corporate insolvency, company voluntary arrangement, administration and receivership

Company voluntary arrangement is an insolvency procedure. It is usually employed when a company is unable to pay its debts which is normally characterized as insolvency.

Where a company is not in administration or liquidation, the directors of the company may propose a company voluntary arrangement to the creditors of the company for a composition in the satisfaction of its debts or a scheme of arrangement of its affairs. Section 434(1) CAMA, 2020.

Administration is a statutory insolvency procedure introduced by the Companies and Allied Matters Act, 2020 with the primary purpose of rescuing an insolvent company instead of the company going into liquidation.

The rescue of the company is the primary objective of administration as an insolvency procedure unless the administrator believes it is not reasonably practicable or that a better result can be achieved for the company’s creditors by pursuing some other course. Section 444 (2) CAMA, 2020.

A person may be appointed as an administrator of a company by the following persons:

• a. An administration order of the court under Section 449 CAMA, 2020.
• b. The holder of a floating charge under Section 452 CAMA, 2020.
• c. The company under Section 459 CAMA, 2020.
• d. The directors of a company under Section 459 CAMA, 2020.

Mr. Aloysius Wakama is an officer of court, whether or not he is appointed by the court and must perform his functions as quickly and efficiently as it is reasonably practicable. Section 445 and Section 446 CAMA, 2020.

The following are the effects of an administration order:

• a. Dismissal of winding up order.
• b. Vacation of office by receiver.
• c. No resolution may be passed or order made for winding up.
• d. No steps may be taken to enforce security.
• e. No repossession of goods under hire purchase agreement.
• f. No right of forfeiture by re-entry of landlord.
• g. No legal action may be taken against the company.
• h. Disclosure of administration and administrator.

By Section 511(1) of the Companies and Allied Matters Act,* administration may be challenged by creditors and members of the company and the grounds on which they may can challenge an administration are as follows:

• a. That the administrator is acting or has acted so unfairly as to harm the interests of the applicant unfairly as to harm the interests of the applicant whether alone or in common with some or all other members or creditors. Section 511(1) CAMA, 2020.
• b. That the administrator proposes to act unfairly as to harm the interests of the applicant whether alone or in common with some or all other members or creditors. Section 511 (1) CAMA, 2020.
• c. That the administrator is not performing his functions quickly or as efficiently as is reasonably practicable. Section 511(1) CAMA, 2020.

The ways which an administration can come to an end are as follows:

• a. Automatic cessation of administration. Section 513 CAMA, 2020.
• b. Cessation on application of administrator to the court. Section 517 CAMA, 2020.
• c. Cessation when the purpose of administration is achieved. Section 518 CAMA, 2020.
• d. Cessation upon application of creditor. Section 519 CAMA, 2020.
• e. Cessation upon a winding up order in the public interest. Section 520 CAMA, 2020.
• f. Cessation upon registration of notice of the administrator. Section 521 to 524 CAMA, 2020.

A receiver is an impartial person appointed by the court to manage, collect and receive pending the proceedings, rents, issues and profits of land or personal estate which it does not seem reasonable to the court that either party should collect or receive or for the same to be distributed among the persons entitled. Uwakwe v. Odogwe (1989) 5 NWLR (Pt. 123) 562. A receiver is a disinterested person appointed by the court, or by a corporation or other persons for the protection or collection of property that is the subject of diverse claims.

According to Section 550(1) of the Companies and Allied Matters Act*, the following persons cannot be appointed as receivers or managers of an property or undertaking of any company:

• a. An infant.
• b. Any person found by a competent court to be of unsound mind.
• c. A body corporate.
• d. An undischarged bankrupt, unless he shall have been given leave to act as a receiver or manager of the property or undertaking of the company by the court by which he was adjudged bankrupt.
• e. A director or auditor of the company.
• f. Any person convicted of any offence involving fraud, dishonesty, official corruption or moral turpitude and who is disqualified under Section 280 of the Companies and Allied Matters Act.

A receiver or manager of any property or undertaking of a company appointed by the court will be deemed to be an officer of the court and not of the company and must act in accordance with the directions and instructions of the court. Section 552 (2) CAMA, 2020.

A person appointed a receiver of any property of a company must, subject to prior encumbrances, take possession of and protect the property in his care, receive the rents and profits and discharge all out-goings in respect of it and realize the security for the benefit of those on whose behalf he is appointed but unless appointed manager, he will not have power to carry on any business or undertaking. Section 556 (1) CAMA, 2020. A person appointed manager of the whole or any part of the undertaking of a company must manage it with a view to the realization of the security of those on whose behalf he is appointed. Section 556(2) CAMA, 2020.

The effect of the appointment of a receiver is that from the date of appointment of a receiver or manager, the powers of the directors or liquidators in a members’ voluntary winding up, to deal with the property or undertaking over which he is appointed must cease u less and until the receiver or manager is discharged or the security is realized. Section 556(4) CAMA, 2020, Dematic (Nig.) Ltd. v. Utuk (2022) 8 NWLR (Pt. 1831) 71.