REVISITING THE LEGAL REGIME OF INSOLVENCY PRACTICE IN NIGERIA

INTRODUCTION

Until recently, before the Companies and Allied Matters Act, 2020 (“CAMA 2020”) was passed into law, the Insolvency practice in Nigeria was devoid of a defined legal framework. Once an incorporated entity was declared insolvent by a competent Court of jurisdiction, creditors often resorted to commencement of winding-up proceedings as the first recourse to recovery of bad debts, without exploring other alternatives by which debtors could achieve business recovery as a route to repayment of debts.

However, with the signing of the new CAMA 2020 into law, a definitive legal framework for insolvency proceedings in Nigeria appears to be introduced, emphasizing the need to have a modern insolvency regulation that prioritizes reorganisation and restructuring of business entity and its operations, with a view to rehabilitating to ensure economic stability and financial propriety as opposed to corporate death via winding up. In this clime, the insolvency sector will be primarily driven by the goal of rescuing a financially distressed company as against winding up of such company or receivership. Also, there would be balancing of the interests of both creditors, debtors and critical supplier of essential services to the distressed company. The CAMA 2020 delves into issues of business recovery and sets out a framework for the regulation of the insolvency profession.

THE CURRENT LEGAL STRUCTURE FOR INSOLVENCY IN NIGERIA

There are various laws applicable directly and indirectly to insolvency practice generally in Nigeria. These include the following.

a.   The CAMA 2020.

b.   The Companies Winding-Up Rules 2001 (made subject to the CAMA)

c.   The Bankruptcy Act (as amended)

d.   The Bankruptcy Rules made pursuant to the Bankruptcy Act.

e.   The Investment and Securities Act (ISA).

f.      The Securities and Exchanges Commission Rules (made subject to the ISA).

g.   The Secured Transactions in Movable Assets Act (the Collateral Registry Act).

h.   The Credit Reporting Act.

i.       The Banks and Other Financial Institutions Act, 2020 (BOFIA)

j.       The AMCON Act 2015 (as amended).

k.    The Failed Banks (Recovery of Debts) and Financial Malpractices in Banks Act.

l.       The Insurance Act.

m. The Economic and Financial Crimes Commission Establishment Act (as amended)

n.   The Mortgage Institutions Act.

o.   The Nigeria Deposit Insurance Corporation Act (NDIC Act).

 

With the introduction of the innovative provisions of the CAMA 2020, more companies now explore the option of company restructuring to avert insolvency. Also, the provisions in BOFIA as well as the NDIA Act, deal with insolvency as it relates to banks and other financial institutions. The Insurance Act contains certain provisions on the winding up of insurance companies. The Bankruptcy Act governs bankruptcy of natural persons and partnerships together with the Bankruptcy Rules. The Collateral Registry Act, operating with the objective to facilitate financial inclusion, established the Collateral Registry and further legitimised the use of movable assets as collateral to secure loans. This Act applies to individual and companies.

Notwithstanding the above, there is still the great need for comprehensive reform of existing insolvency legislation in line with modern and global trends and best practices, which can ultimately help by encouraging business restructuring mechanisms. For the purpose of this paper, we shall hereunder discuss some of the innovations introduced by CAMA 2020.

A.  Business Recovery and Insolvency Practitioners Association of Nigeria (BRIPAN):

The need to have a body that regulates insolvency practice gave rise to the Business Recovery and Insolvency Practitioners Association of Nigeria (BRIPAN).  For emphasis, the law categorises liquidator, provisional liquidator or official receiver; administrator or administrative receiver; or receiver and manager, or a nominee or supervisor of a company’s voluntary arrangement as insolvency practitioners(“IP”). Chapter 26 of CAMA 2020 provides for regulation of insolvency practice and practitioners in Nigeria, it also prescribes qualifications for insolvency practitioners to act in such capacity. The BRIPAN, as a professional body whose certification is a condition for licensing of IPs by the Corporate Affairs Commission (“CAC”), is authorized under Section 706 of CAMA 2020 which empowers the CAC to confer recognition on BRIPAN to regulate the practice of IPs, maintain and enforce rules to ensure that its members permitted to act as IPs are fit and proper persons and to meet acceptable requirements like education, practical training and experience as well as revoke such recognition where the professional body no longer upholds the foregoing requirements in the understanding of CAC. These qualifications include:

 

i.             A degree in law, accountancy or any other recognized discipline from either a university or polytechnic.

 

ii.            At least five years post qualification experience in insolvency matters; and

 

iii.     membership of Business Recovery and Insolvency Practitioners Association of Nigeria (“BRIPAN”) or any other professional body recognized by the CAC.

 

It is our considered view that the inclusion of these qualifications for IPs, will ensure best practices in business rescue and insolvency proceedings and it is a major step towards establishing an insolvency regime that ensures only experienced persons are put in charge of insolvent bodies with the primary aim of business rescue and protection of investments. The description of who an IP is, his expected level of competence and skills in terms of education, training and qualifications, his standards, ethics, responsibilities, subjection to proper regulatory oversight addresses critical aspects of regulation of the profession and practice of insolvency. It is important to note that only an individual, as opposed to a corporate body, is entitled and qualified to act as an IP emphasizing that only a single source of regulation through the CAC is empowered by the Act to regulate practice as an IP[1], while the conditions, in terms of the model of regulation to be adopted, is also spelt out[2]. It is pertinent to equally note that CAMA 2020 gives recognition to the role of certain professional bodies now or in the future, it does not give them the power to authorize persons to act as IP notwithstanding the use of the word authorization[3] under the condition in relation to certification by a recognized professional body (RPB). Hence, the power to authorize rests solely in the CAC and on the condition that an application for authorisation to act as an IP shall be “accompanied by a certificate of membership issued by BRIPAN or any other professional body approved by the Commission”.[4] CAMA 2020 also requires an IP to have a degree in law, accountancy or any other recognized discipline; at least five years PQE in insolvency matters; and be a member of BRIPAN. However, the provision also creates an alternative to associating with BRIPAN, by stating that the IP may be a member of any other professional body recognized by the CAC. Before becoming a member of BRIPAN, an applicant has to undergo a compulsory insolvency training in stages, and like any other professional body in Nigeria, BRIPAN charges a fee for the training, and induction of members. Thereafter, the inducted member pays the annual membership dues.

Concluding on this point, it is important to note that the CAC’s power to authorize, refuse or withdraw an authorisation to practice as an IP is not final but accommodates a process of appeal and review of the Commission’s decision by the Federal High Court. Consequently, upon notification of the affected party in writing (with reasons thereof) within seven days of such refusal or withdrawal of authorisation, the affected person retains the right to apply to the Federal High Court within 21 days of receipt of notification by the Commission for a review of the Commission’s decision and the Court, upon hearing the summons, may refuse or grant the summons on such terms as it deems fit. An Appeal from the decision of the Federal High Court lies to the Court of Appeal which is the final arbiter in relation to refusal or withdrawal of authorisation.

Administration and Company Voluntary Arrangement                                           

Administration and Company Voluntary Arrangement are notable practices of insolvency in Nigeria that have been in place long before CAMA 2020 was signed into law and will continue to account as insolvency practice long after the introduction of CAMA 2020. However, notable changes were made to certain aspects of Administration and Company Voluntary Arrangement. Company Voluntary Arrangement (“CVA”) is an instance where there is a change in company administration. There are three broad types of CVA procedures, to wit: Receivership, Liquidation/Winding-up and Corporate Restructuring. CAMA 2020 creates an avenue for business rescue options such as Corporate Restructuring and Voluntary Winding up to be prioritized and explored before receivership and involuntary liquidation. CVA is recommended for financially distressed companies or companies on the verge of financial distress. The directors of a company may make a proposal to its creditors for a composition in satisfaction of its debts or a scheme of arrangement. The proposal to rescue a company may be made, where an administration order is in force in relation to the company, or where the company is being wound up. Besides this, the directors or shareholders of a financially distressed company, having formed the opinion that the company is unable to pay its debts, can promptly enter into binding arrangements with the creditors through the voluntary arrangement procedure, or utilize the administration procedure by bringing an application to the court to appoint an administrator/receiver for the company. This obviates the need for enforcement actions by creditors. Consequently, business liquidation will no longer be the first course of action against insolvent companies. Creditors are also more likely to opt for one of the business rescue options, rather than liquidation, in the hope that they would realise better returns than if the company were to be wound up. Administration is also recommended for financially distressed companies or companies on the verge of financial distress. The objectives of administration are (1) rescuing the company, the whole or any part of its undertaking, as a going concern; (2) to achieve a better result for the company’s creditors as a whole than would be likely, if the company were wound up, without first being in administration; and (3) to realize property in order to make a distribution to one or more secured or preferential creditors. A company enters administration when the appointment of the administrator takes effect, and an administrator may be appointed by the court, the holder of a floating charge, the company, or its directors. Where a company is in administration, a resolution cannot be passed for the winding up of the company, neither can an order be made for winding up of the company, except on the grounds of public interest, or where the application for winding up is made for regulated entities in the financial industry. The following points are of importance:

a.   Where a company is in administration, enforcement steps, legal proceedings, execution, distress, exercise of the right of peaceable re-entry amongst others, may not be commenced or instituted against the company without the consent of the administrator, or permission of the court as the case may be.

 

b.   Any attachment, sequestration, distress or execution put in force against the estate or effects of the company after the commencement of liquidation by the creditors, is void. However, holders of fixed charge are excluded from the application of this provision.

 

c.   Section 665 of CAMA ensures that companies undergoing insolvency are able to continue to receive supply of essential services such as water, electricity and gas despite their financial difficulties.

 

d.   The supplier of such essential services may make it a condition of the supply that it receives from an officeholder of the company, a personal guarantee for the payment of any charges in respect of the services. By specifically permitting the supply of essential services in any of the insolvency options, the new insolvency regime seeks to ensure that the companies in financial distress are able to continue operations ultimately for the benefit of the business rescue.

 

e.   CAMA 2020 now specifically provides that claims of secured creditors rank in priority to other claims including preferential (or statutory) payments and winding up expenses.

 

f.      The financial threshold for deeming that a company is unable to pay its debt has been increased from the sum N2000 to a sum exceeding N200,000. Similarly, for unregistered companies, a company is deemed unable to pay its debts where such company is indebted in the sum of N100,000, instead of the sum of N100 previously provided under the repealed CAMA.

 

g.   One of the provisions under CAMA 2020 is that a company that has not commenced business operations can, upon passing a special resolution, make an application to the Corporate Affairs Commission (“CAC”) for the company’s name be struck out from the register of the CAC, where it can satisfy that the reasons given for the application are sufficient to justify the striking off, the company has not commenced business and has no undischarged obligations and no reasonable objection has been received within 28 days of the publication of advertisements in three national daily newspapers. The implication of this is that companies that are yet to commence business operations may explore the option of having their names struck out of the CAC’s register instead of undergoing voluntary liquidation.

Winding Up

Winding-up is a legal process regulated by CAMA 2020. Winding-up is primarily governed by the CAMA. Closing down ones company is legally known as winding up. Winding-up is a process where a company formally dissolves its business, statutorily goes into extinction and consequently ceases to exist as a corporate entity. The purpose of a winding-up process is for a company to cease doing business as usual, sell off its assets, pay off creditors (where applicable) and distribute the remainder of its assets, if any, to its partners or shareholders.

It is pertinent to make a clear distinction between Winding-up and Bankruptcy. Winding up a business is not the same as bankruptcy, although it is usually an end result of bankruptcy. Winding up is when a business liquidates and permanently ceases operations, while bankruptcy may allow a company to start again. Bankruptcy is a legal proceeding that involves creditors attempting to gain access to a company’s assets so that they can be liquidated to pay off debts. Although there are various types of bankruptcy, the proceedings can help a company emerge as a new entity that is debt-free and for the purpose of this article, we shall focus on the regulations and guidance provided under the CAMA 2020.

Types of Winding Up

There are two broad types of Winding-up proceedings in Nigeria:

Compulsory Winding-up

Voluntary Winding-up

 

Voluntary Winding Up

As the name implies, this is a self-imposed winding-up and dissolution of the company following the decision and approval of its shareholders for the company to discontinue operations. It is the winding up of a company initiated by a special resolution of the company rather than by a petition to the court. A company’s shareholders or partners may trigger a voluntary winding up, usually by the passage of a resolution. If the company is insolvent, the shareholders may trigger a winding-up to avoid bankruptcy and, in some cases, personal liability for the company’s debts. Even if it is solvent, the shareholders may feel their objectives have been met, and that it is time to cease operations and distribute company assets. The voluntary winding-up of a company is a decision that is collectively taken by the company in general meeting, to cease operations and dissolve the company. This consequently leads to the distribution of the company’s assets for the benefits of the creditors and members of the company. The Companies Allied Matters Act provides stipulations and guidance on how to effectively achieve this.

A company can be voluntarily wound up in two circumstances[5]:

a) when the period, if any, fixed for the duration of the company by the articles expires, or the event, if any, occurs, which the articles provided that the company is to be dissolved and the company in a general meeting has passed a resolution requiring the company to be wound up voluntarily;

(b) if the company at its general meeting makes a decision on its own and resolves by a special resolution that the company be wound up.

Procedure For Voluntary Winding Up in Nigeria

There are two ways in which a company can be voluntarily wound up and they include: Members Voluntary Winding-up and Creditors Voluntary Winding-up[6].

Members Voluntary Winding-up

This is a process where the director(s) of the company makes a statutory declaration to the effect that they have made a full inquiry into the affairs of the company and that having done so, they have formed the opinion that the company will be able to pay its debts in full within a period, not exceeding twelve (12) months from the commencement of the winding up exercise. A company may also be wound up, where its members voluntarily apply for a winding-up order, especially where it is a special purpose vehicle (SPV) and the purpose has been achieved. However, this is unusual in Nigeria as most SPVs are maintained as going concerns, even after they have achieved their intended purpose.

Procedure For Members’ Voluntary Winding-Up

The procedure for Voluntary Winding-up are as provided in the Companies and Allied Matters 2020. It includes the following steps:

1.    Declaration of solvency – A company must declare its solvency. This is a requirement for member’s voluntary winding up. For the declaration of solvency to be effective under CAMA, it must be made within five (5) weeks immediately preceding the date of the passing of the resolution for voluntary winding-up and must be delivered to the Corporate Affairs Commission for registration. It must also embody a statement of the company’s assets and liabilities as at the latest date before the making of the declaration.

2.    Special resolution – A general meeting of the members of the company shall be called to pass a special resolution that the company be wound up. The Resolution is to be signed by two Directors or a Director and the Company Secretary. The Resolution is to be filed at the Corporate Affairs Commission (CAC) within 35 days of filing a Statutory Declaration of Solvency (SDS).

3.    Notice of special resolution to the Corporate Affairs Commission – Within 14 days after its passing, such notice of special resolution calling for Voluntary winding-up of the affairs of the Company shall be made public by advertisement in the Federal Government Gazette or two national daily newspapers and the company shall deliver such notice to the Commission.

4.    Appointment of a Liquidator – At the general meeting, members shall also pass a special resolution appointing a liquidator. Once a liquidator is appointed, the directors will cease to act.

5.    Notice of appointment of liquidator to the Corporate Affairs Commission – The Liquidator appointed by the company shall within 14 days of such appointment cause to be published a notice of appointment of liquidator in the Federal Government Gazette or in two national daily newspapers and shall serve a notice of appointment of liquidator on the Commission for registration.

6.    Liquidator shall call a meeting each year – In the event of the winding-up continuing for more than one (1) year, the liquidator shall summon a general meeting of the company at the end of the first year from the commencement of the winding-up, and of each subsequent year and shall lay before the meeting an account of the conduct of the winding up. These meetings shall be called to notice by publishing them in the official gazette and in some newspapers printed in Nigeria.

7.    Final meeting – As soon as the affairs of the company are fully wound-up, the liquidator shall prepare an account of the winding-up, showing how the winding-up has been conducted and thereupon the liquidator shall call a general meeting of the company for the purpose of laying the account before the meeting. A copy of the accounts/returns of the meeting shall be sent to the Corporate Affairs Commission (CAC) within 7days of the meetings for registration.

8.    Dissolution – The Commission on receiving the account and, in respect of the meeting of the creditors and the company shall register them, and on the expiration of three (3) months from the registration, thereof, the company shall be deemed to be dissolved.

Creditors Voluntary Winding-up

A creditors’ voluntary winding up is the winding up of a company by a special resolution of the shareholders under the scrutiny of the company’s creditors in order to pay its debts.  This occurs when the company is insolvent. The large volume of cases may be attributed to provisions of the law stating that a company must be compulsorily wound up if it is unable to meet its financial obligations. It should be noted that if the company disputes the nature or quantum of the liability alleged, the court may not make an order for compulsory winding-up of the company. The reasoning behind this is only a creditor has the locus standi to petition the court to wind up a company.

Procedure For Creditors Voluntary Winding Up

1.    The Company and its Creditors would hold separate meetings to propose a winding up of the company. In this case, the company must call the meeting of the creditors on the same day or the next day after the meeting of the Company at which the resolution of winding up shall be proposed.

2.    The Company shall cause a notice of the meeting of creditors to be published once in the Federal Government Gazette and at least once in two national daily newspaper distributed in the area where the Company has its registered address or principal place of business.

3.    At least 14 days before the creditors meeting is held, the directors of the Company shall forward to each Creditor of the Company a statement of the position of the Company affairs containing, particulars of the Company’s assets, debts and liabilities, list of creditors, and estimated amount of such Creditor’s claims.

4.    The Directors shall appoint one director who shall be present and preside at the meeting of the Creditors and who shall ensure that the statement above is laid before the creditors at the meeting.

5.    The Creditors and the Company at their respective meetings may nominate a person to be the liquidator of the winding up process. However, the person nominated by the Creditors will be the liquidator if different persons were nominated at the two meetings. Meanwhile, any director, member, or creditor may apply to the court to order otherwise.

6.    The Creditors at their meeting may, if they think fit, appoint a committee of inspection of not more than 5 persons. The Company may also appoint not more than 5 persons to the committee but the Creditors may reject such persons so appointed by the Company.

7.    The liquidator shall within 14 days of his appointment publish notice of such appointment in the Federal government gazette or 2 daily newspapers and shall deliver same to the commission for registration.

8.    The liquidator shall make publications of notice of the final meeting and the account of the liquidation is laid before and approved by the meeting. And after this meeting, the liquidator must within 7 days sends a copy of the accounts and return holding of the meeting to the Corporate Affairs Commission.

9.    The company is subsequently deemed dissolved after 3 months of the registration of the accounts and return to the commission. However, the Court upon an application by the liquidator, member, or creditor can defer the date, which the dissolution is to take effect.

Effects of Voluntary Winding Up on a Company

There are legal implications of the voluntary winding up of a company. The following legal implications shall ensue as the process of the voluntary winding up of a company is perfected:

1.    The company shall, from the commencement of the winding up, cease to carry on its business, except so far as may be required for the beneficial winding up thereof. Provided that the corporate state and powers of the company shall, notwithstanding anything to the contrary in its articles, continue until it is dissolved.

2.    Upon the appointment of a liquidator, all the powers of the directors shall cease, except so far as the company in general meeting, or the liquidator, sanctions the continuance thereof.

3.    Any transfer of shares, not being a transfer made to or with the sanction of the liquidator, and any alteration in the status of the members of the company, made after the commencement of a voluntary winding up, shall be void.

4.    Upon the commencement of the winding-up process, a company can no longer pursue business as usual. The only action it may attempt is to complete the liquidation and distribute its assets. At the end of the process, the company will be dissolved and will cease to exist.

5.    The property of the company shall be applied towards the satisfaction of its liabilities, subject thereto, shall, unless the articles otherwise provide, be distributed among the members according to their rights and interests in the company.

Corporate Restructuring 

This is a redesigning process that is practised all over the world. For a corporation to survive in Nigeria today, it must be possessed with sufficient drive for growth. This is because the competitiveness of the commercial landscape in Nigeria has made continuous development an inevitable phenomenon in corporate governance. Simply put, any corporation that fails to embrace growth and development will be left behind by its peers.

While it is not untrue that corporate growth and development can also be achieved through brand development, management shakeup and similar options, drastic situations require drastic solutions. That drastic solution is corporate restructuring. In order to have a full understanding of what corporate restructuring means, it is expedient to give a simple definition of the individual words that make up the phrase. First, the term “corporate” according to the Black’s law dictionary means something relating to a corporation or a business entity. On the other part, to “restructure” an organization or system means to change the way it is organized, usually in order to make it work more effectively. From the foregoing, therefore, we can safely conclude that corporate restructuring is the process of reorganizing a corporation or a business entity in order to make it work more effectively.

Types of Corporate Restructuring

• Internal restructuring
• External restructuring

Internal Restructuring

Internal restructuring is generally employed when a Company has a large debt profile and the Company desires to retain its corporate identity without the involvement of any third party.

Internal Restructuring Options

The methods of internal restructuring available to a Company include:

• Arrangement and compromise
• Arrangement on sale
• Buy-out (e.g management buy-out, shareholders buy-out, employee buy-out)

Arrangement on Compromise

Arrangement is defined as any change in rights or liabilities of members, debentures holders or creditors of a company or any class of them. Compromise is essentially an arrangement by a company with its creditors and/or members or a class of them, to accept less than they are actually entitled to in full and final satisfactions of the obligations which the company owes to them. However, it must be noted that arrangement and compromise must always be with the sanction of the court.

Arrangement on Sale

Arrangement on sale is one of the internal reconstruction methods towards the survival of an ailing company. Here, the members of a General Meeting are empowered to resolve by way of special resolution that the company should be wound up and that the liquidator appointed and authorized to sell the whole or part of its undertaking or assets to another corporate body. The consideration for the sale may be cash, shares, debentures or policies which should then be distributed in species amongst the members of the company in accordance with their rights in liquidation. The main difference between the liquidation process in corporate restructuring and that of dissolution of the company lies in the fact that the winding-up process embarked upon in corporate restructuring usually results in the resurrection of the company in another form. On the other hand, the winding up for dissolution of a company brings the company to a permanent end since the assets are distributed to those entitled according to the rules of distribution of assets of a dissolved company.

Corporate Buy-Out

This is an agreement or arrangement where certain interest groups within a Company acquire the interest in shares of others in a Company. It may be in the form of an Employee’s buy-out or a Management buy-out.

In an employee’s buy-out, the employees may decide to buy out a Company because of their job securities or attachment to the Company and pool their resources together and buy out the management of the Company.

A management buy-out is an acquisition by the management team (usually the directors and officers) of the Company of controlling shares of the Company or its subsidiaries by buying controlling shares.

MBO is the acquisition, by the management team of a company, of controlling shares of that company or its subsidiaries with or without third party financing.

External Restructuring

• Merger and Acquisition
• Takeover
• Purchase and assumption
• Cherrypicking

Mergers and Acquisitions

It is instructive to begin by pointing out that even though mergers and acquisitions are sometimes used interchangeably, they do have some distinctions. Generally, a merger is a combination of two companies to form a new company, while an acquisition is the purchase of one company by another in which no new company is formed. For mergers, the emerging entity could assume an entirely new name or retain the identity of one of the merging companies.

Categories of Merger

Mergers are classified into three types namely horizontal, vertical and conglomerate mergers.

• Horizontal mergers: Horizontal is one involving direct competitors. Thus, a horizontal merger is a combination or fusion of companies in the same line of business. Thus, a merger of two or more banks is a horizontal merger.

• Vertical mergers: Vertical merger is one between companies in a non-competitive relationship. That is, a vertical merger is a combination or fusion of two or more companies which are engaged in complementary business activities. e.g. a packaging company and a manufacturing company.
• Conglomerate mergers: A conglomerate merger is a combination or fusion of two or more companies that engage in completely unrelated aspects of business.

Merger Under the Federal Competition and Consumer Protection Act (FCCPA)

Prior to the enactment of the FCCPA, the regulatory body for mergers and acquisitions in Nigeria was the Securities and Exchange Commission and the legal framework was the Investments and Securities act. However, with the enactment of the FCCPA, the regulatory body is now the Federal Competition and Consumer Protection Commission and the legal framework is the FCCPA 2019.

Takeover

A takeover is virtually the same as an acquisition, except that “takeover” has a negative connotation, indicating the target does not wish to be purchased. When an acquiring company makes a bid for a target company, it is called a takeover. If the takeover goes through, the acquiring company becomes responsible for all of the target company’s operations, holdings and debt. When the target is a publicly-traded company, the acquiring company will make an offer for all of the target’s outstanding shares.

Purchase and Assumption

This involves another company purchasing the liability of a failing company and assuming ownership of its asset usually at an auction price. An application must be made to the Federal High Court for the P&A to be sanctioned. The assumed company does not go through the formal winding-up process but is dissolved through a judicial sale of its assets and liabilities to the purchasing company.

Cherry Picking

This is an external restructuring option for a failing company, also aimed at reducing the loss of investment. Unlike Purchase & Assumption, the company/investor is not taking up all the liabilities of the failing/failed company, but is allowed to inspect the books, assets, business operations/activities of the failing company with a view to pick or choose out those aspects it could save by integrating them into its own business activities.

Conclusion

The structure of insolvency in Nigeria is without doubt an area of corporate practice which has seen tremendous improvement with the introduction of the new CAMA. And it is hoped that while we look forward to the enactment of an all-inclusive insolvency practice in Nigeria, the current regime will serve the purpose of ensuring corporate continuity as opposed to extinction.

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[1] Section 705 CAMA 2020.

[2] Sections 705 to 707

[3] Section 705 (c) 

[4] Section 707 (1)(c)

[5] Section 620 of the CAMA 2020

[6] Section 625 (1 – 4) CAMA 2020