The Mondaq Comparative Guide To Restructuring And Insolvency

1. Legal framework

1.1 What domestic legislation governs restructuring and insolvency matters in your jurisdiction?

Restructuring and insolvency matters in Nigeria are primarily governed by the Companies and Allied Matters Act (CAMA) 2020. There are several other instruments governing restructuring and insolvency in Nigeria, including the following:

• General law:
  • the Companies Winding Up Rules 2012;
  • the Insolvency Regulation 2022; and
  • the Bankruptcy Act (for personal insolvency).
• Special regimes and provisions:
  • the Investment and Securities Act 2007;
  • the Securities and Exchange Commission Rules 2013;
  • the Banks and other Financial Institution Act 2020, as amended;
  • the Central Bank of Nigeria Act 2007;
  • the Nigerian Deposit Insurance Commission Act 2023;
  • the Asset Management Corporation of Nigeria Act 2010, as amended; and
  • the Federal High Court (Civil Procedure Rules) 2019.

1.2 What international / cross-border instruments relating to restructuring and insolvency have effect in your jurisdiction?

Currently, there is no binding international/cross-border instrument relating to restructuring and insolvency in Nigeria. The United Nations Commission on International Trade Law Model Law on Cross-Border Insolvency has not yet been ratified. However, reference to international instruments – particularly those which have been adopted but have not yet been domesticated through legal promulgation by the National Assembly – have persuasive force in the Nigerian courts.

1.3 Do any special regimes apply in specific sectors?

Special regimes apply in specific sectors, including the following:

• The Banks and Other Financial Institutions Act and the Asset Management Corporation of Nigeria Act apply to banks and other financial institutions.
• The Investment and Securities Act 2007 applies to capital markets operators and public companies, with regard to the treatment of funds in the event of insolvency.
• The Petroleum Industry Act, 2021 applies to restructurings and mergers in the oil and gas sector, particularly with regard to the transfer of a participating interest in an oil or gas asset/licence.
• The Advertising Regulatory Council of Nigeria Act 2022 applies to all insolvency and rescue procedures to which persons or organisations regulated under the act are subject (Section 22).

1.4 Is the restructuring and insolvency regime in your jurisdiction perceived to be more creditor friendly or debtor friendly?

Prior to the enactment of the CAMA 2020, Nigeria was perceived to be extremely creditor friendly. The old CAMA 1990 empowered creditors to wind up the affairs of a debtor for any debt above NGN 2,000. It also permitted “Arrangement and Compromise, Arrangement on Sale and Scheme of Arrangement”, with stringent conditions (Sections 537-540 of the CAMA 1990).

With the entry into force of the CAMA 2020, Nigeria became a more debtor-friendly jurisdiction, with the introduction of procedures such as administration, company voluntary arrangements and netting. The ruling in Seyi Akinwunmi and Okorie Kalu (Nominees) (Suit FHC/L/CS/1250/2021) – in which the nominees were granted leave to present a proposal to stakeholders reflects the courts' intention to give life to the debtor-friendly provisions of the CAMA 2020 and redefine Nigeria as a debtor-friendly jurisdiction.

1.5 How well established is the legal regime and infrastructure relevant to restructuring and insolvency in your jurisdiction (e.g. extent of recent legislative changes, availability of specialist judges / courts / advisers)?

The restructuring and insolvency regime in Nigeria has advanced considerably in recent years, with the enactment of laws such as:

• the CAMA 2020;
• the Federal Competition and Consumer Protection Act 2018; and
• the Asset Management Corpororation of Nigeria Act.

These laws have eased the operation of debt restructuring in Nigeria, with the aim of balancing the interests of creditors and debtors.

Pursuant to the powers conferred on him by Section 867 of the CAMA 2020, the minister of industry, trade and investment approved the Insolvency Regulations 2022, which define and guide the operation of insolvency administration as set out in the CAMA 2020.

The Federal High Court generally deals with interpretations of the CAMA 2020. Although, there are no specialist insolvency judges, the CAMA 2020 and its bylaws (ie, the Insolvency Regulations) specify the qualifications required of persons who act as insolvency professionals. The Business Rescue and Insolvency Practitioners Association of Nigeria provides ongoing training and advocacy in an effort to promote the development of insolvency and business rescue in Nigeria.

2. Security

2.1 What principal forms of security interest are taken over assets in your jurisdiction?

Several different types of security may be taken over the assets of a company in Nigeria. Under Section 191 of the Companies and Allied Matters (CAMA) 2020, a company may:

• borrow money for the purpose of its business; and
• mortgage or charge its undertaking or property or any part of its assets and issue a debenture for the debt.

The form of security interest is negotiated and agreed upon by the parties and is largely dependent on the company's:

• size;
• business and financial projections; and
• available assets.

Generally, the security may be classified as either a floating charge or a fixed charge. A floating charge relates to all non-constant/current assets of the company, which may change in quantity and value. The company continues to deal with the assets until the right of realisation crystalises. A fixed charge attaches to a particular piece of property of the company. The identity of the property does not change. The charge must be registered within 90 days of its creation with the Corporate Affairs Commission (Section 222 of the CAMA 2020).

Hence, the security interests that may be taken over assets in Nigeria include the following:

• a mortgage of property;
• a charge of uncalled capital;
• a charge of all or part of the undertaking of the company; and
• the creation of an equity lien or equity over assets, inventory and property of the company.

2.2 How can those security interests be enforced (and what factors could complicate or prevent this process)?

Generally, the means of enforcement may be agreed by the parties at the initial stage of negotiation and specified in the security agreement. The use of a receiver/manager to enforce a registered charge or debenture has become very helpful for both fixed and floating charges in Nigeria. A receiver usually:

• acts as an agent of the company in favour of the creditor to take over the property used as security; and
• realises the same in order to settle the debt.

Creditors in Nigeria often resort to the courts by filing a debt recovery suit in a high court. More dramatically, creditors may commence a winding-up process to exert pressure on the debtor to pay the outstanding debt.

In most mortgage transactions, creditors have statutory powers of sale, which enable them to:

• take over the mortgaged property;
• appoint a receiver; or
• foreclose the property to enforce the security (see Sections 19, 20, 21 and 22 of the Property and Conveyancing Act, 1881).

In other situations, the transaction documents permit the conversion of debt to equity upon the occurrence of certain trigger events. A creditor may also invoke this provision of the clause that allow for debt-equity conversion, especially where there is a high probability of business prospect.

Factors that may hinder the process of enforcement may include:

• multiple court actions;
• resistance of enforcement by the debtor;
• delay to the process of recovery in court;
• the cost of maintaining assets taken over by the creditors;
• deterioration of the assets; and
• difficulties in finding purchasers for the assets.

3. Restructuring

3.1 Are informal workouts available in your jurisdiction? If so, what forms do they typically take, and what are the benefits and drawbacks as compared to formal restructuring proceedings?

The Companies and Allied Matters (CAMA), 2020 does not expressly provide for informal workouts aimed at restructuring debt. However, in line with international best practice, insolvency professionals may propose informal workouts that may be adopted by the parties and the court. In United Bank for Africa Plc v Chief (Dr) Ernest Shonekan (Suit FHC/L/CS/178/2016), the debtor engaged third-party insolvency professionals who proposed an informal workout plan with the creditors, leading to a consent judgment in the matter. Also, in Robert Dyson & Diket Ltd v Diamond Bank Plc (Suit FHC/L/CS/156/2017), the parties adopted an informal workout plan proposing a debt-asset swap to liquidate the debt and the proposal was adopted as a consent judgment.

An informal workout may include the renegotiation of securities, interests or standstill agreements. A standstill agreement, depending on the specific agreements of the parties, may involve the suspension of further accrual of interests or the suspension of rights of action (informal moratorium), preventing the institution of court proceedings until a specified time in the future.

The advantages of informal workouts include the following:

• They are considerably less rigid and faster to implement than formal restructuring;
• They can be a lot more affordable; and
• They can help to preserve business relationships.

The disadvantages include the following:

• It is impossible to compel a creditor to accept the proposed workout plan; and
• Any dispute arising from the implementation of the informal workout plan may lead to a new cause of action in court.

3.2 What formal restructuring proceedings are available in your jurisdiction, and what are the benefits and drawbacks of each?

The formal restructuring proceedings that are available in Nigeria include the following.

Arrangement or compromise: Where a scheme is proposed for a compromise, arrangement or reconstruction between companies, the court may – on the application in summary of any of the companies affected – order separate meetings to be summoned in such a manner as the court may direct. If a majority representing at least three-quarters in value of the share of members present and voting either in person or by proxy at each of the separate meetings agrees to the scheme, an application may be made to the court by one of the companies and the court will sanction the scheme. The benefits of this tool include the flexibility in the negotiations and decision of the three-quarters majority required for the court to sanction the scheme.

One of the drawbacks is that adequate compensation must be given for the dissolution of the company before the court will sanction the scheme. The word ‘adequate' leaves room for the court to exercise its discretion in determining what is adequate for the employees, which may frustrate the entire the scheme.

Company voluntary arrangement (CVA): A CVA allows the directors to remain in control of the company while they make a proposal to the creditors to restructure the debt. The proposal will provide for the nominee to act in relation to the CVA either as trustee or otherwise for the purpose of supervising the implementation of the proposal. The drawback is that the creditors may not be comfortable with the directors remaining in control of the company, particularly if they have lost confidence and trust in the directors.

Administration: An administrator may be appointed by:

• the company;
• its directors;
• one or more creditors of the company;
• the holder of a floating charge in special circumstances; or
• a combination of the above.

The company or its directors may appoint an administrator out of court. Once appointed, the administrator has 14 days to:

• send a notice of his or her appointment to the company;
• publish a notice of his or her appointment in the prescribed manner;
• obtain a list of the company's creditors;
• send a notice of his or her appointment to each creditor whose claim and address he or she is aware of; and
• send a notice of his or her appointment to the Securities and Exchange Commission (SEC).

The administrator has the power to do all such things he or she considers necessary in order to:

• rescue the company, in whole or part;
• achieve a better result for the company's creditors; or
• realise property in order to make a distribution to one or more secured or preferential creditors.

Some of the drawbacks of this procedure is the amount of time and cost that must be spent on:

• reviewing the claims of unsecured creditors; and
• defending the claims of other creditors pending in court.

In Mrs Majiyagbe Ayodapo Iyabo v NISL Ventures Ltd, in a bid to manage the drawback of the process, the administrator obtained:

• an order from the court to notify all Nigerian high courts of the statutory effect of collective stay; and
• an order directing that all commercial claims be filed with the administration court in order to:
  • save litigation costs; and
  • meet the statutory aim of the collective resolution of all claims.

Mergers and acquisitions: Mergers facilitate growth and development, while acquisitions facilitate expansion. However, there is a risk that they may result in job losses and could potentially strengthen monopolies.

The relevant procedures and guides are contained in:

• Sections 434-549 and 710-715 of the CAMA 2020; and
• Sections 92-103 of the Federal Competition and Consumer Protection Act 2018.

3.3 How, by whom and on what grounds are formal restructuring proceedings initiated? What are the main preconditions for success?

Formal restructuring may be initiated where:

• the liabilities of a company exceed its assets;
• the company is experiencing acute financial distress which threatens its survival as a going concern; or
• the company wishes to secure new financing to restructure its debt and expand the operations.

Formal restructuring proceedings can be initiated in the following ways.

Arrangement or compromise: Where an arrangement or compromise is proposed between a company and its creditors or any class thereof, the court may, on the application of the company or any of its creditors, order a meeting of creditors or any class thereof, as the case may be. If a majority representing at least three-quarters in value of the interests of creditors present and voting at the meeting agrees to the compromise or arrangement, the compromise or arrangement may be referred by the court to the SEC, which will appoint one or more inspectors to investigate the fairness of the compromise and submit a written report to the court. The report from the inspectors is an essential precondition for success.

If the court is satisfied of the fairness of the compromise or arrangement, it will sanction it accordingly and the compromise or arrangement will become binding on the creditors. The order will have no effect until a certified true copy has been delivered to the Corporate Affairs Commission for registration.

Administration: An administrator may be appointed by:

• the company;
• its directors;
• one or more creditors of the company;
• the holder of a floating charge in special circumstances; or
• a combination of the above.

The company or its directors may appoint an administrator out of court. Once appointed, the administrator has 14 days to:

• send notice of his or her appointment to the company;
• publish a notice of his or her appointment in the prescribed manner;
• obtain a list of the company's creditors;
• send notice of his or her appointment to each creditor whose claim and address he or she is aware of; and
• send notice of his or her appointment to the SEC.

The administrator must prepare a proposal on how to achieve the purpose of administration and send it to:

• the Corporate Affairs Commission;
• every creditor of the company of whose claim he or she is aware; and
• every member of the company of whose address he or she is aware.

An initial creditors' meeting will be convened to consider the proposal and the administrator will report any decision taken to the court and the Corporate Affairs Commission. One of the main preconditions of this process is that:

• the administrator's proposal be accepted as is; or
• any suggested modifications be acceptable to the administrator. If the modifications are not acceptable to the administrator, the court may:
  • order that the appointment of the administrator will cease to have effect from a specified time; or
  • adjourn the hearing conditionally or otherwise.

CVA: A CVA allows the directors to remain in control of the company while they make the proposal to the creditors to restructure the debt. The proposal will provide for the nominee to act in relation to the CVA either as trustee or otherwise for the purpose of supervising the implementation of the proposal. Within 28 days of being given notice, the nominee must submit a report to the court stating whether, in his or her opinion, meetings of the company and its creditors should be convened to consider the proposal and decide whether to approve it with or without modifications.

After the conclusion of the meeting, the chairman of the meeting will report the results of the meeting to the court. If the decision taken by the creditors' meeting differs from that taken by the company meeting, a member of the company may apply to the court, which may:

• order the decision of the company meeting to have effect instead of the decision of the creditors' meeting; or
• make such other order as it deems fit.

3.4 What are the effects of the commencement of formal restructuring proceedings, both for the debtor and for creditors?

Administration: Where a company is in administration:

• no step may be taken to enforce security over or repossess its assets without the consent of the administrator or the court:
• a landlord may not exercise a right of forfeiture by peaceable entry in relation to premises let to the company without the consent of the administrator or the court;
• no legal proceedings may be instituted or continued against the company without the consent of the administrator or the court; and
• any receiver of part of the company's property appointed by a secured creditor must vacate his or her office if the administrator requires him or her to do so.

A petition for winding up of a company will be:

• dismissed on the making of an administration order; and
• suspended while the company is in administration.

CVA: The nominee has a 28-day timeframe (or such longer period as the court may allow) to submit a report stating whether, in his or her opinion, meetings of the company and creditors should be convened to consider the proposal. During this timeframe, the nominee may bring an application to court to:

• stay all proceedings in the winding up;
• provide for the appointment of the administrator to cease to have effect; or
• issue such directions as it considers appropriate for facilitating the arrangement.

3.5 Does a moratorium or stay apply and, if so, what is its scope? Are there exceptions?

The CAMA 2020 provides greater flexibility to debtors to voluntarily initiate or achieve a business rescue through a moratorium in restructuring proceedings. For instance, moratorium protection and a stay mechanism to achieve a formal collective resolution that best protects all creditors are available in administration.

A company may also engage in a creditors' voluntary liquidation under Chapter 22 of the CAMA 2020, essentially to achieve either:

• a CVA, which does not trigger a moratorium; or
• a scheme of arrangement, which triggers a six-month moratorium to give the scheme the chance to achieve a business restructuring. The moratorium is enforceable against all creditors and forestalls the initiation of winding-up and enforcement processes.

3.6 What process do restructuring proceedings typically follow (including likely length of process and key milestones)?

The process which an insolvency practitioner will typically follow in restructuring proceedings depends on the procedure adopted. However, there are usually three key milestones in restructuring processes:

• The first stage involves the collection of data on and analysis of the performance of the company. The directors may hire an independent auditor, financial expert or accountant to analyse the company's financial position and business prospects. A proposal for restructuring or a scheme of arrangement may be prepared (see Section 434 of the CAMA 2020).
• The second stage – especially in an informal process – involves the presentation of the proposal or the scheme to the creditors in a meeting convened for that purpose. In a formal process, a summary application may be made to the court for separate court-ordered meetings of creditors and members. The proposal or application will specify the administrator, nominee, supervisor or any persons that may be responsible for monitoring the implementation of the proposal or scheme. It is at the court-ordered meetings that the company members or creditors will consider and vote on the proposal or scheme (see Sections 436, 437, 487 and 711 of the CAMA 2020).
• The final stage involves:
  • implementation of the proposal;
  • the filing of appropriate regulatory documents; and
  • the filing of appropriate accounts.

The duration of these proceedings also depends on the process adopted. Informal procedures are subject to the agreement of the parties. In formal processes, the law does not prescribe a set timeframe; the scheme may specify that it will conclude on sanction or another trigger event. An administration takes one year, subject to further extension (see Section 513 of the CAMA 2020).

3.7 What are the roles, rights and responsibilities of the following stakeholders in restructuring proceedings?

The debtor is expected to comply with the procedure as provided by law. Also, where an administrator, receiver or receiver-manager has been appointed, the debtor can no longer exercise control over the asset/security. The debtor must provide all accurate information needed during the restructuring proceedings.

The directors of the debtor can elect for a restructuring process in order to rescue the company from financial distress or expand the company. Where an administrator, receiver or receiver-manager has been appointed, the directors will cease to act for the company pending the determination of the appointment of the administrator, receiver or receiver-manager.

The shareholders of the debtors can also propose a restructuring plan. In an arrangement or compromise, the shareholders apply to court for a court-ordered meeting. Dissenting shareholders can abstain from the arrangement and have the fair value of their shares paid to them through a forced takeover of the company.

A secured creditor has rights which are protected through an ascertained asset and can enforce the security to realise its interest. A secured creditor must be informed and consent to any restructuring that could affect the nature of its right or interest in a company. A secured creditor can enforce its security if the restructuring threatens its interest in the company.

An unsecured creditor has an interest in the assets of the company but this is not attached to a specific asset. The interest of an unsecured creditor becomes realisable upon crystallisation. An unsecured creditor must file and defend its claim in order for this to be acknowledged by the insolvency professional.

During a restructuring, an employee may agree to a pay cut or to resign and collect his or her employment benefits from the company.

Pension creditors are responsible for:

• the investment and management of pension funds and assets within the ambit of the Pension Reforms Act; and
• the pursuit of claims relating to the pension assets they manage.

They are obliged to maintain a statutory reserve contingency fund to meet any claim for which they may be liable as determined by the National Pension Commission.

An insolvency officeholder manages the affairs of the company during the restructuring procedure. An insolvency officeholder deals with the asset of the company for the purpose of realising the goal of his or her appointment, whether as an administrator, receiver-manager or receiver.

The court vested with powers in a restructuring proceeding is the Federal High Court (Section 251 of the Constitution 1999, as amended). The court is vested with the power to approve:

• arrangements and compromises;
• applications from dissenting shareholders; and
• any other consequential application during the restructuring process.

3.8 Can restructuring proceedings be used to “cram down” and bind dissentient creditors to a transaction supported by other creditors? Are creditors separated into classes for the purposes of voting in the proceedings? What are the relevant voting thresholds? Is “cross-class cramdown” available?

Where a decision taken on a proposal or scheme by the creditors' meeting diverges from that taken by the company at a company meeting, a member of the company may apply to court to request that the decision of the company meeting take precedence over the decision of the creditors (see Section 438 of the CAMA 2020).

Furthermore, dissenting creditors can be bound to a restructuring proposal if a majority of the creditors have consented to it. For instance, in an arrangement or compromise, if 75% of the creditors have consented to the scheme and it has also been sanctioned by the court after investigation by the SEC, dissenting creditors will be bound by the proposal.

Depending on the restructuring procedure adopted, creditors may be separated into classes for the purpose of voting as provided under Section 715 of the CAMA 2020.

3.9 Can restructuring proceedings be used to compromise secured debt?

A secured debt may be compromised under a restructuring process, especially where:

• the terms of the scheme will still generally provide a benefit to the creditor; and
• the creditor consents to the compromise.

Furthermore, a secured creditor may still require leave to enforce the security against the company. For instance, in an administration, no security can be enforced over the company's property without the consent of the administrator or the court (see Section 480(2) of the CAMA 2020; see also Section 508 relating to the disposal of charged property by an administrator).

3.10 Can contracts / leases be disclaimed or otherwise addressed through restructuring proceedings?

The restructuring proceeding will generally determine whether contracts may be disclaimed or otherwise. For instance, under Section 480 of the CAMA 2020, where a company is undergoing administration, goods or property in its possession under a hire purchase agreement cannot be repossessed without the consent of the administrator or the permission of the court. Similarly, a landlord cannot exercise a right to forfeiture in relation to premises let to a company in administration without the consent of the administrator or the court (see also Section 509 of the CAMA 2020). Furthermore, where a company is in receivership, the receiver-manager may:

• carry on the business of the company under its existing contracts; or
• challenge any contract and apply to the court to set it aside on grounds of preference under Section 659 of the CAMA 2020.

Can liabilities of third parties (e.g. guarantors, professional advisers) be released through restructuring proceedings?

A third party (guarantor) may be released from liability in restructuring proceedings if:

• the underlying agreement provides for this; or
• the debtor can provide some other sort of security that affords acceptable comfort to the creditor.

3.11 Is any protection and/or priority afforded to the providers of new money in the context of restructuring proceedings (i.e. is “DIP financing” available)?

Prior to the introduction of the CAMA 2020, there was little or no room for an established reorganisation that would afford priority to rescue financiers. However, the CAMA 2020 has created a window under the general corporate insolvency regime for businesses to explore rescue finance and attach priority to the new financiers.

For instance, Chapter 18 provides for the administration of companies and states that the administrator may:

• do all such things necessary for the management of the company with the objective of rescuing the company or some or all of its undertakings as a going concern (Section 444 of the CAMA 2020); and
• obtain post-commencement finance under a contract which will have the highest priority as a first charge payable out of assets over which the administrator has control (Section 537(3) of the CAMA 2020).

Section 537 provides a window for an administrator to give super-priority to rescue finance under different options. The rescue finance may, in certain circumstances, be treated:

• as an administration cost under Sections 503, 537(2) and 665 of the CAMA 2020;
• as a first charge before the administration costs (Section 537(3) of the CAMA 2020); or
• where the consent of the secured creditors has been obtained, as ranking above or pari passu with secured claims (Section 490 and 510 of the CAMA 2020).

3.12 How do restructuring proceedings conclude?

The restructuring proceedings may conclude on:

• achievement of the purpose of the restructuring (ie, full implementation of the scheme or proposal);
• termination of the process; or
• the expiry of the statutory period.

Usually, certain documentation must be filed or notice must be given to stakeholders. The documents may be filed:

• with the Corporate Affairs Commission; or
• in the form of a report to the court in case of court-monitored proceeding.

For instance, under Rule 2.31 of the Insolvency Rules, 2022, upon full implementation or termination of a CVA, the supervisor must:

• send notice of the implementation or termination to the creditors within 28 days; and
• deliver such notice to the Corporate Affairs Commission within the same period.

Regulations 3.53 and 3.54 of the Insolvency Regulations relate to:

• notice of automatic termination of an administration and an administrator's order for termination of administration; and
• the requirements of the law with regard to the filing of reports and accounts.

4. Insolvency

4.1 What types of insolvency proceeding are available in your jurisdiction, and what are the benefits and drawbacks of each?

The types of insolvency proceedings available in Nigeria include the following.

Company voluntary arrangement (CVA): The Companies and Allied Matters Act (CAMA) 2020 introduced the CVA and company administration to Nigeria's corporate insolvency framework. These processes are similar, as they allow the insolvent company to continue its operations as a going concern. The insolvent company thus has the opportunity to agree on an arrangement with its creditors.

The major advantage of a CVA is that it allows the directors of the company to remain in control of the company. The main drawback is that it may be difficult to convince the majority of the shareholders of the company and the creditors to adopt a business restructuring plan, particularly as the directors will remain in control of the company.

Administration: The act allows for the appointment of an administrator to run an ailing company with the primary aim of rescuing the business and ensuring its survival. An administrator can be appointed either by the court or out of court. The role of the administrator involves:

• gathering the property of the company;
• examining claims against the company;
• analysing whether the company can be salvaged or should be wound up; and
• administering the best option for the company and the creditors.

The major benefits of administration are as follows:

• It offers the company the possibility to continue trading as opposed to the finality of being wound up; and
• It protects the company against any legal action.

The major drawback is that the power of the directors are transferred to an administrator, who will then have all necessary powers to:

• dispose of company assets;
• undertake a corporate restructuring; and
• even put the company into liquidation if it is thought that this will provide a better return to creditors.

Receivership: A creditor or group of creditors may appoint a receiver to receive money or realise their security from a defaulting company. A major advantage of receivership is that it helps creditors to recover the debt owed to them. A disadvantage is that a substantial percentage of the assets of the company may be sold to settle these debts, thereby exposing the company to winding up.

Winding up: This is usually considered as a last resort where:

• a company:
  • becomes irreversibly unable to pay its debts; or
  • continues to trade at a loss; and
• the company or the court determines that the best option is to put the company into liquidation.

The advantages include the following:

• It can provide an opportunity for creditors and equity owners of the company to cut their losses in a moribund investment; and
• It can bring an end to an activity which has become irrelevant. However, in certain cases, the business may still be relevant to the economy but the management of the business or the economic conditions may be affecting profitability.

3.2 How, by whom and on what grounds are insolvency proceedings initiated? Can the instigating party (or any other parties) select the identity of the relevant insolvency officeholder?

The CAMA 2020 sets out:

• the procedures and persons involved in insolvency proceedings; and
• the justification for their initiation.

Generally, depending on the procedure to be adopted, insolvency proceedings may be instigated by:

• a resolution of the company in a general meeting; or
• the appointment of a receiver pursuant to an instrument or application to the court (Sections 552, 553, 571 and 620 of the CAMA 2020).

The proceedings may be instigated by:

• the company itself;
• the creditors; or
• a director of the company (see Sections 232, 551 and 573 of the CAMA 2020).

The most crucial ground for the commencement of insolvency proceedings is the inability of the company to pay its debts or fulfil its obligations to the creditors (Sections 232 and 572 of the CAMA 2020). However, there are other grounds for the commencement of insolvency proceedings, which may include where:

• the company's object of incorporation has become obsolete because it has either been achieved or become unlawful; or
• the duration of the company has elapsed.

That said, there is nothing under Nigerian law that prohibits an instigating party from appointing an insolvency officeholder. The instigating party may:

• appoint the insolvency officeholder out of court where the instrument provides for this; or
• apply to the court to sanction the appointment of the proposed insolvency officeholder.

4.3 What are the effects of the commencement of insolvency proceedings, both for the debtor and for creditors?

Administration: Where a company is in administration:

• no step may be taken to enforce security over or repossess its assets without the consent of the administrator or the court;
• a landlord may not exercise a right of forfeiture by peaceable entry in relation to premises let to the company without the consent of the administrator or the court;
• no legal proceedings may be instituted or continued against the company without the consent of the administrator or the court; and
• any receiver of part of the company's property appointed by a secured creditor must vacate office if the administrator requires him or her to do so.

A petition for winding up of a company will be:

• dismissed on the making of an administration order; and
• suspended while the company is in administration.

CVA: The nominee has a 28-day timeframe (or such longer period as the court may allow) to submit a report stating whether, in his or her opinion, meetings of the company and creditors should be convened to consider the proposal. During this timeframe, the nominee may bring an application to court to:

• stay all proceedings in the winding up;
• provide for the appointment of the administrator to cease to have effect; or
• issue such directions as it considers appropriate for facilitating the arrangement.

4.4 Does a moratorium or stay apply and, if so, what is its scope? Are there exceptions?

The CAMA 2020 provides greater flexibility to debtors to voluntarily initiate or achieve a business rescue through a moratorium in restructuring proceedings. For instance, moratorium protection and a stay mechanism to achieve a formal collective resolution that best protects all creditors are available in administration.

A company may also engage in a creditors' voluntary liquidation under Chapter 22 of the CAMA 2020, essentially to achieve either:

• a CVA, which does not trigger a moratorium; or
• a scheme of arrangement, which triggers a six-month moratorium to give the scheme the chance to achieve a business restructuring. The moratorium is enforceable against all creditors and forestalls the initiation of winding-up and enforcement processes. The moratorium is enforceable against all creditors and forestalls the initiation of winding-up and enforcement processes.

4.5 What process do insolvency proceedings typically follow (including likely length of process and key milestones)?

CVA: The directors of the company, the administrator or the liquidator, as applicable, will make a CVA proposal to the creditors of the company. A nominee (qualified to act as insolvency practitioner) appointed by the directors of the company, the administrator or the liquidator, as applicable, will make a CVA proposal to the creditors for the purpose of supervising the implementation of the CVA. Within 28 days of receiving the notice of the proposal for a CVA, the nominee must submit a report to the Federal High Court stating:

• whether, in his or her opinion, meetings of the company and its creditors should be convened to consider the proposal; and
• if so, the date, time and place at which the proposed meetings should be held.

The requirement for the nominee to submit a report to the court applies only where the company is not in administration or winding up. The nominee may proceed to convene the necessary meetings without recourse to the court. The meetings of the members and creditors are to be held separately.

The CVA proposal may be approved with or without modifications, provided that the proposal itself or any subsequent modification thereto does not affect the right of a secured creditor to enforce its security or the priority and rights of preferential creditors, except with the consent of the secured creditor or preferential creditors concerned. If the decision taken at the creditors' meeting differs from that taken at the members' meeting, the court may, on application by a member:

• order that the decision of the members' meeting will prevail; or
• make such order as it thinks fit.

Administration: An appointment can be made by:

• the company;
• its directors;
• the holder of a floating charge; or
• the court.

In an administration that has a cross-border element, an application must be made ex parte to the court for approval.

The appointed administrator must:

• prepare a detailed schedule of assets and submit a copy to the party by which he or she was appointed within 60 days of the appointment;
• send a notice of the appointment to the company;
• obtain a list of creditors;
• send notice of the appointment to each creditor of whose claim and address the administrator is aware; and
• publish notice of his or her appointment with the Corporate Affairs Commission within 14 days of the appointment.

The administrator is expected to convene the initial creditors' meeting within 42 days of the date on which the company entered into administration. The statement of proposal must be presented at the meeting and may be approved either:

• without modification; or
• with modifications which are accepted by the administrator.

After the conclusion of the creditors' meeting, the administrator will report any decision taken to the court and the Corporate Affairs Commission.

If the administrator reports that the initial creditors' meeting has failed to approve the proposal, the court may:

• order that the appointment of the administrator will cease to have effect within a specified period;
• adjourn the hearing conditionally or unconditionally; or
• make any consequential order that the court deems appropriate.

Receiver or receiver-manager: There are two methods by which a receiver or a receiver-manager may be appointed – out of court or by the court.

Out of court: Where the charge instrument or mortgage document states that the debenture holders or a trustee of the debenture can, as a remedy to a default, exercise the right to appoint a receiver or a receiver-manager, a receiver or receiver-manager may be appointed if the trustee or the debenture holder is satisfied that the event which entitles the debenture holders to realise the security has occurred. Once the appointment is made:

• notice must be given to the Corporate Affairs Commission within 14 days indicating the terms of and remuneration for the appointment; and
• every invoice, order for goods or business letter issued by or on behalf of the company, or by the receiver, receiver-manager or liquidator of the company, being a document on or in which the company's name appears, must contain a statement that a receiver, receiver-manager or liquidator has been appointed.

In addition, an application may be made to the Federal High Court for direction in relation to any matter arising in connection with the performance of the receiver or receiver-manager's functions. On any such application, the court may give such directions or make such order declaring the rights of persons before the court or otherwise as it thinks just. Where a receiver or receiver-manager has been appointed on behalf of the debenture holders of the company secured by a floating charge:

• the receiver or receiver-manager must immediately send notice to the company of his or her appointment and the terms of such appointment
• the company must, within 14 days of receipt of the notice or such longer period as may be allowed by the court or by the receiver or receiver-manager, submit to him or her a statement on the affairs of the company; and
• the receiver or receiver-manager must, within two months of receipt of the statement, send:
  • a copy of the statement and a summary of the statement and of his or her comments thereon, if any, to the Corporate Affairs Commission;
  • a copy of the statement and of his or her comments thereon, if any, to the court;
  • a copy of any comments to the statement or notice that no such comments were necessary to the company; and
  • a copy of the summary to any trustees for the debenture holders on whose behalf he or she has been appointed and, insofar as he or she is aware of their addresses, to all such debenture holders.

Upon appointment, the floating charge over the assets of the company crystallises.

By the court: At any time after a debenture holder becomes entitled to realise its security, a receiver of any assets subject to a mortgage, charge or security in favour of the debenture holder or the trustee of the trust deed, or any other person, may be appointed by the court on the application of the trustee. An application may also be made by the creditors of a company being wound up by a court – in particular, a debenture holder. In such case, the court will appoint an official receiver on behalf of the creditor. In addition, the court may, on the application of interested persons, appoint a receiver or a receiver and manager of the property or undertaking of a company if:

• the principal money borrowed by the company or the interest is in arrears; or
• the security or property of the company is in jeopardy.

Where so appointed, the receiver or manager is deemed to be an officer of the court and must act according to the directions of the court.

Winding up: Two types of procedures can be used to voluntarily wind up a company in Nigeria:

• a members' winding up, where the company is solvent and can pay its debts in full within 12 months of commencement of the winding up, under Sections 627-633 of the CAMA 2020; or
• a creditors' voluntary winding up, where the company is insolvent and the creditors of the company will take charge of the liquidation process, under Sections 635-641 of the CAMA 2020.

The procedure for a members' winding-up is as follows:

• The company, at a general meeting, passes a special resolution proposing to wind up the company and appoints one or more liquidators accordingly. The appointed liquidator may be a corporate lawyer or professional such as an accountant with good knowledge of the winding-up laws and procedures.
• The company:
  • gives notice of the special resolution passed to the Corporate Affairs Commission within 14 days of its passage; and
  • advertises it in the Official Gazette or in two daily newspapers.
• A statutory declaration of solvency is made by the directors or a majority of the directors within five weeks of passing of the special resolution for winding up the company.
• The company must cease to carry out business once the resolution for winding up has been passed; and the directors' powers will cease upon the appointment of a liquidator, unless the company in a general meeting or the liquidator allows them to continue.
• If the winding-up process last for more than a year, the liquidator must hold a meeting at the end of each year, publishing notification thereof in the Official Gazette and in certain newspapers printed in Nigeria.
• The liquidator must hold final meetings upon liquidation of the company and send a copy of the accounts/returns of the meeting to the Corporate Affairs Commission for registration within seven days of the meetings.
• Once the affairs of the company have been fully wound up, the liquidator must prepare, forward and convene a meeting at which to present the financial accounts from the winding up, showing how it was conducted and the results of any trading during this period.
• The liquidator:
  • must preserve all books, papers and documentation of the company resulting from his or her activities as a liquidator for a period of five years; and
  • if so directed by the Corporate Affairs Commission, may not destroy them without the commission's written consent.
• Within 28 days of the meeting, the liquidator must send to the Corporate Affairs Commission:
  • copies of the accounts; and
  • a statement of the meeting held and the relevant dates for registration.
• Finally, the liquidator must apply for a dissolution order and send this to the Corporate Affairs Commission. The company is deemed dissolved three months after registration of the accounts/returns with the commission.

The procedure for a creditors' voluntary winding up is as follows:

• Both the company and its creditors hold separate meetings to propose the winding up of the company. In this case, the company must convene the creditors' meeting on the same day or the following day.
• The creditors and the company, at their respective meetings, may nominate someone to be the liquidator. However, the creditors' nominee will be appointed as the liquidator if different persons are nominated at the two meetings. Meanwhile, any director, member or creditor may apply to the court to order otherwise.
• At their meeting, the creditors may appoint a committee of inspection of not more than five persons if they think it fit to do so. The company may also appoint not more than five persons to the committee, although the creditors may reject these appointments.
• Within 14 days of his or her appointment, the liquidator must:
  • publish it in the Official Gazette and two daily newspapers; and
  • deliver to the Corporate Affairs Commission for registration a notice of his or her appointment.
• The liquidator must publish notification of the final meeting and present it to the meeting for approval. After this meeting, the liquidator has seven days to send a copy of the account and make a return on the holding of the meeting to the Corporate Affairs Commission.
• The company is deemed dissolved three months after registration of the accounts with the commission. However, the court – upon an application by the liquidator, a member or a creditor – can defer the date from which dissolution is to take effect.

The procedure for court winding up is as follows:

• The petition for winding up is filed together with a verifying affidavit.
• The petition and affidavit are served on the respondent with proof of service.
• Leave of the court to advertise the petition is obtained.
• A memorandum of compliance is filed.
• The respondent files:
  • a notice of intention to appear;
  • a memorandum of appearance; and
  • an affidavit in opposition to the petition.
• The petitioner files a reply to the respondent's processes.
• The court appoints a provisional liquidator or, if none is appointed, the official receiver becomes the provisional liquidator.
• A summons for security for costs and a list of persons appearing are filed.
• The petition is heard and a winding-up order is made.
• On the making of a winding-up order, a Liquidator is appointed. If no liquidator is appointed, the official receiver shall by virtue of this office become the liquidator.
• The winding-up order is served on the respondent.
• The liquidator applies for dissolution and the court issues an order of dissolution.
• A copy of the court order is delivered within 14 days to the Corporate Affairs Commission, which records the dissolution of the company in its books.

An aggrieved party may appeal any order made by a court in the course of the winding up and dissolution of the company (Section 619 of the CAMA 2020).

4.6 What are the respective roles, rights and responsibilities of the following stakeholders during the insolvency proceedings?

During winding-up proceedings, the debtor ceases to carry out business. Where an administrator, receiver or receiver-manager is appointed:

• the rights of the debtor over all securities and assets are extinguished; and
• the creditors' interests take priority.

The functions of the board are largely limited during insolvency proceedings, as the directors' rights and duties cease during the proceeding.

At a shareholders' meeting, a special resolution for the winding up of the company is passed. There is also an annual general meeting with the liquidator while the winding-up proceedings are ongoing.

During winding-up proceedings, secured creditors have the right to submit their claims against the company and have them attended to with priority.

An unsecured creditor is one with an interest in the assets of the company but which is not attached to a specific asset. The interest of an unsecured creditor becomes realisable upon crystallisation. During winding-up proceedings, unsecured creditors have the right to submit their claims against the company and have them attended to in accordance with the priority of the claim.

The administrator assumes the management of the company's affairs during insolvency proceedings. The administrator has the general power to do anything necessary or expedient to manage the company's affairs and achieve a better result for the creditors.

During insolvency proceedings, employees can be laid off or have their services retained by the insolvency practitioner. They can also bring claims for payment of their wages and other entitlements.

Pension creditors stand in the same position as regular creditors and enjoy the same rights and obligations as other creditors, subject to any priority-based registration that such pension creditors may have.

An insolvency officeholder manages the insolvency proceedings, which involves:

• collating claims;
• managing the business;
• disposing of assets where necessary; and
• generally overseeing the insolvency proceeding.

The Federal High Court (by virtue of Section 251 of the Constitution 1999) has jurisdiction in insolvency matters to hear winding-up applications and insolvency applications to appoint an administrator or receiver-manager.

4.7 What is the process for filing claims in the insolvency proceedings?

The process for filing claims depends on the nature of the insolvency proceedings. For instance, in a winding-up petition, once leave has been granted to the petitioner to advertise the petition, the creditors will file their claims through affidavit, attaching relevant documents to justify their claims. The affidavit verifying the claim must contain the particulars of the claim, such as:

• statements of account;
• agreements;
• receipts; or
• any other documentary evidence that substantiates the claim.

4.8 How are claims ranked in the insolvency proceedings? Do any claims have “super priority” and is there scope for subordination by operation of law (e.g. equitable subordination)?

The ranking of claims will depend on the nature of the insolvency proceedings. For instance, in an administration, the administrator may exercise his or her discretion to propose that any claim be treated as super priority because he or she considers the compromise of the claim pertinent to rescuing the company. In winding-up proceedings, the priority is as follows:

• The claims of secured creditors rank in priority to all other claims.
• Preferential payments (eg, local rates, charges, tax deductions and labour-related claims such as unpaid wages and contributions to occupational pension schemes) rank equally among themselves after the expenses of the winding up and must be paid in full, unless the assets are insufficient to meet them, in which case they will abate in equal proportion.
• The claims of unsecured creditors are then paid.
• The claims of equity holders are ranked last.

4.9 What is the effect of insolvency proceedings on existing contracts? Is the counterparty free to terminate? Can they be disclaimed? Will retention of title and set-off provisions in these contracts remain enforceable?

The effect of the commencement of insolvency proceedings on existing contracts will largely depend on the nature of the proceedings. The effect of administration on existing contracts is outlined in Section 380 of the CAMA 2020.

In receivership, the company remains in business and the powers of the receiver may be exercised subject to:

• the scope of the instrument of appointment; and
• the assets that are subject to receivership.

Contracts between the company and any other persons will continue to be valid insofar as they are not challenged by the receiver-manager.

In a liquidation, under Sections 575 and 580 of the CAMA 2020, all existing contracts remain valid and enforceable, subject to obtaining leave from the court to proceed against the company. Thus, while the contracts remain valid, an action to enforce them may not be commenced without leave of the court.

Depending on the terms of the specific agreement or contract, the commencement of insolvency proceedings may be identified as an event of force majeure that will frustrate the contract, especially where performance is pending. Hence, the counterparty may disclaim the contract to that extent.

A mortgagee or secured creditor that has a fixed charge over the assets of the company may retain the document of title; and where the contract allows for setoff, a counterparty may exercise this right in particular, as the proceedings do not affect the validity of the contract but only enforcement of the same in court.

4.10 Can transactions entered into by the debtor prior to be insolvency be challenged and set aside? What are the relevant grounds / look-back periods / defences?

Yes. Any conveyance, mortgage, delivery of goods, payment, execution, transaction or other act relating to the assets of a company performed in the years preceding the commencement of insolvency grants the counterparty grounds to challenge the transaction. The company will be deemed to have entered into a transaction at an undervalue if it made a gift to a person or entered into a transaction on terms that provided for the company to receive no or significantly less consideration than the true value of the transaction. On such an application, the court will make such order as it deems fit to restore the situation to that which would have existed had the company not entered into the relevant transaction.

The defences that may be brought against such application include the following:

• The company entered into the transaction in good faith for the purpose of carrying on its business; and
• At the time it did so, there were reasonable grounds to believe that the transaction would benefit the company.

4.11 How do the insolvency proceedings conclude? Can any liabilities survive the insolvency proceedings?

The insolvency proceedings may conclude if their purpose is achieved – that is:

• full implementation of the scheme or proposal;
• termination of the process; or
• the expiry of the statutory period.

Usually, certain documentation must be filed or notice must be given to stakeholders. The documents may:

• be filed with the Corporate Affairs Commission; or
• take the form of a report to the court in the case of court-monitored proceedings.

Liabilities can survive the insolvency proceedings if the assets are insufficient to cover all outstanding claims.

5. Cross-border / Groups

5.1 Can foreign debtors avail of the restructuring and insolvency regime in your jurisdiction?

The insolvency regime in Nigeria applies to companies that are registered to carry on business in Nigeria. A foreign debtor cannot avail of the rescue tools as it is not registered as a corporate entity in Nigeria.

5.2 Has the UNCITRAL Model Law on Cross Border Insolvency or the UNCITRAL Model Law on Recognition and Enforcement of Insolvency-Related Judgments been adopted or is it under consideration in your country?

The UNCITRAL Model Law on Cross-Border Insolvency and the UNCITRAL Model Law on Recognition and Enforcement of Insolvency-Related Judgments have not been adopted and ratified in Nigeria. However, insolvency professionals may refer the court to these instruments as persuasive authority.

5.3 Under what conditions will the courts in your jurisdiction recognise and/or give effect to foreign insolvency or restructuring proceedings or otherwise grant assistance in the context of such proceedings?

Where any foreign proceedings have a cross-border element that involves Nigeria, an application may be made to the court to grant assistance in the context of such proceedings. For instance, in Global Steel Holdings Limited (in liquidation) v Global Infrastructure (Nigeria) Limited (Suit FHC/L/CP/695/2023), the foreign applicant sought the assistance of the local court in relation to foreign proceedings. The local court made an order on 20 April 2023:

• permitting the applicant to take custody and preserve the records of the respondent; and
• directing domestic banks to disclose any amounts in the accounts of the respondent.

5.4 To what extent will the courts cooperate with their counterparts in other jurisdictions in the case of cross-border insolvency or restructuring proceedings?

An application may be made to the court attaching the relevant certified processes of foreign proceedings and requesting the local court to cooperate with its foreign counterparts (see Global Steel Holdings Limited (in liquidation) v Global Infrastructure (Nigeria) Limited (Suit FHC/L/CP/695/2023)). Although there is no express provision in the Companies and Allied Matters Act, 2020 (CAMA) or the rules of court on communication between local courts and foreign courts, an application may also be made for the court to communicate with its counterpart in the case of cross-border proceedings.

5.5 How are corporate groups treated in the context of restructuring and insolvency proceedings? If there is no concept of a group proceeding (or consolidation), is there any regime through which insolvency officeholders must / may cooperate?

There is no legal framework for joint insolvency proceedings for corporate groups in Nigeria. Notwithstanding the status of corporate groups, the companies that make up a corporate group maintain distinct corporate legal personality; thus, insolvency proceedings must be commenced severally against all of them, although an application may be made to consolidate the insolvency proceedings.

Insolvency professionals may cooperate considering the effect of the relevant restructuring proceeding. For instance, where a company is under administration, a petition for winding up will be suspended and any provisional liquidator may suspend his or her actions. A receiver will also vacate his or her office if the administrator requires him or her to do so, as provided under Section 478 of the CAMA 2020.

5.6 Is your country considering adoption of the UNCITRAL Model Law on Enterprise Group Insolvency?

The amendments to the CAMA 2020 and other laws suggest that Nigeria is keen to ensure that its regimes reflect international best practice, which may lead to the adoption of the UNCITRAL Model Law.

5.7 How is the debtor's centre of main interests determined in your jurisdiction?

The debtor's centre of main interests in Nigeria is determined on the basis of the primary place of business, which is usually:

• the company's registered address;
• where the company's primary assets are located; or
• where the company carries out its business operations.

In BB Energy Holding Mauritius Limited v Samuel Chuba Okeke (Suit FHC/CA/CS/167/2023), the company in receivership had its registered address in Lagos but its primary assets and business operations were located in Cross-River State. The receivership proceedings were initiated in Cross-River State and the court granted orders to protect the interests of a secured creditor.

5.8 How are foreign creditors treated in restructuring and insolvency proceedings in your jurisdiction?

A foreign creditor can institute insolvency proceedings against a company registered Nigeria. Please see BB Energy Holding Mauritius Limited v Samuel Chuba Okeke (Suit FHC/CA/CS/167/2023), in which a foreign creditor validly instituted an action in Nigeria to recover an outstanding debt.

6. Liability risk

6.1 What duties do the directors of the debtor have when the company is in the “zone of insolvency” (or actually insolvent)? Do they have an obligation to commence insolvency proceedings at any particular time?

Directors are trustees of the company's money and property, and as such must account for the company's affairs, whether the company is in the zone of insolvency or not. If the company is in the zone of insolvency, the directors are not obliged to commence insolvency proceedings. However, they may:

• make a proposal under a company voluntary arrangement to the creditors in an attempt to satisfy their claims; and
• appoint an administrator to manage the company's affairs.

If the company is actually insolvent and an insolvency officeholder has been appointed, the directors have a duty to assist the insolvency officeholder by providing all documents of the company needed for the insolvency officeholder to perform his or her statutory functions.

6.2 Are there any circumstances in which the directors could incur personal liability in the context of a debtor's insolvency?

Each director is individually responsible for the actions of the board; and a director's absence from the board's deliberations, unless justified, does not relieve him or her from such responsibility. In a limited liability company, the liability of the directors may be unlimited if this is specified in the memorandum. If a director acts contrary to the interests of the company (whether in the zone of insolvency or not):

• the relevant transaction may be set aside; and
• a civil or criminal action may be filed against the director, depending on the circumstances of the case.

6.3 Is there any scope for any other party to incur liability in the context of a debtor's insolvency (e.g. lender or shareholder liability)?

Generally, a shareholder cannot incur further liability beyond its shareholding, as long as the memorandum does not provide for unlimited liability. If a debtor is found to have entered into a transaction at an undervalue with a lender, not only will the transaction be set aside, but the lender may incur liability for acting in bad faith. In Cakasa (Nig) Company Limited v Samon Petroleum Limited (in receivership) (Suit HC/74/2023), the lender – knowing that the company was in receivership – instituted an action against it and failed to notify the receiver-manager or inform the court that the company was under receivership. It subsequently obtained a judgment for the unsecured debt. The company in receivership applied for the judgment to be set aside and it was duly set aside with additional costs to the lender for acting in bad faith.

7. The Covid-19 pandemic

7.1 Did your country make any changes to its restructuring or insolvency laws in response to the Covid-19 pandemic? If so, what changes were made, what is their effect and are they temporary or permanent?

In a 16 March 2020 circular, the Central Bank of Nigeria announced measures in response to the COVID-19 outbreak. The measures included:

• a one-year moratorium on all principal repayments;
• an interest rate reduction on intervention facilities from 9% to 5%;
• the grant of a three-month repayment moratorium for all government-funded loans, including those issued by:
  • the Bank of Industry;
  • the Bank of Agriculture; and
  • the Nigeria Export Import Bank; and
• regulatory forbearance to deposit money banks for the restructuring of loans for affected businesses and households, among additional incentives to encourage the extension of longer-tenured credit facilities.

The forbearance on the interest rate was extended for a further one-year period after its expiry on 28 February 2021, while the extension of the moratorium is being considered on a case-by-case basis. This is in addition to the Companies and Allied Matters Act 2020, which was enacted in August 2020 (a few months after the pandemic); the provisions contained in the new law are permanent.

8. Other

8.1 Is it possible to effect a “pre-pack” sale of assets, and is it possible to sell the assets free and clear of security, in restructuring and insolvency proceedings in your jurisdiction?

Yes, it is possible to effect a ‘pre-pack' sale of assets in a restructuring. The directors or creditors may negotiate and finalise the terms of the scheme with all stakeholders before appointing the insolvency officeholder.

8.2 Is “credit bidding” permitted?

There are no specific regulations that allow a secured creditor to bid in the sale of its secured asset for the amount of its debt (as a credit bid). However, the parties may agree to auction the secured asset in order to liquidate the liability.

9. Trends and predictions

9.1 How would you describe the current restructuring and insolvency landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

The restructuring and insolvency regime in Nigeria has evolved considerably in recent years with the enactment of new laws such as:

• the Companies and Allied Matters Act (CAMA) 2020;
• the Federal Competition and Consumer Protection Act 2018; and
• the Asset Management Corporation of Nigeria Act.

These laws are gradually redefining Nigeria as a creditor-friendly jurisdiction and continue to facilitate the operation of restructuring and insolvency in the country.

Pursuant to the powers conferred on him by Section 867 of the CAMA 2020, the minister of industry, trade and investment approved the Insolvency Regulations 2022, which define and guide the operation of insolvency administration as set out in the CAMA 2020.

Also, the ongoing training and advocacy provided by the Business Rescue and Insolvency Practitioners Association of Nigeria continues to promote the development of insolvency and business rescue in Nigeria.

Anticipated developments primarily relate to how the courts will interpret the provisions of the new laws.

10. Tips and traps

10.1 What are your top tips for a smooth restructuring and what potential sticking points would you highlight?

Some tips for a smooth restructuring include the following:

• Ensure that communications are transparent;
• Maintain integrity, accountability, independence and competence; and
• Ensure that the proposed repayment plan is based on reasonable, objective speculation.

Potential sticking points include:

• coordination and cooperation, particularly in cross-border proceedings;
• verification of claims;
• asset tracing;
• restructuring; and
• ranking of claims.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.