Appraising The Corporate Administration Regime Under The Companies And Allied Matters Act 2020: Towards A Rescue Culture In Nigeria, by Ishie-Johnson Emmanuel

ABSTRACT

The Companies and Allied Matters Act 2020 (CAMA 2020) represents Nigeria’s most significant corporate law reform in three decades. For the first time, it establishes a formal corporate rescue regime through administration and Company Voluntary Arrangements (CVAs), principally under sections 444–482. This marks a significant shift from Nigeria’s traditionally creditor-driven and liquidation-oriented approach towards a framework that recognises business rescue as an alternative to corporate failure. This article critically examines the administration framework established under CAMA 2020. It argues that, although the Act constitutes a commendable step towards developing a rescue-oriented insolvency regime, its effectiveness is constrained by statutory ambiguities, institutional deficiencies, and potential resistance from creditors accustomed to traditional insolvency procedures. Drawing on the experiences of the United Kingdom under the Insolvency Act 1986 and South Africa under the Companies Act 71 of 2008, the article identifies areas requiring reform and proposes measures aimed at developing a more effective corporate rescue culture in Nigeria, capable of preserving viable businesses, employment, and investments.

Keywords: CAMA 2020, Administration, Corporate Rescue, Insolvency, Receivership, Business Rescue, CVA

1. INTRODUCTION

For over three decades, corporate insolvency in Nigeria was largely characterised by liquidation-oriented mechanisms. Under the repealed Companies and Allied Matters Act 1990, companies experiencing financial distress had limited avenues for restructuring or rescue, with receivership at the instance of secured creditors and court-ordered winding-up constituting the principal mechanisms available. Consequently, companies experiencing temporary cash-flow difficulties could be subjected to insolvency procedures that resulted in liquidation, with potential consequences for employment, enterprise value, and entrepreneurial activity.

The enactment of the Companies and Allied Matters Act 2020 (CAMA 2020) marked a significant shift in Nigeria’s corporate insolvency framework. For the first time, Nigerian law expressly incorporated business rescue mechanisms through the introduction of Company Voluntary Arrangements (CVAs) and administration. This development reflects broader international approaches to corporate rescue, including the framework established under the United Kingdom Insolvency Act 1986, as subsequently amended by the Enterprise Act 2002, and the reorganisation framework under Chapter 11 of the United States Bankruptcy Code.

Against this background, the central question addressed by this article is whether the administration regime established under CAMA 2020 provides an effective framework for the rescue and rehabilitation of financially distressed companies in Nigeria.

2. HISTORICAL EVOLUTION: FROM CAMA 1990 TO CAMA 2020

Under CAMA 1990, the statutory framework governing receivership and winding-up provided limited mechanisms for the rescue of financially distressed companies. An administrative receiver appointed pursuant to a floating charge primarily served the interests of the appointing secured creditor rather than the company and its wider body of stakeholders. Moreover, the regime did not provide a comprehensive statutory moratorium capable of protecting a financially distressed company from creditor enforcement while restructuring efforts were undertaken. These features attracted criticism from scholars, including Orojo and Akanki, who regarded the framework as outdated and predominantly creditor-oriented.

CAMA 2020 represents a significant departure from this approach. The Act restricts the appointment of administrative receivers in respect of floating charges created after 7 August 2020 and introduces administration under section 450. Under the new regime, an administrator is required to pursue the statutory objectives of administration, which include rescuing the company as a going concern where reasonably practicable, achieving a better result for the company’s creditors as a whole than would be achieved through liquidation, or, where appropriate, realising property for distribution to one or more secured or preferential creditors. This represents a fundamental shift from the predominantly creditor-driven receivership model towards a broader corporate rescue framework.

3. THE NEW ADMINISTRATION REGIME: AN OVERVIEW

Section 444 of CAMA 2020 defines administration as a procedure for managing the affairs, business and property of a company in financial distress. The principal features of the administration regime include the following:

(a) Modes of Appointment: An administrator may be appointed by the court under section 450, by the holder of a qualifying floating charge under section 450, or by the company or its directors under section 454, subject to the statutory requirements governing each mode of appointment.

(b) Statutory Moratorium: Section 453 provides a statutory moratorium that restricts the commencement or continuation of legal proceedings against the company, the enforcement of security, and the forfeiture of premises without the consent of the administrator or the leave of the court. This protection provides the company with the necessary breathing space to facilitate restructuring and other rescue measures.

(c) Hierarchy of Objectives: Section 451 establishes three statutory objectives of administration, to be pursued in the prescribed order: first, rescuing the company as a going concern; second, achieving a better result for the company’s creditors as a whole than would be likely if the company were wound up; and third, realising property for distribution to one or more secured or preferential creditors. The hierarchy reflects the rescue-oriented character of the administration regime.

(d) Powers of the Administrator: Sections 461–468 confer extensive powers on the administrator to manage the affairs, business and property of the company. These powers include continuing the company’s business, removing or appointing directors where legally permissible, and dealing with property subject to security interests, subject to the statutory limitations imposed by CAMA 2020.

(e) Regulation of Insolvency Practitioners: CAMA 2020 establishes qualification and regulatory requirements governing the appointment of insolvency practitioners. In particular, section 707 provides for the licensing and regulation of insolvency practitioners, while the provisions governing administration prescribe the qualifications required of a person appointed as an administrator.

4. COMPANY VOLUNTARY ARRANGEMENT (CVA)

Sections 434–442 of CAMA 2020 provide for Company Voluntary Arrangements (CVAs), which enable a company to enter into a voluntary arrangement with its creditors for the restructuring or settlement of its debts, subject to the statutory requirements and supervision of an insolvency practitioner. Unlike administration, a CVA does not necessarily require the company to undergo a formal administration process, thereby providing a potentially less complex mechanism for financially distressed companies seeking to restructure their liabilities.

The flexibility of the CVA framework may make it particularly suitable for small and medium-sized enterprises (SMEs) that may find the costs and procedural demands of formal administration burdensome. The Nigerian framework broadly reflects the approach to CVAs under Part I of the United Kingdom Insolvency Act 1986, which similarly provides a mechanism through which companies can restructure their obligations by agreement with creditors.

5. CRITICAL GAPS AND CHALLENGES TO EFFECTIVE RESCUE

Despite its novelty, the administration regime under CAMA 2020 has encountered several challenges in its implementation:

(i) Limited Jurisprudence: Since the commencement of CAMA 2020, there appears to be limited reported judicial consideration of administration proceedings before the Federal High Court. The scarcity of reported cases has, in turn, limited the development of jurisprudence capable of clarifying the interpretation and practical application of the administration provisions.

(ii) Absence of a Specialised Insolvency Court: Unlike the United Kingdom, which has a specialised Insolvency and Companies Court within the High Court, Nigeria does not currently have a dedicated court exclusively responsible for insolvency and corporate restructuring matters. Insolvency disputes before the Federal High Court are therefore handled within a broader jurisdiction encompassing various commercial matters. This may present challenges where complex restructuring and insolvency issues require specialised judicial expertise.

(iii) Institutional and Regulatory Weaknesses: The effectiveness of the administration regime also depends on the capacity of regulatory institutions to supervise insolvency practitioners and ensure compliance with applicable regulatory standards. Concerns have been raised regarding the practical implementation and enforcement of the Companies Regulations 2021 and Insolvency Regulations 2022, particularly in relation to the licensing, supervision, and discipline of insolvency practitioners.

(iv) Creditor Attitudes and the Continued Preference for Receivership: The continued familiarity of financial institutions with receivership, particularly under existing security arrangements, may present an obstacle to the wider adoption of administration. Creditors accustomed to the more direct enforcement mechanisms associated with receivership may be reluctant to embrace a rescue procedure that places greater emphasis on collective creditor interests and the preservation of the company as a going concern.

(V) Absence of a Statutory Rescue-Financing Framework: A further limitation is the absence of an express statutory framework for post-commencement financing. Unlike section 135 of South Africa’s Companies Act 71 of 2008, which provides for post-commencement finance during business rescue, CAMA 2020 does not establish a comparable regime for rescue financing. The absence of such a mechanism may make it difficult for financially distressed companies to obtain the working capital necessary to continue operations during administration, thereby undermining the prospects of a successful rescue.

6. COMPARATIVE LESSONS: UNITED KINGDOM AND SOUTH AFRICA

Despite its novelty, the administration regime under CAMA 2020 has encountered several challenges in its implementation:

(i) Limited Jurisprudence: Since the commencement of CAMA 2020, there appears to be limited reported judicial consideration of administration proceedings before the Federal High Court. The scarcity of reported cases has, in turn, limited the development of jurisprudence capable of clarifying the interpretation and practical application of the administration provisions.

(ii) Absence of a Specialised Insolvency Court: Unlike the United Kingdom, which has a specialised Insolvency and Companies Court within the High Court, Nigeria does not currently have a dedicated court exclusively responsible for insolvency and corporate restructuring matters. Insolvency disputes before the Federal High Court are therefore handled within a broader jurisdiction encompassing various commercial matters. This may present challenges where complex restructuring and insolvency issues require specialised judicial expertise.

(iii) Institutional and Regulatory Weaknesses: The effectiveness of the administration regime also depends on the capacity of regulatory institutions to supervise insolvency practitioners and ensure compliance with applicable regulatory standards. Concerns have been raised regarding the practical implementation and enforcement of the Companies Regulations 2021 and Insolvency Regulations 2022, particularly in relation to the licensing, supervision, and discipline of insolvency practitioners.

(iv) Creditor Attitudes and the Continued Preference for Receivership: The continued familiarity of financial institutions with receivership, particularly under existing security arrangements, may present an obstacle to the wider adoption of administration. Creditors accustomed to the more direct enforcement mechanisms associated with receivership may be reluctant to embrace a rescue procedure that places greater emphasis on collective creditor interests and the preservation of the company as a going concern.

(V) Absence of a Statutory Rescue-Financing Framework: A further limitation is the absence of an express statutory framework for post-commencement financing. Unlike section 135 of South Africa’s Companies Act 71 of 2008, which provides for post-commencement finance during business rescue, CAMA 2020 does not establish a comparable regime for rescue financing. The absence of such a mechanism may make it difficult for financially distressed companies to obtain the working capital necessary to continue operations during administration, thereby undermining the prospects of a successful rescue.

7. RECOMMENDATIONS

To strengthen the effectiveness of the administration regime under CAMA 2020, the following reforms are proposed:

(a) Introduction of Pre-Pack Administration and Rescue Financing: CAMA 2020 should be amended to expressly provide for pre-packaged administration and a statutory framework for rescue financing. The framework should draw on relevant aspects of the South African approach while incorporating safeguards to protect creditors and other stakeholders from potential abuse.

(b) Establishment of a Specialised Insolvency Division: A specialised Insolvency Division should be established within the Federal High Court, supported by appropriate practice directions issued by the Chief Judge. Such a division would facilitate the development of judicial expertise and consistency in the determination of complex insolvency and restructuring matters.

(c) Strengthening of Professional Regulation: The regulatory framework governing insolvency practitioners should be strengthened, with the Corporate Affairs Commission exercising effective oversight and BRIPAN playing an appropriate professional and institutional role within the statutory framework. Clear mechanisms should be established for licensing, monitoring, professional discipline, and continuing development of insolvency practitioners.

(d) Judicial Training and Stakeholder Sensitisation: Continuous judicial training on corporate insolvency and restructuring should be prioritised. Financial institutions and other major stakeholders should likewise be sensitised to the objectives and potential benefits of administration, particularly as an alternative to immediate enforcement and liquidation where business rescue is reasonably practicable.

(e)  Issuance of Practice Directions and Procedural Rules: The Chief Judge of the Federal High Court, in conjunction with relevant stakeholders, should issue comprehensive Insolvency Practice Directions and Rules of Procedure governing administration proceedings. Clear procedural guidance would promote certainty, reduce delays, and facilitate the efficient administration of rescue proceedings.

8. CONCLUSION

CAMA 2020 represents a significant legislative step towards developing a modern corporate rescue framework in Nigeria. Its introduction of administration and Company Voluntary Arrangements marks an important departure from the predominantly liquidation-oriented approach of the previous regime. However, the effectiveness of these mechanisms will depend not only on the statutory framework but also on the strength of the institutions, expertise of practitioners, judicial capacity, and willingness of creditors and other stakeholders to embrace corporate rescue.

Without corresponding institutional and procedural reforms, the administration regime risks remaining more effective in law than in practice. Nigeria must therefore continue to develop its rescue framework in a manner that reflects its economic and commercial realities while drawing appropriate lessons from established international models. A functional rescue culture has the potential to preserve viable businesses, protect employment, and sustain investment. The responsibility now rests with judges, insolvency practitioners, regulators, creditors, and policymakers to ensure that the objectives embodied in CAMA 2020 are effectively translated from statutory provisions into practical outcomes.

REFERENCES

1. J O Orojo, Company Law and Practice in Nigeria (5th edn, LexisNexis 2008) 412.
2. S Sanni, Nigerian Company Law (2nd edn, Obafemi Awolowo University Press 2010) 305.
3. Companies and Allied Matters Act 2020, ss 434–482.
4. V Finch, Corporate Insolvency Law: Perspectives and Principles (2nd edn, CUP 2017) 12.
5. Companies and Allied Matters Act 1990, ss 388–398 (repealed).
6. R Goode, Principles of Corporate Insolvency Law (4th edn, Sweet & Maxwell 2011) 45.
7. Orojo (n 1) 415.
8. Companies and Allied Matters Act 2020, s 444.
9. Companies and Allied Matters Act 2020, ss 450, 452, 454.
10. Companies and Allied Matters Act 2020, s 453.
11. Companies and Allied Matters Act 2020, s 451.
12. Companies and Allied Matters Act 2020, ss 461–468.
13. Companies and Allied Matters Act 2020, s 707; Companies Regulations 2021, reg 19.
14. Companies and Allied Matters Act 2020, ss 434–442.
15. Insolvency Act 1986 (UK), pt I.
16. Re C Evans (Nigeria) Ltd (FHC/L/CS/123/2022) (unreported).
17. B Adegbite and T Esan, ‘An Appraisal of the New Administration Regime under CAMA 2020’ (2021) 12 Gravitas Review of Business & Property Law 34.
18. Companies Regulations 2021; Insolvency Regulations 2022.
19. O Oluwakemi and F Adeyemi, ‘From Receivership to Rescue: Assessing CAMA 2020’ (2022) 6 Journal of Corporate and Commercial Law 112.
20. Companies Act 71 of 2008 (South Africa), s 135.
21. Insolvency Act 1986 (UK), sch B1; Statement of Insolvency Practice 16 (UK).
22. A Loubser, ‘The Business Rescue Proceedings in the Companies Act of 2008’ (2010) 2 Journal of South African Law 29.
23. D Burdette, ‘Business Rescue in South Africa’ (2011) 20 International Insolvency Review 45.
24. World Bank, Doing Business 2020: Comparing Business Regulation in 190 Economies (World Bank 2019).

Ishie-Johnson Emmanuel Esq. Writes from Ishie-Johnson and Associates

Email: emmajohnsonace@gmail.com

Phone No: 08033816237, 08023186281