6.1 What is the effect of each restructuring or insolvency procedure on employees? The CAMA Bill prioritises business rescue above liquidation and receivership. 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. Under Section 422 of the CAMA, the directors have a duty to cooperate with the appointed liquidator and deliver up all company properties and provide any document so requested. Therefore, a restructuring procedure does not affect the company’s contracts except that such contracts made restructuring grounds for termination. 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. adjourn the hearing of the petition conditionally or unconditionally; or. 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. In such a case, any non-utilised capital allowances or tax losses of the former entities may not be taken over by the new company. The Banks and Other Financial Institutions Act (CAP B3, Laws of the Federation of Nigeria, 2004) regulates the restructuring, reorganisation, merger and disposal of banks. Likewise, a company may be investigated by the CAC and the investigation may result in civil action against the company. Section 238 of the Bankruptcy and Insolvency (Repeal and Re-enactment) Act 2016 provides that where there is a bankruptcy, insolvency or reorganisation order made against a debtor in a foreign proceeding, a certified copy of the order is, in the absence of contrary evidence, proof that the debtor is insolvent and a foreign representative has been appointed. Section 4 of the new act provides that a person will be considered to have committed an act of bankruptcy if he or she, in Nigeria or abroad: Section 5 of the new act provides that a creditor may file a bankruptcy petition if the debtor owes it up to N1 million or commits any acts of bankruptcy within six months of presenting the petition. The pledgor transfers the possession and use of the asset to the pledgee as guarantee for the payment of a loan with the common intention of redeeming the asset on payment of the debt. where the company resolved to be wound up by special resolution; where the company has fewer than two members; where the company cannot pay its debts; or. 4.4 How are the creditors and/or shareholders able to influence each winding up process? Defences available to a liable director include as follows: A director must have reasonable grounds to believe that: Defences available to a liable parent company A subsidiary is a distinct corporate entity from its parent company. What is the extent of the courts’ powers to order the winding up of foreign companies doing business in your jurisdiction? A typical restructuring process takes a period of 6-12 months. 2.2 Which other stakeholders may influence the company’s situation? Etisalat Nigeria Meets Banks for $1.2bn Debt Restructuring Talks The Nigerian arm of Abu Dhabi telecom group Etisalat met lenders in London yesterday for talks on restructuring a $1.2 billion debt, Access Bank CEO Herbert Wigwe has revealed. Once the scheme of arrangement is approved, the directors will make a declaration of solvency as the basis of winding up. Etisalat Nigeria signed the $1.2 billion medium-term facility with 13 local banks in 2013 to refinance a […] A liquidator has the power to carry on the business of a company in liquidation, insofar as this necessary for the beneficial winding up of the company, and all expenses or cost incurred thereof will have priority over the debts. Informal work-out is strongly encouraged and practiced in Nigeria. The information contained in the publications is credible, accurate as of the date of printing, and a reliable first-source when seeking the support of expert resources.William Glennon, Managing Partner - UnderwritersTrust Transaction & Risk Management LLP, © 2002-2021 Copyright: ICLG.com | Our Privacy, Unlock 3 FREE PDF chapters by registering with us FREE By virtue of Section 160(2) of the CAMA, a company can acquire its own shares for several reasons including to settle or compromise a debt or to satisfy the claims of dissenting shareholders. This week's key development has been the 97.85% acceptance by bondholders of Ecuador's debt restructuring proposals, and Argentina's agreement with its three key bondholder groups, which should now permit the achievement of qualifying majorities to approve restructuring. The operation of the provision of this law is predicated on the reciprocity of treatment of similar judgments in the original jurisdiction. Are any entities explicitly barred from initiating such procedures? The Investment and Securities Act 2007 and the Securities and Exchange Commission Rules 2013 regulate mergers, takeovers and acquisitions of shares in publicly traded companies. 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 the Federation of Nigeria, 2004), which requires the existence of a wholly or partly unsatisfied foreign monetary judgment debt. 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. The only extant provision that identifies priority for secured creditors is the Assets Management Corporation of Nigeria (AMCON), amended No. 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. Section 471 of the Companies and Allied Matters Act provides for the voluntary winding up of a company by creditors. Such remedies include rescission of a transaction and damages. There are several legal means available to creditors to recover unpaid debts other than through insolvency proceedings, including the following. In cases where members of a group are involved in insolvency proceedings, they may elect to appoint the same insolvency officers to save costs and avoid a multiplicity of processes. Under Section 422 of the Companies and Allied Matters Act, the liquidator is appointed by the court. Once a liquidator is appointed by the court, the stakeholders cease to be involved in the company’s business during an insolvency procedure. What is the extent of directors’ and shareholders’ involvement in liquidation procedures? DEBT RECOVERY STRATEGIES IN NIGERIA: STEPS TO FOLLOW TO RECOVERING MONEY FROM A DEBTOR Overdue debts may arise for non-liquidation of loan advances within the agreed time or for failure to settle unpaid accounts for goods and services supplied, etc. A director has a fiduciary duty to act in the interest of the creditors as a whole if the company is insolvent and must not take any action which is detrimental to the company’s creditors. How does a company’s insolvency affect employees and the company’s legal obligations to employees? The court is involved in all restructuring procedures, but the extent of its involvement depends on the type of restructuring. Any out-of-court restructuring is considered an “informal” arrangement. There are two broad types of winding up proceedings in Nigeria: compulsory winding up (i.e. This is done to increase shareholders’ value and produce a more efficient capital structure. Nigeria’s external debt is the biggest in all of sub-Saharan Africa in absolute terms and has already been rescheduled several times. 4.6 What is the ranking of claims in each procedure, including the costs of the procedure? He or she relied on the advice of certified experts. Will termination and set-off provisions be upheld? Dissenting shareholders can write to an appointed liquidator requesting to abstain from the arrangement. For mergers, the transferee company must command at least 51% of the controlling shares of the transferor company, and a pre-merger notification shall be made to the SEC before it is approved. incorporation documents and the sales agreement between the company and the management team. In accordance with Section 464 of the Companies and Allied Matters Act, once the liquidator is appointed in a voluntary winding up, the directors’ powers cease, except with regard to the company’s general meeting or where the liquidator approves the continuance of their powers. What defences are available to a liable director or parent company? This is because the competitiveness of the commercial landscape in Nigeria has made continuous development an inevitable phenomenon in corporate governance. 4.1 What is/are the key insolvency procedure(s) available to wind up a company? Decisive debt restructurings are usually followed by … READ MORE Nigeria’s Ardova seeks debt and equity finance to up clean energy. Is this common practice? The rationale behind this is that business of the acquired entity is deemed continued by the acquirer. These include petroleum storage facilities with capacity of more than 320 million litres at Port Harcourt and Apapa. Charge Another way in which creditors can take security is by way of a charge. In the case of an acquisition, or a merger of unrelated parties, Section 29 of the Act provides that the company formed, or the acquiring company must file commencement tax returns, while the acquired company pays cessation tax returns. commencing recovery proceedings for the principal debt and interest following a court order. the parties’ disputes are resolved timeously; the venue and content of proceedings are private; complex rules of procedure and evidence are not used; and. 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