The Reacue Culture Under CAMA 2020: Has Nigeria Truly Moved Beyond Liquidation? -By Oluwaleye Adedoyin Grace

Abstract

The Companies and Allied Matters Act 2020 (CAMA 2020) introduced a significant change in Nigerian corporate insolvency law by incorporating formal mechanisms directed at the rescue and rehabilitation of financially distressed companies. In particular, the introduction of Company Voluntary Arrangements (CVAs) under sections 434–442 and administration under sections 443–549 represents a departure from the predominantly liquidation-oriented framework that characterized Nigerian corporate insolvency practice under the former Companies and Allied Matters Act 1990. The reforms recognise that corporate failure does not necessarily require the immediate death of the enterprise and that, where a viable business can be preserved, rescue may produce better economic outcomes for creditors, employees, shareholders and the wider economy. This article examines whether the statutory introduction of rescue mechanisms has translated into a genuine rescue culture in Nigeria. It argues that CAMA 2020 has undoubtedly moved Nigerian insolvency law away from a liquidation-first philosophy at the doctrinal level. However, Nigeria has not yet fully developed a mature rescue culture in practice. While administration enjoys a relatively strong statutory moratorium and a clearly articulated rescue objective, the CVA regime contains structural limitations, including the absence of a standalone moratorium. In addition, limited practical experience, institutional capacity, creditor confidence, access to rescue financing and judicial familiarity continue to affect the effective use of rescue mechanisms. The article concludes that CAMA 2020 represents the beginning of Nigeria’s movement towards rescue rather than the completion of that transition.

INTRODUCTION

For many years, Nigerian corporate insolvency law was predominantly associated with winding up and receivership. Once a company became financially distressed, the legal response frequently centered on the realization of its assets and satisfaction of creditors rather than the preservation of the enterprise itself. This approach reflected a conception of insolvency primarily as a process of corporate failure rather than as a possible stage in the life of a business from which recovery might still be achieved.

The Companies and Allied Matters Act 2020 represents a significant departure from this traditional orientation. Among its most important insolvency reforms are the introduction of Company Voluntary Arrangements (CVAs) under sections 434–442 and administration under sections 443–549. These procedures provide distressed companies with alternatives to immediate liquidation and recognise the possibility that a financially troubled company may still possess sufficient economic value to justify rescue.

The significance of these reforms extends beyond the mere creation of additional insolvency procedures. A genuine rescue culture requires more than statutory provisions. It requires a legal and commercial environment in which distressed companies can identify financial difficulties early, access restructuring mechanisms without unnecessary delay, obtain temporary protection from creditor enforcement where appropriate, secure professional assistance and ultimately implement a credible restructuring plan.

The central question, therefore, is not simply whether CAMA 2020 contains rescue provisions. It is whether those provisions have altered the practical culture of corporate insolvency in Nigeria. This article argues that Nigeria has made a substantial legislative movement towards rescue but has not yet fully moved beyond liquidation in practice.

UNDERSTANDING THE CONCEPT OF RESCUE CULTURE

A rescue culture refers to an insolvency philosophy which seeks, where economically feasible, to preserve viable businesses rather than immediately terminate them through liquidation. Its underlying assumption is that financial distress does not necessarily mean that a business has lost all economic value.

The preservation of a viable company may produce benefits extending beyond shareholders. Employees may retain their employment, suppliers may preserve commercial relationships, creditors may obtain a better return than they would through an immediate break-up of the company’s assets, and the economy may retain productive capacity.

The concept therefore represents more than an emotional preference for keeping companies alive. It is an economic approach to insolvency. A going concern may be worth considerably more than the aggregate value of its individual assets when sold separately. Consequently, liquidation may destroy value that could otherwise have been preserved through restructuring.

A mature rescue culture ordinarily requires mechanisms for early intervention, collective creditor participation, temporary protection from enforcement, restructuring of liabilities and professional management of distressed enterprises. CAMA 2020 contains several of these elements, but the effectiveness of the framework must be assessed against its practical operation.

FROM LIQUIDATION TO RESCUE: THE SIGNIFICANCE OF CAMA 2020

CAMA 2020 is undoubtedly a landmark development in Nigerian corporate insolvency law. The Act introduced administration as a formal corporate rescue procedure and established CVAs as another mechanism through which a company may reach an arrangement with its creditors.

The importance of administration is particularly evident in section 444. The administrator’s objectives include:

(a) rescuing the company, or the whole or part of its undertaking, as a going concern;

(b) achieving a better result for the company’s creditors as a whole than would be likely if the company were wound up without first being placed in administration; or

(c) realizing property in order to make a distribution to one or more secured or preferential creditors.

Importantly, rescue is placed first in this hierarchy. Section 444(2) further establishes rescue as the primary objective except where it is not reasonably practicable or another objective would produce a better result for creditors.

This represents a significant philosophical change. The law does not simply permit a company to survive liquidation; it positively recognises rescue as a legitimate objective of insolvency administration.

COMPANY VOLUNTARY ARRANGEMENTS: A FLEXIBLE RESCUE MECHANISM

The CVA regime under sections 434–442 provides another important departure from the liquidation-first approach.

Under section 434, directors may propose to creditors a composition in satisfaction of the company’s debts or a scheme of arrangement of its affairs. The proposal must provide for a nominee, who must be qualified to act as an insolvency practitioner, to supervise or otherwise oversee the implementation of the arrangement.

The attractiveness of a CVA lies partly in its flexibility. Unlike administration, the company remains under the control of its existing management. This allows a financially distressed company to negotiate a restructuring of its liabilities without necessarily surrendering management of the business to an administrator.

The CVA regime therefore has considerable rescue potential. A company may negotiate revised payment terms with creditors while continuing to operate its business. Where successful, this can preserve the company’s going-concern value and avoid the disruption associated with liquidation.

However, the CVA framework also reveals one of the weaknesses in Nigeria’s emerging rescue culture. Unlike administration, a CVA does not have a general standalone statutory moratorium protecting the company from creditor enforcement. This means that a company attempting to negotiate and implement a CVA may remain exposed to creditor action.

The absence of such protection creates a structural tension: the law encourages restructuring, but the company may not always have sufficient breathing space to complete the restructuring process. This is an area where legislative improvement would strengthen the rescue framework.

ADMINISTRATION AND THE STATUTORY MORATORIUM

Administration constitutes perhaps the strongest evidence that CAMA 2020 genuinely embraces a rescue philosophy.

Section 443 permits an administrator to be appointed through an administration order of the Court, by a qualifying floating charge holder, or by the company or its directors in the circumstances prescribed by the Act.

The administrator assumes a central role in managing the affairs, business and property of the company. This is significant because the objective is not simply to realize assets but, where reasonably practicable, to preserve the company or its undertaking as a going concern.

The rescue objective is supported by the moratorium contained in section 480. Once administration takes effect, restrictions apply to the enforcement of security and to the commencement or continuation of legal proceedings, execution, distress and other legal processes against the company or its property without the consent of the administrator or permission of the Court.

The moratorium is essential to rescue. A distressed company cannot realistically restructure while individual creditors are simultaneously dismantling its assets through separate enforcement actions. The statutory breathing space allows the administrator to assess the company’s position, formulate proposals and attempt to preserve value.

Thus, contrary to the suggestion that CAMA 2020 generally lacks moratorium protection, administration provides a relatively robust statutory shield. The more accurate criticism is that such protection is not uniformly available across all rescue mechanisms.

 WHY LIQUIDATION STILL REMAINS POWERFUL

Despite the reforms, it would be premature to conclude that Nigeria has completely developed a rescue culture.

1. Limited Familiarity and Professional Capacity

Rescue procedures require specialized knowledge. Administration and CVAs involve complex questions of valuation, creditor classification, restructuring, insolvency practice and corporate governance. The success of these procedures therefore depends significantly on the availability of practitioners who understand how to deploy them effectively.

CAMA 2020 itself recognises the importance of professional insolvency practice by requiring nominees and administrators to possess the relevant professional qualifications. Nevertheless, statutory recognition alone cannot immediately create a mature professional culture.

Where practitioners, creditors and corporate directors are more familiar with liquidation and receivership, those traditional procedures may continue to appear more predictable.

2. Creditor Confidence

Rescue culture also depends upon creditor confidence. Creditors must believe that allowing a distressed company time to restructure will ultimately produce a better outcome than immediate enforcement.

This is particularly important because creditors have legitimate interests in recovering money owed to them. A rescue regime that excessively delays recovery without producing a realistic prospect of rehabilitation will naturally encounter resistance.

The challenge is therefore to maintain an appropriate balance between creditor protection and debtor rehabilitation. CAMA 2020’s administration regime attempts to achieve this by making the rescue objective subject to the broader interests of creditors as a whole.

3. Rescue Financing

A company cannot be rescued merely by postponing its debts. It must have sufficient resources to continue operating while restructuring takes place.

This makes access to rescue financing particularly important. A company experiencing temporary liquidity difficulties may have a fundamentally viable business but lack the cash required to pay employees, suppliers, rent or other operating expenses during restructuring.

Without access to new financing, rescue may become theoretical. Nigeria’s rescue culture must therefore develop mechanisms that encourage credible financiers to provide funding to distressed but potentially viable businesses while protecting the legitimate interests of existing creditors.

4. Economic Conditions

Nigeria’s broader economic environment also presents challenges to corporate rescue. Inflation, exchange-rate volatility, high borrowing costs and unstable cash flows can push companies into distress rapidly.

A rescue mechanism works most effectively where the underlying business remains commercially viable. Where the problem is merely temporary liquidity pressure, restructuring may preserve the enterprise. Where the company’s business model has fundamentally collapsed, however, liquidation may remain the economically rational outcome.

Rescue culture should therefore not be understood as an argument against liquidation. Liquidation remains necessary where rescue is not reasonably practicable. The objective is rather to ensure that liquidation is not automatically chosen where genuine rescue remains possible.

RESCUE CULTURE AND THE NIGERIAN JUDICIAL ENVIRONMENT

The courts occupy an important position in determining whether CAMA 2020’s rescue provisions become effective in practice.

Administration necessarily involves judicial intervention at several stages. For example, section 449 empowers the Court to make an administration order where the statutory requirements are satisfied, while section 451 gives the Court powers concerning the administration order.

Because administration is a relatively new feature of Nigerian corporate insolvency law, Nigerian courts will inevitably have to develop jurisprudence around questions concerning the interpretation of the rescue objectives, the scope of the moratorium, creditor rights and the powers of administrators.

There is already useful judicial experience concerning companies in administration. In United Capital Trustees Ltd v Nigerian International Securities Ltd & Ors, questions arose concerning the operation of section 480(4), particularly the requirement for consent of the administrator or permission of the Court before legal proceedings may be commenced or continued against a company in administration.

Such cases demonstrate why judicial interpretation is crucial. A rescue regime cannot flourish if its participants are uncertain about the extent of the statutory protection available to them.

LESSONS FROM COMPARATIVE JURISDICTIONS

Nigeria’s rescue framework did not develop in isolation. The administration provisions of CAMA 2020 bear substantial similarities to the administration framework developed under the United Kingdom’s Insolvency Act 1986.

The UK experience demonstrates that rescue culture requires more than legislation. Over time, statutory reforms and judicial decisions have developed a more sophisticated restructuring environment. The UK’s later introduction of a standalone corporate moratorium under the Corporate Insolvency and Governance Act 2020 further demonstrates the importance attached to giving distressed companies temporary protection while rescue options are explored.

South Africa provides another useful comparison. Chapter 6 of the South African Companies Act 2008 establishes business rescue proceedings expressly aimed at facilitating the rescue and rehabilitation of financially distressed companies. The regime also provides significant protection against legal proceedings and enforcement during business rescue.

The comparison is instructive. Nigeria has moved in the same broad direction, but its rescue culture remains younger and less developed. The Nigerian framework would benefit from greater institutional experience, clearer procedural practice and stronger mechanisms for early intervention.

THE MOORHOUSE AND TOURIST COMPANY EXPERIENCES

The practical development of Nigerian rescue law is becoming increasingly significant.

The Moorhouse administration has been described as Nigeria’s first court-ordered administration and provides an important practical example of the operation of the new administration framework. Its significance lies not merely in the individual company involved but in demonstrating that administration under CAMA 2020 can move from statutory text into actual insolvency practice.

Similarly, the restructuring of the Tourist Company of Nigeria through a CVA provides an important practical illustration of the CVA mechanism. The creditors and company considered and approved the proposal, after which the Federal High Court sanctioned the outcome pursuant to the relevant provisions of CAMA 2020.

These developments weaken any suggestion that the rescue provisions are merely theoretical. At the same time, isolated successful cases cannot by themselves establish that Nigeria has developed a mature rescue culture. The real test is whether rescue procedures become accessible, predictable and routinely considered whenever a viable company encounters financial distress.

WHAT MUST CHANGE?

If Nigeria is to move from a statutory rescue framework to a genuine rescue culture, several reforms are necessary.

First, rescue mechanisms should be made more accessible and procedurally predictable. Companies and creditors must be able to understand when administration or a CVA is appropriate and how the process should be commenced.

Second, consideration should be given to strengthening protection available to companies pursuing CVAs. The absence of a standalone moratorium can undermine the effectiveness of the procedure by exposing the company to creditor enforcement while negotiations are ongoing.

Third, the insolvency profession should continue to develop through specialized training and professional regulation. The success of rescue depends heavily upon the competence and independence of insolvency practitioners.

Fourth, the judiciary should continue developing specialized jurisprudence on administration, CVAs and related restructuring mechanisms. Clear judicial guidance will reduce uncertainty and improve confidence in the system.

Fifth, Nigeria should encourage greater availability of rescue financing. Without working capital, a legally viable restructuring may nevertheless fail commercially.

Finally, corporate directors and creditors should be encouraged to consider rescue at an early stage. Rescue is most effective before the company’s assets have been dissipated and its commercial relationships irreparably damaged.

CONCLUSION

CAMA 2020 has unquestionably changed the philosophy of Nigerian corporate insolvency law. By introducing Company Voluntary Arrangements and administration, the Act recognises that financial distress does not inevitably require liquidation and that preserving a viable business may produce better outcomes for creditors and other stakeholders.

The statutory position therefore supports the conclusion that Nigeria has moved beyond the liquidation-only mindset. Administration, in particular, provides a clear rescue objective and a statutory moratorium capable of creating the breathing space necessary for restructuring.

Nevertheless, legislation alone cannot create a rescue culture. The effectiveness of rescue depends upon professional competence, judicial certainty, creditor confidence, access to finance and the willingness of companies to seek assistance before distress becomes irreversible. The weaknesses surrounding CVA protection further demonstrate that the statutory framework remains capable of improvement.

Nigeria has therefore not completely moved beyond liquidation. Rather, CAMA 2020 has placed Nigeria on the road from liquidation to rescue. The next stage is to ensure that the rescue mechanisms contained in the Act become practical, trusted and routinely used. A mature rescue culture will emerge not when liquidation disappears, but when liquidation becomes the last resort for businesses that genuinely cannot or should not be rescued.

REFERENCES

1. Companies and Allied Matters Act 2020, ss 434–442, 443–549.
2. Kunle Aina and Oluwatumininu Omotoye, ‘Administration or Receivership? Making the Right Choice Towards Corporate Rescue’ (2022) 12(1) University of Ibadan Law Journal “https://doi.org/10.36108/UILJ/2202.21.0110” (https://doi.org/10.36108/UILJ/2202.21.0110) accessed 28 August 2026.
3. Aisha Ali Tijjani, Emmanuel Oluwafemi Olowononi, Asma’u Sulaiman Muhammad and Precious AN Ahiarammunnah, ‘An Examination of Company Rescue through Voluntary Arrangement under the Companies and Allied Matters Act 2020’ (2026) 4(1) African Journal of Law, Ethics and Education 100–137 “https://ajleejournal.com/index.php/ajlee/article/view/317” (https://ajleejournal.com/index.php/ajlee/article/view/317) accessed 28 August 2026.
4. United Capital Trustees Ltd v Nigerian International Securities Ltd & 4 Ors, Suit No FHC/L/CS/2219/2022, Federal High Court, Lagos Judicial Division, judgment delivered 5 July 2023.
5. Insolvency Act 1986 (UK), sch B1; Corporate Insolvency and Governance Act 2020 (UK), pt A1.
6. Companies Act 71 of 2008 (South Africa), ch 6.
7. Anaje Olumide Oke Akinkugbe, ‘Lessons Learnt from Nigeria’s First Court-Ordered Administration: The Moorhouse Company Limited – Pt 1’ (29 May 2024) “https://ao2law.com/lessons-learnt-from-nigerias-first-administration-the-moorhouse-company-limited-pt-1/” (https://ao2law.com/lessons-learnt-from-nigerias-first-administration-the-moorhouse-company-limited-pt-1/) accessed 28 August 2026.
8. Anaje Olumide Oke Akinkugbe, ‘Lessons Learnt from Nigeria’s First Court-Ordered Administration: The Moorhouse Company Limited – Pt 2’ (21 June 2024) “https://ao2law.com/lessons-learnt-from-nigerias-first-administration-the-moorhouse-company-limited-pt-2/” (https://ao2law.com/lessons-learnt-from-nigerias-first-administration-the-moorhouse-company-limited-pt-2/) accessed 28 August 2026.
9. Bashir Ramoni, Olayinka Alao and Oluwadolapo Owoyokun, ‘Part I – Commencing an Action Against Companies under Administration – A Review of United Capital Trustees Limited v Nigerian International Securities Limited & 4 Ors’ (SimmonsCooper Partners, 23 May 2024) “https://resource.scp-law.com/wp-content/uploads/2025/11/SCP-Article-Part-1-Commencing-an-Action-Against-Companies-under-Administration.pdf” (https://resource.scp-law.com/wp-content/uploads/2025/11/SCP-Article-Part-1-Commencing-an-Action-Against-Companies-under-Administration.pdf) accessed 28 August 2026.
10. United Capital Trustees Limited v. Nigerian International Securities Limited & 4 Ors (Suit No: FHC/L/CS/2117/2022)
11. Accor Afrique SA v. The Moorhouse Company Limited (Suit No: FHC/L/CS/1039/2022)

Oluwaleye Adedoyin Grace, LLB. (Hons.)

Oluwaleyeadedoyingrace2001@gmail.com or 08106289069