order, to be satisfied that the company is or is likely to become unable to pay its debts and that the order is reasonably likely to achieve the purpose of administration.[6] The existence of an unpaid debt is therefore not, in itself, sufficient. The Court must also consider whether the statutory objectives are capable of being achieved.
The practical development of corporate rescue through administration was first seen in the suit filed by a creditor of Moorhouse Company Ltd. In that suit, the Federal High Court, Lagos Judicial Division, made an interlocutory administration order in respect of The Moorhouse Company Limited and appointed an administrator. The proceedings subsequently progressed to an initial creditors’ meeting held in October 2022.[7] The significance of the case lies in demonstrating that administration under the Companies and Allied Matters Act 2020 could move from statutory recognition into actual operation. The company and its creditors were brought within a collective process in which the administrator was required to assess the company’s affairs and pursue the statutory objectives.
The case therefore provides an indication of the practical operation of the administration regime and consequently illustrates that the appointment of an administrator is only the beginning of the rescue process.
C. Arrangements and compromise
Sections 710–717 of CAMA provide another mechanism through which corporate difficulties may be addressed. An arrangement and compromise may involve the restructuring of the rights or liabilities of creditors, members or a class of them.[8] The procedure is particularly useful where the company’s difficulties can be addressed through restructuring its financial or corporate relationships without the more extensive intervention associated with administration. Its collective nature is significant because it enables affected stakeholders to consider a proposal within a statutory framework rather than leaving individual creditors to pursue separate enforcement measures. The court’s supervisory role is consequently important.
Corporate restructuring involves competing interests, while the statutory process provides a mechanism through which those interests can be considered collectively.
D. Receivership and winding-up
Corporate rescue must also be considered alongside the traditional insolvency procedures comprising of winding up and receivership. Receivership remains important, particularly where secured creditors seek to realize secured assets.[9] Winding up remains the principal mechanism for bringing the existence of an insolvent company to an end and distributing its assets in accordance with the statutory order of priority.[10] These procedures are not necessarily inconsistent with corporate rescue. Rather, they form part of the wider insolvency framework. Where a business is viable, rescue may produce a better outcome. Where rescue is not commercially realistic, winding up and liquidation may be the appropriate approach.
The critical issue is therefore whether the appropriate procedure is selected at the appropriate time. A viable company placed into liquidation prematurely may lose substantial value. Equally, keeping an unviable company alive indefinitely may increase the losses ultimately borne by creditors and shareholders alike. Generally, a corporate restructuring option chosen by a company should be dependent on the result intended to be achieved. This consideration may not be appealing to creditors whose ultimate goal is to recover their money and not necessarily to reposition the company.
E. Other legislative and regulatory framework
The Companies and Allied Matters Act, 2020 and the Insolvency Regulations 2022 do not constitute the entirety of the Nigerian framework applicable to corporate rescue and insolvency. Other legislation and regulatory frameworks become relevant depending on the nature of the company and the circumstances involved.
Financial institutions, for example, are subject to a specialized framework under the Banks and Other Financial Institutions Act 2020 (BOFIA), together with the intervention and resolution powers of the Central Bank of Nigeria as well as the Nigeria Deposit Insurance Corporation pursuant to the Nigerian Deposit Insurance Corporation Act 2023, The Nigerian Insurance Industry Reform Act 2025 and the Pension Reform Act 2014.
The regulatory framework therefore incorporates a form of preventive insolvency intervention through which the regulatory agencies of the government are directly involved in corporate rescue exercises in some critical sectors of the economy.
In corporate rescues within the financial sector, besides the powers of the Central Bank of Nigeria as regulator over failing banks pursuant to the Banks and Other Financial Institutions Act[11], the National Deposit Insurance Corporation also plays a significant role in the corporate rescue or restructuring of financial institutions.[12] On another hand, the involvement of National Insurance Commission is indispensable in the winding up of an insurance company.[13] Also, in administration, the approval of the National Insurance Commission is required before a person will be appointed as Administrator of an insurance company.[14] For corporate restructuring involving Pension Fund Administrators and Pension Fund Custodians, a written consent of the Pension Commission is required prior to any arrangement or restructuring.[15] Also, the law prohibits the application of funds and assets kept with a Pension Fund Custodian from being used to satisfy any claim by a creditor in the event of liquidation or execution of judgment against the Pension Fund Custodian.[16].[17]
These powers enable regulatory authorities to intervene at different stages of financial distress, with the objective of protecting depositors, preserving the value of the institution’s assets and liabilities, and preventing the failure of one institution from producing wider instability in the financial system. The Asset Management Corporation of Nigeria framework may also become relevant in dealing with distressed financial assets and institutions.[18] The existence of sector specific regimes is understandable. The failure of a financial institution may have consequences extending beyond the ordinary relationship between a company and its creditors. Depositors, the wider financial system and economic stability may be affected, making regulatory intervention necessary.
CAMA provides the general corporate insolvency framework, while other legislation and regulatory regimes may apply depending on the nature of the company and the circumstances of each case. The effectiveness of the regime therefore depends partly on coordination between these different legal and regulatory frameworks.
3. STAKEHOLDERS PARTICIPATION IN CORPORATE RESCUE
The principal strength of CAMA 2020 is that it provides Nigeria with a recognizable statutory framework for corporate rescue. Achieving a corporate restructuring or rescue involves some key stakeholders who are considered indispensable. These stakeholders are drawn from the regulators, insolvency practitioners and the judiciary.
The Role and Capacity of Insolvency Practitioners
The success of any rescue procedure depends substantially on the competence and independence of the insolvency practitioner[19]. An administrator must manage the company’s affairs while balancing the interests of creditors, shareholders, employees and other stakeholders and determining whether the business can realistically be rescued. The Insolvency Regulations 2022 provide additional requirements concerning insolvency practitioners, administrators, creditors’ committees, reporting and remuneration. These safeguards are important because liquidators, nominees, receivers and administrators exercise significant control over the company’s affairs. The quality of insolvency practice therefore remains central to the effectiveness of the restructuring regime. Insolvency practitioners require not only knowledge of insolvency law but also financial, restructuring and commercial expertise. They must be able to determine whether a business is genuinely viable and deploy a realistic strategy for preserving its value.
Independence is equally important. The administrators must pursue the statutory objectives rather than simply advancing the interests of the creditor who initiated the proceedings, because they are deemed as agents of the company, likewise receiver managers
The role of the courts and judicial efficiency
The Federal High Court has exclusive jurisdiction over matters arising from the operation of Companies and Allied Matters Act pursuant to section 251(1)(e) of the Constitution of the Federal Republic of Nigeria 1999, as amended.[20]
The Court’s role is particularly important because insolvency is time sensitive. A business that may be viable when proceedings begin can become incapable of rescue if proceedings are unduly delayed.
There is need for specialized handling of insolvency matters by giving them accelerated hearing. In insolvency, a delayed remedy can effectively become a failed remedy leaving parties helpless. It is good for courts to consider the far-reaching commercial implications of interim and interlocutory orders. In most insolvency proceedings at the instance of creditors, there have been instances where the interim or interlocutory orders of court under the auspices of preserving the assets of a company from dissipation, become far-reaching by stifling business activities of going concerns, which in turn is capable of exposing such entities to greater loss and damages that are almost irreparable.
This practice by the courts does not in any way promote the justice of a case, especially where there is no real risk of such assets being dissipated. In circumstances where the necessity of such interim or interlocutory orders is exigent, the courts are now enjoined to vacate or vary them at the instance of the affected parties so as to sustain business operations and payment of salaries and other outgoings pending the determination of the substantive claims. This posture was first laid by the Supreme Court in the case of Cesare Missini and Ors. v. Balogun and Ors[21]. The Court of Appeal followed this path in the case of Seplat Petroleum Dev. Co. Limited v. Access Bank Plc & Ors[22] when it held thus:
“The Supreme Court had occasion to hold in the case of Cesare Missini and Ors. v. Balogun and Ors. (1968) 1 All N.L.R. 318 at 325, that where machines had been kept idle and a number of people would be out of work, the Court could intervene to arrest the irreparable damage. The Supreme Court had on an earlier occasion held in the case of John Holt Nigeria Ltd. and Anor. v. Holt African Workers Union of Nigeria and Cameroons (1963) 1 All N.L.R. 379 at 383 inter alia that the Court would resist an application by the plaintiff to prevent the defendants from carrying on their business in the manner they think beneficial to themselves before the trial of the action. The Court (Katsina-Alu, Uwaifo and Nsofor, JJ.C.A.) also held in the case of Shell Petroleum Development Company of Nigeria (SPDCN) Limited v. Omu (1998) 9 NWLR (pt.567) 672 cited by the applicant that it is recognized that damages for disruption of business is difficult to assess and therefore that fact must be taken into account as an issue of balance of convenience relying on the English case of Merchant Adventurers Ltd. v. Grew and Co. (1972) Ch. 242 at 256; that when an appeal is pending against an interlocutory (or any interim) injunction, the Court may exercise its discretion to intervene in the meantime to suspend the injunction before the appeal is determined relying on the English case of Shelfer v. City of London Electric Lighting Co. (1895) 5 Ch. 388. The Court further emphasized that the pendency of an appeal against an injunctive order does not preclude the Court from intervening, when desirable, to relieve its effect before the appeal is determined by either staying or suspending it as the occasion demands; that the Court must react to the situation with a practical approach and, without necessarily doing injustice to either party, do what is considered equitable upon terms where appropriate; and that it would be a reproach to the administration of justice if the Court were to remain helpless in a situation where great hardship is caused by an interlocutory injunction, or where, for example, it is plain that it ought not to have been granted at all, and there is immense delay in having the appeal against it set down for hearing. The Supreme Court further held in the case of Josien Holdings Limited and Ors. v. Lornamead Limited and Anor. (1995) 1 NWLR (pt.371) 254 at 267 cited by the applicant that whenever it appears that where an injunction had been granted and considerable damage would be done to the defendant pending appeal by the stoppage of his business which could not be compensated in damages, as in this case, the injunction should be suspended or stayed on terms pending the determination of the appeal.”
Accordingly, I find substance in the application and hereby grant it to the extent that, the order of interlocutory injunction made by the Court below, restraining the applicant from occupying and using its premises earlier mentioned in the opening phase of the discussion, is hereby suspended for the applicant to continue with its registered business activities on its said sundry premises without let or hindrance pending the determination of the appeal against the order of interlocutory injunction.
For avoidance of doubt, and in addition, all the bank accounts operated by the applicant in the banks and financial institutions affected or blocked by the said order of interlocutory injunction are hereby lifted/unblocked or re-opened for transactions by the applicant following the suspension of the order of interlocutory injunction as it affects the said bank accounts pending the determination of the appeal against the order of interlocutory injunction.
4. THE CHALLENGES OF CORPORATE RESCUE
The need for early intervention
One of the most significant challenges facing corporate rescue is timing. Rescue mechanisms are most effective when intervention occurs before the underlying business has been substantially ruptured. Directors may delay restructuring because of the stigma associated with certain classes of insolvency, uncertainty about the outcome or the hope that the company’s financial position will improve. By the time formal proceedings commence, the company may have lost customers, employees, suppliers and financing window.
There is therefore a need to encourage earlier identification of financial difficulty and earlier engagement with creditors and restructuring professionals.
Rescue financing
A further challenge is access to financing during the rescue process. A company cannot be rescued merely by preventing creditors from enforcing their claims. It must continue operating, paying employees, maintaining essential services and preserving commercial relationships.
Rescue financing is therefore critical. A potential financier will require sufficient certainty concerning the treatment and priority of new funds advanced to a distressed company. This may pose a difficult condition to the company unless its first ranking creditors are willing to compromise. Moreso, greater clarity around rescue financing would make administration more commercially viable and could significantly improve the prospects of successful restructuring.
Creditor protection and confidence
Corporate rescue must also maintain creditor confidence. Creditors should not be placed in a position where rescue procedures merely prevent them from enforcing legitimate rights without providing a credible prospect of recovery. The Companies and Allied Matters Act 2020 attempts to address this through creditor participation, statutory objectives and the role of the administrator. The Insolvency Regulations further provide for creditors’ committees and reporting requirements.
The effectiveness of these safeguards will, however, depend on transparency and meaningful participation. Creditors must have sufficient information to assess whether continued rescue is preferable to liquidation.
Coordination of the insolvency framework
Although Companies and Allied Matters Act provides the general statutory framework for corporate insolvency in Nigeria, its application operates alongside various sector-specific laws and regulatory regimes. While this is necessary for industries subject to specialized regulation, particularly the financial services sector, the interaction between the different frameworks may create uncertainty where their respective provisions overlap.
The effectiveness of the insolvency framework would therefore benefit from clearer coordination between the general corporate insolvency framework and sector-specific regimes. Greater clarity on the respective roles and powers of the relevant institutions would improve predictability for companies, creditors and insolvency practitioners and reduce the risk of conflicting or duplicative processes.
Strengthening the framework
The first priority should be to strengthen the operation of the mechanisms that already exist rather than simply introducing additional procedures. There should be greater emphasis on early intervention and restructuring before a company’s underlying business has deteriorated to the point where rescue is no longer realistic. The framework should also provide greater certainty concerning rescue financing so that viable companies are not forced into liquidation simply because they cannot obtain funding during the rescue process.
The courts should continue developing specialized insolvency case management and ensure that insolvency proceedings are dealt with expeditiously. The regulation of insolvency practitioners should likewise continue to be strengthened. Independence, competence, transparency and accountability are essential to creditor confidence.
5. CONCLUSION/RECOMMENDATION
The Nigerian legal framework governing corporate rescue and insolvency has evolved from a predominantly liquidation-oriented approach towards one that recognizes the preservation of viable businesses as an important objective. The Companies and Allied Matters Act 2020, which is the substantive insolvency legislation and other legislative measures provide a statutory foundation for corporate rescue and restructuring. Going forward, attention should focus not only on the framework itself but also on its effective implementation through consistent judicial interpretation, efficient case management, appropriate judicial discretion and effective coordination among courts, insolvency practitioners, creditors and regulatory authorities. This will support the preservation of viable businesses, protection of legitimate creditor interests and an orderly exit where rescue is no longer commercially viable.
Please note that the foregoing does not in any way constitute legal advice. Please kindly contact the key contacts for any legal advice on the subject matter
[1] Companies and Allied Matters Act 2020 (CAMA 2020); Insolvency Regulations 2022
[2] Sections 434–442 of the Companies and Allied Matters Act 2020.
[3] Section 437(3) of the Companies and Allied Matters Act 2020
[4] Sections 443–536 of the Companies and Allied Matters Act 2020.
[5] Section 444(1)(c) of the Companies and Allied Matters Act 2020.
[6] Section 449 of the Companies and Allied Matters Act 2020.
[7] Accor Afrique SA v The Moorhouse Company Ltd, Suit No FHC/L/CS/1039/2022 (Federal High Court, Lagos Judicial Division, 22 July 2022). The Firm, AO2LAW® acted for the creditor, while Bidemi Olumide, a Partner of the Firm was the Court’s appointed administrator for Moorehouse Company Limited.
[8] Section 537–539. of the Companies and Allied Matters Act 2020.
[9] Section 550–563. of the Companies and Allied Matters Act 2020.
[10] Section 564–703. of the Companies and Allied Matters Act 2020.
[11] Sections 35 and 36 of the Banks and Other Financial Institutions Act 2020
[12] Sections 55 – 76 of the Nigerian Deposit Insurance Corporation Act 2023
[13] Sections 110, 111, 112, 113 and 114 of the Nigerian Insurance Industry Reform Act, 2025
[14] Section 447(5) Companies and Allied Matters Act
[15] Section 71 of Pension Reform Act 2014
[16] Section 116 of the Pension Reform Act 2014
[18] Section 24 of the Asset Management Corporation of Nigeria Act 2010
[19] AO2LAW® is a firm of registered Business Recovery and Insolvency Practitioners Association of Nigeria (BRIPAN).
[20] Section 251(1)(e) of the Constitution of the Federal Republic of Nigeria 1999, as amended.^
[21] (1968) 1 All N.L.R. 318 at 325
[22] LPELR-54640(CA) Pages 17, Para. G, Page 18 paras. A – G, Page 19 – 20, Paras. A-A, Page 21, Paras. A-E
Please do not treat the foregoing as legal advice as it only represents the public commentary views of the authors. All enquiries on this should please be directed at the authors.
