Nigeria: Insolvency In Nigeria: A Change In Status Quo

Last Updated: 23 November 2018
Article by Ifeatu Medidem

At the recently concluded Business Recovery and Insolvency Practioners Association of Nigeria (BRIPAN) International Conference themed, "Driving Business Rescue in the Shadow of the Law", which was well organized, well attended and very enlightening, several salient issues were raised in the discussions by speakers and discussants alike.

In all, insolvency practice in Nigeria needs to be stepped up several notches if the Nigerian economy is to thrive and attain its maximal potential.

The Global Shift

Insolvency practice has moved away from contentious, lengthy Court proceedings. Globally, there's a shift from the 'kill the indebted company' standpoint. Not every financially distressed company has to be put down. In some cases, the business is yet viable and with the help of business rescue mechanisms, a viable but temporarily insolvent company may survive.

What Is Business Rescue?

The Insolvency Act of the United Kingdom provides two business rescue options, Administration, which allows for the appointment of an Administrator for the company to ensure the company's survival and for realization of its assets for the benefit of its creditors; and Company

Voluntary Arrangement which initially did not provide for a moratorium but later upgraded to include a moratorium, assists the ailing company to develop and execute a business rescue plan for survival and optimal realization of its assets.

The South African version of business rescue, modeled from the United Kingdom Company Voluntary Arrangement, involves the rehabilitation of a financially distressed company through the temporary supervision of the affairs, business and property of the company.

The creditors allow a moratorium during which a business rescue plan to restructure the indebted company's business, assets and equity against its debts and liabilities for a possible survival of the company or at best fuller recovery on the part of the creditors.

In the United States of America, reorganization is recognized as an alternative to liquidation, involving a 120-day moratorium during which the debtor-in-possession files a reorganization plan, and trustees are appointed to monitor progress and the company continues as a going concern.

There is also some creditor involvement in the process. It is economically more beneficial to all parties.

Regulatory Framework In Nigeria

If anything was emphasized at the BRIPAN conference, it was definitely the lack of a regulatory framework, majorly the lack of a bankruptcy Protection law to allow ailing but viable companies some respite to reorganize and work out a recovery plan. The CAMA Bill contains only the barest requirements or engagement in insolvency practice.

It was largely recommended that BRIPAN spearheads the drive for more contemporary provisions in CAMA and the long pending Insolvency Bill; perhaps culling from the UK, USA and South African provisions, as may be appropriate for Nigeria.

Needless to say, the operating environment in these jurisdictions is quite different from the Nigerian environment.

The Nigerian Experience

Things are quite different in Nigeria, and the operating environment is not conducive for various reasons. Chiefly, is a gaping lacuna of specialized Insolvency and Bankruptcy legislations to protect the ailing company where the need arises and to better manage the assets to settle the creditors accordingly.

Lack of experience in the business rescue model of insolvency naturally flows from the lack of a regulatory regime for insolvency practice. In the same vein, insolvency, bankruptcy or liquidation in whatever form is often stigmatized.

Of course, the largely litigious disposition to conflict resolution in Nigeria plays a huge part. Notably, Arbitration is only lately shedding the perception of being a prelude to litigation with the directives of the Chief Justice of Nigeria.

The Way To Go

Business recovery is the preferred strategy, because it entails rehabilitating a financially distressed company applying various options like moratorium, post commencement financing, informal workouts, etc. Nigeria ought to borrow a leaf or two from any or all of the jurisdictions highlighted above as may best suit our unique cultural terrain.

Not So Real Life Example

A very interesting highlight of the conference was a case study session where all in attendance were given an insolvency scenario to work out. The company in question had experienced several unforeseen challenges which left it with huge debts to its lenders, staff, and trade creditors, and shut-down operations in its key factories.

We were grouped as financial advisors to the top management of the company, insolvency practitioners and legal advisers to the majority shareholder, insolvency practitioners and legal advisers to the lenders, legal advisers to the employees union and the company's trade creditors.

The idea was to work out a restructure plan agreeable to all stakeholders, without any recourse to court proceedings at all. It was quite an eye-opener and interestingly, within an hour, an ostensibly good business rescue plan was drawn up by all stakeholders to revive the company's business and partly settle the creditors.

Naturally, in real life, such a case may not be so easily resolved, and most probably not within an hour. However, it is worth the work-out.

Final Word

It is important for liquidators and lenders to think more long term in order yield fuller recovery, rather than the assets stripping recovery that leaves all stakeholders wanting.

There should also be a shift from government bailout and instead, shareholders should be obliged to inject funds into the ailing company/business, while presenting a restructure proposal.

Another important point is that in some cases, the lenders (the Banks) generally do not quite understand the debtor company's business and this is often exacerbates the indebtedness of the company.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions