SOURCE:

Faculty: Law
Department: Law

CONTRIBUTORS:

Halliday, C. E.
Umenweke, M.N.

ABSTRACT:

A foremost incidence of incorporation is not that the company shall have all powers of a natural person of full capacity only but that it can in furtherance of its authorised business or object, borrow money and may mortgage or charge its undertaking, property, uncalled capital or any part of it and issue debentures, debenture stock and other securities. However, the enforcement or realisation of borrowed money or securities when the company is unable to pay its debts or discharge it liabilities has posed a challenge to secured or unsecured creditors. When a company is unable to pay debts, it means that it is insolvent. Usually, the two legal options resorted to address the cause of insolvency under the extant laws in Nigeria are receivership and winding up. The winding up or liquidation procedure describes a process whereby the existenceof a company is eventually brought to an end by it dissolution. Receivership is the procedure utilised by secured creditors to enforce their security. The negative impact of winding up and receivership on the company, its employees and other stakeholders, including the host communities and the Government far outweighs the rationale for it. Thus, this study examined the multifarious statutory framework for corporate rescue and insolvency in Nigeria and the need for reforms. In this study, the doctrinal research methodology wasadopted. This entailed a review and analysis of primary sources of information such as statutes that addressedcorporate rescue and insolvency matters. It also included a review and analysis of case laws and other secondary sources of information. This study found that the provisions of the Companies and Allied Matters Act, Cap C20, Laws of the Federation of Nigeria 2004 (CAMA) on receivership, arrangements and compromise and winding up by the court are rather defective and obsolete, the winding up procedure are essentially complex, technical and cumbersome and the multiplicity of Statutes on insolvency and rescue matters.Furthermore, it was found that there are no moratorium provisions in the available corporate rescue options, no minimum qualification criteria and regulation of corporate rescue and insolvency practitioners in Nigeria. It was further found in this study that there are certain issues and challenges obfuscating a seamless and orderly corporate rescue practice in Nigeria such asthe lack of single and holistic Statute, paucity of corporate rescue mechanisms, lack of efficient and pragmatic institutions to regulate corporate rescue and insolvency system, absence of moratorium provisions, absence of minimum qualification and thenon-regulation of corporate rescue and insolvency practitioners, corruption and other sharp practices,the continuing finance of insolvent companies during rescue proceedingsand the absence of uniform guideline for informal corporate rescue mechanisms. It was the conclusion of this Study that reform of the corporate rescue and insolvency law and practice in Nigeria is not only imperative but exigent. In light of the statement of problem and the summary of findings, it was recommendedamongst others that the National Assembly should enact a single, comprehensive and holistic statute to consolidate the disparate Laws on corporate rescue and insolvency, which statute isto be known as the “Insolvency Act”, the establishment of a body corporate to administer, manage and regulate corporate rescue and insolvency matters, which body corporate is to be known as the “ Insolvency Services Commission of Nigeria”, the entrenchment of moratorium provisions, stipulation of minimum qualification for corporate rescue and insolvency practitioners and creation of a special fund forthe rescue of insolvent companies.