From Liquidation To Rescue: Reforming Nigeria’s Corporate Insolvency Regime Under CAMA 2020 For The Digital Age -By Ishie-Johnson Emmanuel

Abstract

For over three decades, Nigerian corporate insolvency law was synonymous with corporate death. The enactment of the Companies and Allied Matters Act 2020 introduced a paradigm shift from a liquidation-centric to a rescue-oriented framework. This article examines the key innovations of CAMA 2020, particularly administration and Company Voluntary Arrangements, and evaluates whether Nigeria has developed a genuine rescue culture. It argues that while CAMA 2020 represents a significant doctrinal departure from liquidation, its practical impact remains limited by structural constraints including absence of a standalone moratorium for CVAs, lack of rescue financing, high costs, and institutional incapacity. More fundamentally, the regime is ill-equipped for the digital economy. Fintechs, e-commerce platforms, and crypto-asset businesses derive value from intangible assets, licenses and data, which CAMA 2020 does not adequately recognize. Drawing comparative insights from the United Kingdom, the United States and South Africa, this article proposes a second-generation reform agenda encompassing recognition of digital assets, pre-pack administration, SME rescue track, super-priority rescue financing, adoption of the UNCITRAL Model Law, and tech-enabled insolvency procedures.

Keywords:  CAMA 2020, Corporate Insolvency, Rescue Culture, Administration, CVA, Digital Assets, Insolvency Reform

1. Introduction

Corporate insolvency law mediates two competing objectives: the maximisation of returns to creditors and the preservation of viable enterprises. For many years, insolvency in Nigeria was largely synonymous with liquidation. Once a company became financially distressed, the law offered limited options beyond winding up its affairs and distributing its assets to creditors.¹

The Companies and Allied Matters Act 2020 (CAMA 2020), which repealed the Companies and Allied Matters Act 1990, is widely regarded as the most comprehensive reform of Nigerian corporate law in thirty years.² Part XVII of the Act governs insolvency proceedings and introduces, for the first time in Nigerian law, a coherent statutory framework for corporate rescue. This reflects a global shift in insolvency jurisprudence away from liquidation-centric frameworks towards rescue culture policies that prioritise enterprise continuity, employment retention, and stakeholder protection.³

This article contends that CAMA 2020 laid the foundation for rescue but did not complete the transition. Furthermore, the framework was designed for a brick-and-mortar economy and is structurally deficient for businesses of the digital age, where value resides in code, data, regulatory licences and network effects rather than tangible assets.

1. The Old Regime: Liquidation Culture under CAMA 1990

Under CAMA 1990, the insolvency landscape was dominated by two mechanisms: administrative receivership and winding up. Section 390 of the old Act allowed a holder of a floating charge to appoint an administrative receiver to take control of the entire undertaking and realise assets primarily for the appointor’s benefit. The receiver owed his primary duty to the charge holder, not to the general body of creditors.⁴ In _Intercontractors Nigeria Ltd v UAC Ltd_, the Supreme Court affirmed the wide and largely unfettered powers of such a receiver.⁵

Winding up under section 408 was available where a company was unable to pay a debt as low as ₦2,000. There was no statutory moratorium to give a distressed company breathing space, no debtor-in-possession restructuring tool, and no regulated profession of insolvency practitioners. Appointments were largely unregulated, often resulting in inefficiencies and abuse.⁶ The result was predictable: viable businesses with temporary cash-flow problems were dismembered, going-concern surplus was destroyed, and employees lost jobs.

III. CAMA 2020: The Foundations of a Rescue Culture

CAMA 2020 introduces several innovations that collectively signal a move from liquidation to rescue.

1. Administration – Sections 443-549

Administration provides an alternative to immediate liquidation by allowing distressed companies to restructure under professional supervision.⁷ A company, its directors, or a holder of a floating charge may appoint an administrator, either out of court or by court order.⁸

Crucially, section 453 imposes a statutory moratorium. During administration, no winding up petition can be presented, no security can be enforced, and no forfeiture of premises can occur without the consent of the administrator or the court. This breathing space is the hallmark of modern rescue law.

The administrator, who must be a licensed insolvency practitioner and acts as an officer of the court, must pursue three hierarchical objectives under section 444: first, to rescue the company as a going concern; second, to achieve a better result for creditors than would be likely on winding up; and third, to realise property for the benefit of secured or preferential creditors.

1. Company Voluntary Arrangement – Sections 434-442

The introduction of Company Voluntary Arrangements represents a departure from the predominantly liquidation-oriented framework that characterised Nigerian corporate insolvency practice.⁹ A CVA is a management-driven proposal under which directors propose a compromise to creditors, implemented under the supervision of a supervisor, allowing the company to reorganise debts without immediate liquidation.¹⁰ Approval requires 75% in value of creditors present and voting. It is a debtor-in-possession model, as management remains in control, unlike administration.

1. Abolition of Administrative Receivership

Section 553 prohibits the appointment of administrative receivers in respect of floating charges created after 7 August 2020. Lenders must now use administration, a collective procedure that owes duties to all creditors, rather than a private enforcement tool.

1. Regulation of Insolvency Practitioners – Section 705

CAMA 2020 stipulates that only licensed insolvency practitioners may serve as liquidators, administrators, or receivers.¹¹ This closes a critical gap under CAMA 1990 and aligns Nigeria with international best practice as observed in the UK and South Africa, where strict licensing safeguards the integrity of insolvency processes. Membership of the Business Recovery and Insolvency Practitioners Association of Nigeria (BRIPAN) and appropriate indemnity insurance are now prerequisites.

1. Other Modernising Provisions

Sections 718-721 introduce netting provisions for financial contracts, derivatives and securities settlement systems, critical for banks and fintechs. Sections 711-713 modernise schemes of arrangement, allowing cross-class cram down with 75% majority.

1. Has Nigeria Truly Moved Beyond Liquidation?

While the statutory architecture has changed, practice has not yet caught up. Recent commentary concludes that CAMA 2020 has undoubtedly moved Nigerian insolvency law away from a liquidation-first philosophy at the doctrinal level, but Nigeria has not yet fully developed a mature rescue culture in practice.¹²

Four structural limitations persist. First, the CVA regime contains a critical defect: the absence of a standalone moratorium.¹³ In the UK, a small company proposing a CVA enjoys a 28-day moratorium under Schedule A1 of the Insolvency Act 1986. In Nigeria, creditors may continue enforcement while CVA negotiations are ongoing, rendering the tool ineffective.

Second, cost. Administration requires court filings, administrator remuneration and legal costs that are prohibitive for small and medium enterprises, which constitute over 90% of Nigerian businesses.

Third, there is no provision for rescue financing. Unlike section 364 of the US Bankruptcy Code, which grants super-priority to debtor-in-possession financing, CAMA 2020 offers no incentive for new money. No bank will lend to a company in administration if its security will rank behind existing charges.

Fourth, institutional capacity. The Federal High Court has exclusive jurisdiction under section 251(1)(e) of the Constitution, but has no specialist insolvency list. Applications for administration orders routinely take months, defeating the urgency that rescue requires. Limited practical experience, creditor distrust and judicial unfamiliarity continue to affect the effective use of rescue mechanisms.¹⁴

1. The Digital Age Deficit

CAMA 2020 was drafted for companies that own factories. Its greatest blind spot is the digital economy.

Consider a typical Lagos fintech: it has little tangible property, but holds a Central Bank of Nigeria microfinance or switching licence, ₦500 million in customer e-wallets held in escrow, a proprietary codebase worth billions, and one million customer data records. Under current law, four problems arise.

1. What Constitutes Property? Section 868 CAMA defines property broadly but makes no reference to crypto-assets, tokens, data or digital licences. The SEC Rules on Issuance, Offering and Custody of Digital Assets 2022 and the Nigeria Data Protection Act 2023 recognise digital assets and data as valuable, but the Insolvency Regulations 2022 do not. Can an administrator lawfully sell customer data? Is cryptocurrency held on behalf of users company property or client property? In _AA v Persons Unknown_, the English Commercial Court held that Bitcoin is property capable of being subject to a proprietary injunction.¹⁵ Nigeria has no equivalent statutory clarity.

2. No Pre-Pack Administration. In technology businesses, value evaporates within days if customers lose confidence. A pre-pack administration, where the sale of the business is negotiated before the appointment of the administrator and executed immediately upon appointment, is essential to preserve goodwill. CAMA 2020 has no pre-pack regime. The requirement for marketing and delay destroys the very value rescue seeks to preserve.

3. Regulatory Licence Fragility. CBN licences, SEC fintech licences and NCC licences often contain insolvency as a ground for revocation. The moratorium under section 453 does not prevent a regulator from revoking a licence. In contrast, section 365(e) of the US Bankruptcy Code invalidates ipso facto clauses that terminate contracts solely due to insolvency filing.

4. No Cross-Border Framework. Most Nigerian tech startups have a Delaware C-Corp holding company and a Nigerian operating company. CAMA 2020 provides no mechanism for cooperation with foreign courts. Nigeria has not adopted the UNCITRAL Model Law on Cross-Border Insolvency 1997, which has been adopted by the UK, US, South Africa and Kenya.

1. Comparative Lessons

The UK’s Corporate Insolvency and Governance Act 2020 introduced a free-standing moratorium and a Restructuring Plan with cross-class cram-down, explicitly designed for SMEs. The US Chapter 11 remains the gold standard for digital businesses because it allows founders to remain in possession, protects executory contracts, and incentivises rescue financing through super-priority. South Africa’s business rescue under Chapter 6 of the Companies Act 2008 provides a more accessible, early-trigger model that includes employees as affected persons.

Nigeria borrowed the form of the UK’s Enterprise Act 2002 but not the ecosystem that makes it work.

VII. A Reform Agenda for the Digital Age

This article proposes a second-generation reform that does not require repeal of CAMA 2020 but recalibration through amendments and subsidiary legislation under section 867.

1. Statutory Recognition of Digital Assets. The Insolvency Regulations should be amended to define property to include digital assets as defined by the SEC, electronic money, data where transferable under the NDPA, and intellectual property in software. Escrowed customer funds should be expressly ring-fenced as trust property.
2. Introduction of Pre-Pack Administration. The Corporate Affairs Commission should issue Pre-Pack Regulations requiring an independent evaluator report, compliance with Statement of Insolvency Practice 16, and disclosure to creditors within 14 days of sale.
3. SME Rescue Track. A fast-track CVA with an automatic 21-day moratorium, electronic filing at the CAC, and a fixed fee scale for companies with turnover below ₦500 million should be created. This would mirror the UK’s small company moratorium and make rescue accessible.
4. Rescue Financing. Section 537 should be amended to grant super-priority to post-commencement financing reasonably necessary for rescue, ranking ahead of floating charges, subject to court approval.
5. Adoption of UNCITRAL Model Law. Nigeria should enact a standalone Cross-Border Insolvency Act to facilitate recognition of foreign proceedings, access by foreign representatives, and cooperation between courts.
6. Protection of Licences and Client Money. The moratorium in section 453 should be extended to prohibit termination or revocation of regulatory licences solely by reason of entry into administration or CVA, save on grounds of public interest.
7. Tech-Enabled Procedures. The Insolvency Regulations 2022 already permit virtual creditors’ meetings. This should be made mandatory, with e-voting, virtual data rooms for sale of digital assets with NDPA compliance checklist, and mandatory e-filing at the CAC.
8. Specialist Insolvency Division. The Chief Judge of the Federal High Court should issue a Practice Direction creating an Insolvency and Business Rescue Division in the Lagos and Abuja Divisions, with designated judges trained by BRIPAN and the UK Insolvency Service.

VIII. Conclusion

CAMA 2020 was revolutionary. It moved Nigerian law from a system where failure equals death to one where failure may equal rescue. It introduced administration and CVAs and a moratorium to give viable but distressed companies an alternative to liquidation.¹⁶

However, rescue on paper is not rescue in practice. While administration enjoys a relatively strong statutory moratorium and a clearly articulated rescue objective, the limitations of the CVA and institutional constraints mean the transition is incomplete.¹⁷ For the digital economy, where value is intangible, speed is survival, and borders are irrelevant, the current regime remains liquidation-prone.

Nigeria does not need more liquidation laws. It needs rescue laws that understand that in 2026, value lives in code, data and licences, not in factories. Until that second-generation reform is undertaken, the promise of CAMA 2020 will remain aspirational.

REFERENCES

¹ Companies and Allied Matters Act 2020, Explanatory Memorandum.

² Companies and Allied Matters Act 2020, ss 443-721.

³ J Armour, ‘The Rise of the Rescue Culture in UK Corporate Insolvency Law’ 9(1) Cambridge Law Journal 47; V Finch, Corporate Insolvency Law: Perspectives and Principles (2nd edn, CUP 2009).[2003]

⁴ Adeyemi A, Nigerian Insolvency Law (Babcock 2015) 34.

⁵ _Intercontractors Nigeria Ltd v UAC Ltd_ (1988) 2 NWLR (Pt 76) 303.

⁶ CAMA 2020, s 705 stipulates that only licensed insolvency practitioners may serve as liquidators, administrators, or receivers.

⁷ CAMA 2020, s 480.

⁸ CAMA 2020, ss 450-455.

⁹ CAMA 2020, ss 434-442.

¹⁰ CAMA 2020, ss 434-442.

¹¹ CAMA 2020, s 705.

¹² Oluwaleye Adedoyin Grace, ‘The Rescue Culture Under CAMA 2020: Has Nigeria Truly Moved Beyond Liquidation?’ Opinion Nigeria (2025).

¹³ ibid.

¹⁴ ibid.

¹⁵ _AA v Persons Unknown_ EWHC 3556 (Comm); _Re Gatecoin Ltd_ HKCFI 914 on crypto as property.[2019][2023]

¹⁶ CAMA 2020, ss 443-549.

¹⁷ Grace (n 12).

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

Email: emmajohnsonace@gmail.com

Phone No: 08033816237, 08023186281