388 | Vol. 12.

Issue 2, 2023

Analysis of the Legal Framework on

Corporate Insolvency in Nigeria Under CAMA
2020 and Companies Winding up Rules 2001
Okwudiri Nwosu*
Abstract
This article examined some aspects of the Companies and Allied Matters
Act 2020 which is the principal legislation regulating corporate insolvency
matters in Nigeria. The Act made some provisions that relates to the
activities of actors and officers like Official Receiver, Special Manager and
Liquidator who participates during winding up proceedings of an insolvent
corporate entity. The paper also highlighted the appointment of these
officers, restructuring mechanisms of ailing companies under CAMA and
winding up procedures, which seems very technical in its operation. It
discovered that there are challenges created by some of the CAMA
provisions, in dealing with corporate Insolvency. Again, the Companies
Winding up Rules (CWR) 2001 which complements the provisions of
CAMA, provided enormous technicalities which obviously affects the early
rescue of corporate entities undergoing insolvency. Doctrinal research
method was adopted in this work. Having analysed the relevant statutory
provisions under CAMA and CWR as it relates to corporate insolvency,
recommendations were made to amend some of the provisions which would
ultimately save businesses instead of extinction of corporate entities arising
from insolvency. Court proceedings should not be involved in the
cumbersome procedure for effecting arrangement and compromise under
CAMA in order to rapidly revive financially distressed insolvent company.

Keywords: Legal framework, CAMA, Jurisdiction, Arrangement and

Compromise, Companies Winding up Rules.

Introduction
In any nation, corporate entities constitute one of the Pillars on
which the economy can be created. It is a way important vehicle for
economic growth. Thus when there is corporate collapse, the economy is
worst of. Quite often mismanagement of corporations put shareholders,

*
Okwudiri Nwosu, B.L, Ph.D (Legal Practitioner/Notary Public) [email protected]
08035860587
 Benue State University Law Journal, 2023 | 389

investors and creditors funds into jeopardy requiring legislative

intervention.
The objective of this paper is to analyse the relevant provisions of
the Companies and Allied Matters Acts 2020 (CAMA) and the
companies winding up rules 2001 in dealing with the challenge of
Corporate Insolvency in Nigeria.
The basic and principal legislation in Nigeria that regulates
corporate insolvency proceedings is the Companies and Allied Matters
Act, 2020.1 Thus, it is important to state here that all legal framework
should be focused towards reviving a corporate entity in distress and
possible extinction. However, it is not every ailing company that can be
rescued. Companies that are economically unviable should be allowed to
collapse and be liquidated. A company which is financially distressed is
one which has a potentially valuable business concept but unable to
generate adequate returns to meet its expenditures and make profits. The
issue of rescue versus extinction of companies has been the theme of
various discuss by insolvency practitioners. Financially distressed
companies are the proper candidates for rescue because they have
potential business ideas.2
The paper will expose some of the relevant provisions and the
principal actors in corporate insolvency under Companies and Allied
Matters Act. Those principal actors in the corporate insolvency are the
officers of court vested with investigative and information gathering
powers at the commencement of Insolvency in a winding up by the
court. The legislation and actors in corporate insolvency proceeding
highlighted in this work includes Companies and Allied Matters Act
(CAMA) which its provisions are not mostly corporate rescue friendly.
The CAMA aims at liquidation of companies in financial distress.
Jurisdiction of courts in Insolvency proceedings is very paramount as
where proceedings are being undertaken in a court other than Federal
High Court, the proceedings would be struck out. Receivers and
Liquidators are two important officers that play prominent roles in
winding up proceedings. While the Official Receiver commences his
role from the commencement of proceedings, the Liquidator is

1
CAMA 2020
2
Idornigie, P. Roundtable on Reform of Insolvency Laws in Nigeria at http://www.nials-
nigeria.org//roundable. (Accessed on 18th June 2014)1
390 | Vol. 12. Issue 2, 2023

appointed upon making of winding up order or presentation of petition

for winding up if there is a provisional Liquidator.
Arrangement and compromise are forms of Corporate
restructuring which may lead to rescue. The Companies winding up
Rules regulate the proceedings in winding of a company in Nigeria,
while the winding up procedure is the process that leads to liquidation of
the company in distress.

Companies and Allied Matters Act (CAMA) 2020

The Legal frameworks are the laws that regulate the activities in
corporate insolvency in Nigeria. One of such laws is the Companies and
Allied Matters Act 2020. Historically, the Companies and Allied
Matters Act was a product of several debates and consultations by the
Nigerian Law Reform Commission. Thus, in March 1987, the then
Attorney General of the Federation and Minister for Justice directed the
Nigerian Law Reform Commission to review the Nigerian Company
Law.3 The Commission was expected to discover and eliminate
loopholes in the existing company law, streamline all procedures and
design Nigerian Company Law for the benefit and protection of all
stakeholders.4 The Law reform Committee eventually came out with a
comprehensive Nigerian Company Law that was designed to facilitate
business activities in the Country and to protect the interests of
investors, the public and the country as a whole.5 The Companies and
Allied Matters Decree 1990 is described as a landmark Company
Legislation in Nigeria.6 It was subsequently designated as an Act which
was later modified in 2004 and known as Companies and Allied Matters
Act 2004.
The Companies and Allied Matters Act 2004 is divided into three
parts. Part ‘A’ deals with Incorporation of Companies, Part ‘B’ covers
registration of Business Names while Part ‘C’ deals with Incorporated
Trustees. The Act is the most comprehensive and was able to address
3
Adebola, B. The Nigerian Business Rescue Model (NIAL International Journal of Legal
Studies) 35, 43
4
Idigbe, A. Using existing Insolvency Framework to drive business recovery in Nigeria: The
Rule of judges. Being Paper Presented at the Federal High Court Judges Conference held at
Senkuyu, Sokoto on the 11th day of October, 2015. 39
5
Akanki, Company Law Development through the 1990 Legislation in Obilade. “A Blue print
for Nigeria Law: A Collection of Critical Essays written in commemoration of the thirteenth
anniversary of the establishment of Faculty of Law, University of Law” (Faculty of Law
University of Lagos. 1995)
6
Akanki (n5)
 Benue State University Law Journal, 2023 | 391

some of the problems noticed in the repealed Companies Decree of

1968. For instance, the Act codified most of the principles of
Association, Common law on Company law as well as many of the
general principles hitherto left in the Articles of Association and thus
ensures greater certainty of the law.7 New concepts and procedures were
introduced, while existing procedures were streamlined.8 Among other
innovations introduced by the Act is the establishment of a regulatory
body known as the Corporate Affairs Commission. The Commission is a
body corporate with a perpetual succession and capable of suing and
being sued in its corporate name. The headquarters of the Commission is
situated in the Federal Capital Territory Abuja with establishments of
state offices to facilitate the ease of doing business in Nigeria. The
CAMA, being the principal legislation that regulates corporate
insolvency in Nigeria, is a work in progress as it will continue to
undergo amendments to accommodate changes that may arise as a result
of circumstances of today in Corporate Insolvency proceedings.
Flowing from the issue of CAMA being a work in progress, the
CAMA 2004 was repealed and new CAMA enacted in what is now
known as Companies and Allied Matters Act 2020. The current CAMA
is divided into Seven parts, which are Part A dealing with Corporate
Affairs Commission (CAC), Part B deals with Incorporation of
Companies and Incidental matters, Part C deals with the Limited
Liability Partnership, Part D deals with the Limited Partnership, Part E
addresses Business Names, Part F deals with Incorporated Trustees,
while Part G is General Provisions. Thus, Companies and Allied Matters
Act 2020 is the extant legislation that repealed CAMA 2004 as
amended.
The major gap noticed in CAMA is that under section 564 of
CAMA, a company incorporated in Nigeria can be wound up or
liquidated. This is clearly not in tune with the current trend of business
rescue of ailing or distressed companies which is a global practice aimed
at preventing job losses. It is therefore pertinent to introduce corporate
entity rescue and insolvency legal regime that is not focused on a
company’s extinction, but on rescuing companies from Insolvency
through viable insolvency legal framework. An effective legal regime or
framework in Nigeria must be one that is designed to save viable

7
Amupitan, J. O. Principles of Company Law in Nigeria. (Jos University Press Ltd, 2013) 29
8
For example, new provisions on Unit Trusts, Mergers, Take-overs and Insider Trading were
introduced to the Nigerian Company Law.
392 | Vol. 12. Issue 2, 2023

businesses and to ensure that non-viable businesses can quickly

disappear from market, in order to allow deployment of resources and to
more productive ventures.

Jurisdiction of Court
Black’s Law Dictionary defines jurisdiction as court’s power to
decide a case or issue a decree.9 Thus in the context of this work,
jurisdiction of court is used to show the court that has the power or
competence in deciding issues emanating from the legislations
governing corporate insolvency matters. It is without doubt that the
existence of an efficient court system or judicial machinery is essential
to the success of any legal regime. In Nigeria, corporate insolvency
cases are first handled by the Federal High Court which is by virtue of
the provision of Section 251(1) of the Constitution of the Federal
Republic of Nigeria, 1999. The Federal High Court is vested with the
exclusive jurisdiction to handle insolvency matters. Appeals may be
made to the Court of Appeal and thereafter to the Supreme Court of
Nigeria.
Regrettably, our courts have not thrived so much in terms of
judicial experience in this area of practice and this is evidenced by the
dearth of local case law(s) on receivership in Nigeria decided upon by
the Supreme Court. Since most insolvency cases arise from the issue of
unpaid debts, both our legal practitioners and our courts treat them as
being akin to debt recovery cases. This position has made Akinwunmi &
Busari10 to state thus:
This is no doubt consequent upon a paucity of knowledge on the
part of our practitioners and judicial officers on technical issues relating
to insolvency as they do not have access to regular international
insolvency publications (there are quite a few of them) and sources of
information such as the J-Base which is an electronic database of
International insolvency material.
With regard to winding up of Companies under CAMA, it is
imperative to note that the Federal High Courts exercise jurisdiction in
this aspect of insolvency proceedings where the courts have shown
considerable experience. The Federal High Court that would exercise

9
Bryan, A.G. Black’s Law Dictionary. (Ninth Edition) 927
10
Akinwunmi & Busari Insolvency Practice in Africa–The Nigerian Experience.
http://akinwunmibusari.com. Accessed on 12th January, 2014.
 Benue State University Law Journal, 2023 | 393

jurisdiction in winding up, should be situated within the judicial division

of the registered office or head office of the company. For the purpose
of winding up proceedings, registered office or head office means the
place which has longest been the registered office or head office of the
company during the six (6) months immediately preceding the
presentation of the petition for winding up.11
The issue of jurisdiction came up in the case of Medicore
(Nigeria) Ltd v Labwares (Nigeria) Ltd12 where a company’s registered
office was located at Ilorin but the winding up proceeding was brought
at Federal High Court Lagos. It was held that on the basis of Section 407
(1) of CAMA 2004, the court that had jurisdiction to wind up the
company is the court within whose area of jurisdiction the registered
office or head office of the company is situated; in this case Ilorin,
Kwara State. Also in IMB Nigeria Ltd v Lomay Nigeria Ltd,13 a winding
up petition was brought in Lagos in respect of a company with
registered office or head office of the company in Jos, Plateau State. The
Petition was struck out on the same ground of lack of jurisdiction.
Under the Investment and Securities Act, 2007 the Federal High
Court also exercises jurisdiction to wind up the business of capital
market operators upon an Order of Securities and Exchange
Commission revoking the registration of a capital market operator and
requiring the business of that Capital market operator to be wound up.14
Having stated that both CAMA and Investment and Securities Act
confers jurisdiction on the Federal High Courts to wind up corporate
entities and business of capital market operators. It is the view of this
researcher that limiting jurisdiction of Federal High Courts in
insolvency proceedings to only where the registered office or head
office of the ailing company is situate is inappropriate as the company
may have subsidiaries in other major cities in Nigeria. The company, for
instance may have its head office in Jos, Plateau State, but has many
other states in Nigeria where it has more of its operations than Jos
Plateau State. In that case, it will be appropriate to institute proceedings
in any of the states where its major business concern could be located
and more convenient for the conduct of the proceedings. From the

11
See section 570 (1) (2) CAMA 2020 and s.7(1) (C) (G) Federal High Court Act.
12
(1985) FHCR 240 cited in Amupitan, J.O. (n7) 376
13
(1986) FHCR 28 cited in Amupitan, J.O (n12) 377
14
See S. 53(1) Investment and Securities (ISA) Act.
394 | Vol. 12. Issue 2, 2023

foregoing, it is obvious that Federal High Courts exercises jurisdiction

over companies and businesses established under a Federal Legislation.

Appointment of Official Receivers and Liquidators

The three important officers and Corporate Insolvency
Practitioners who play major roles in winding up of a Company are the
Official Receivers, Provisional Liquidators and Liquidators. It is now
settled that where corporate insolvency does not lead to rescue of a
company, it will ultimately result to winding up of the company.
By section 704 of CAMA 2020, a person acts as an Insolvency
Practitioner in relation to a company by acting as its-
a.) Liquidator, Provisional Liquidator or Official Receiver
b.) Administrator or Administrative Receiver; or
c.) Receiver and manager, or as nominee or supervisor of a
company’s voluntary arrangement.

An official receiver is an officer of the Federal High Court.

According to Section 582 of CAMA,15 and so far as it relates to the
winding up of Companies by the court “Official Receiver” means the
deputy Chief Registrar of the Federal High Court or an officer
designated for the purpose by the Chief Judge of the Court. The CAMA,
under section 583 further provides that where the court has made a
winding up order or appointed a provisional Liquidator, there shall,
unless the court thinks fit to order otherwise and so orders, be made out
and submitted to the official receiver a statement as to the affairs of the
company in the prescribed form, verified by affidavit, and showing the
particulars of its assets, debts and liabilities, the names, residences and
occupations of its creditors, the securities held by them respectively, the
dates when the securities were respectively given, the list of members
and the list of charges and such further or other information as may be
prescribed or as the official receiver may require.
Furthermore, the statement shall be submitted and verified by one
or more of the person who are at the relevant date the directors and the
person who is at that date the Secretary of the company or by such of the
persons mentioned in this subsection as the Official Receiver, subject to
the direction of the court, may require to submit and verify the
statement, that is to say persons who –

15
CAMA 2020.
 Benue State University Law Journal, 2023 | 395

a.) Are or have been officers of the company;

b.) Have taken part in the formation of the company at any time
within one year before the relevant date;
c.) Have been or are in the employment of the company within the
said year, and are in the opinion of the official receiver capable of
giving the information required;
d.) Are or have been within the said year officers of or in the
employment of a company which is, or within the said year was,
an officer of the company to which the statement relates.

The statement shall be submitted within 14 days from the relevant

date or within such extended time as the official receiver or the court
may for special reasons appoint.
As regards a Liquidator, in the context of winding up by the court,
a Liquidator is a person who is appointed by the court to wind up the
affairs of a company and to distribute its assets, if any, among creditors
and contributories in accordance with the articles.16 By section 557(1) of
the Act,17 a receiver or manager of any property or undertaking of a
company is personally liable on any contract entered into by him except
in so far as the contract otherwise expressly provides. If it is a contract
entered into by a receiver or manager in the proper performance of his
functions, such Receiver or Manager is subject to the rights of any prior
encumbrance, entitled to an indemnity in respect of liability thereon out
of the property over which he has been appointed to act as a receiver or
manager.
Under section 585 of CAMA,18 the court may appoint a
Liquidator or Liquidators for the purpose of conducting the proceedings
in winding up a company and performing such duties in reference
thereto as the court may impose and where there is a vacancy, the
official receiver shall by virtue of his office, act as Liquidator until such
time as the vacancy is filled. At any time after the presentation of a
petition and before the making of a winding up Order, the appointment
shall be provisional and the court making the appointment may limit and
restrict the powers of the Liquidator by the order appointing him. If a
provisional Liquidator is to be appointed before the making of a winding

16
Idigbe, A. (n14)18
17
CAMA 2020
18
CAMA 2020.
396 | Vol. 12. Issue 2, 2023

up Order, the official receiver or any other fit person, may be so

appointed. On the making of a winding-up Order, if no Liquidator is
appointed, the official receiver shall by virtue of his office become the
Liquidator. The Official Receiver in his capacity as provisional
Liquidator shall, and in any other case may, summon meetings of
creditors and contributories of the company to be held separately for the
purpose of determining whether or not an application is to be made to
the court for appointing a Liquidator in place of the Official Receiver. If
a person other than the Official Receiver is appointed Liquidator, he
shall not be capable of acting in that capacity until he has notified his
appointment to the Commission and given security in the prescribed
manner to the satisfaction of the court.
According to section 585(4) and (5) of CAMA, if more than one
Liquidator of a company is appointed by the court, the court shall
declare whether anything by the Act required or authorized to be done
by a Liquidator is to be done by all or anyone or more of them. A
Liquidator appointed by the court may resign, or, on cause shown, be
removed by the court; and any vacancy in the office of a Liquidator so
appointed shall be filled by the court. From the foregoing, it is evidently
clear that by the provisions of sections 582, 583 and 585 of CAMA, it is
the court that appoints both an Official Receiver and a Liquidator in
winding up of a company. The Official Receiver is a “provisional”
Liquidator where appointed by the court before an order of winding up
is made. Where no specific order of court was made by the Court for the
appointment of a provisional Liquidator, the Official Receiver of the
Federal High Court by virtue of his office is statutorily deemed to be the
Liquidator and thus can exercise the powers available to a Liquidator
under CAMA.
Beyond the appointment of official receivers and Liquidators by
the court, the CAMA empowers the Corporate Affairs Commission to
regulate practice of Insolvency Practitioners. Section 705(1) of CAMA
provides the qualification to be met before a person can be appointed as
official receiver, provisional Liquidator or Liquidator. By the provision
of section 705(1), A person is only qualified to act as Insolvency
Practitioner where he-
a. Has obtained a degree in law, accountancy or such other relevant
discipline from any recognized university or polytechnic;
b. Has a minimum of five years post qualification experience in
matters relating to Insolvency;
 Benue State University Law Journal, 2023 | 397

c. Is authorized to so act by virtue of a certificate of membership

issued by Business Recovery and Insolvency Practitioners
Association of Nigeria (BRIPAN), or his membership of any
other professional body recognized by the commission, being
permitted to act by or under the rules of that body; and
d. Holds an authorization granted by the Commission

(2) The Commission may prescribe in its regulations such other

additional qualifications as may be considered necessary.
However, by Section 676 of CAMA,19 there are categories of
persons disqualified for appointment as Liquidators. They include:
a.) Infant;
b.) Anyone found by the court to be of unsound mind;
c.) A body Corporate
d.) An undischarged Bankrupt
e.) Any director of company under liquidation
f.) Any person convicted of any offence involving fraud, dishonesty,
official corruption or moral turpitude and in respect of whom
there is a subsisting order under section 672 and 280 of CAMA.

Any appointment made in contravention of the provisions of

subsection (1) above shall be void and if any of the persons named in
paragraphs (c), (d), (e) and (f) above, shall act as a Liquidator of the
company, he shall be guilty of an offence and liable to a fine as
prescribed by the Commission in the Regulations in the case of a body
corporate, or in the case of an individual, to imprisonment for a term not
exceeding six months or to a fine as the court deems fit or both such
imprisonment and fine. It is the opinion of this researcher that Official
Receivers and Liquidators should have a certain degree of knowledge
and experience to effectively discharge the functions inherent in
winding up proceedings which is of technical nature. The degree of
knowledge and experience required for a person to be appointed as
official Receiver or Liquidator is such that should have been derived
from evidence of doing similar assignments for a certain statutory period
or that such appointee must belong to a professional body known to be
Insolvency Practitioners.

19
CAMA 2020
398 | Vol. 12. Issue 2, 2023

However, the provision of section 705(1)(b) as regards post

qualification experience in matters relating to insolvency appears to be
nebulous, as it did not address those who may have less than 5years
experience but are qualified under section 705(a)(c)(d) and (2) in
addition to being in active practice more than a person who may have
above 5 years’ experience but redundant in practice and thus lacking
current experience in practice and procedures of Insolvency matters.
Also, the Act limits the qualification body of Insolvency Practitioners to
the Business Recovery and Insolvency Practitioners Association of
Nigeria (BRIPAN), although certain other professional bodies may be
recognized by the CAC. The particular mention of BRIPAN in the
provision may be seen as an attempt to usurp the legislative power
which may lead to unhealthy rivalry between BRIPAN and other bodies
not mentioned in the legislation.

Arrangement and Compromise

Arrangements and Compromise are forms of corporate
restructuring. Where a company is undergoing financial difficulties that
may lead to its winding up, it may resort to restructure its outlook as a
way of rescuing the company from extinction. Economic realities have
always impacted on the growth and ability of a company to honour its
obligations to creditors. In the midst of such difficulties, a company
which opts to stay afloat must design and embark on legally acceptable
survival options, many of which are available under the Nigerian
Corporate and Investment Law and Practice.20 Arrangements and
Compromise are used interchangeably. It can be arrangement on sale of
company’s property under section 714 of CAMA 2020 or power to
compromise with creditor and member under section 715 of CAMA
2020. Thus, under section 710 of CAMA,21 the expression
“arrangement” means any change in the rights or liabilities of members,
debenture holders or creditors of a company or any class of them or in
the regulation of a company, other than a change effected under any
other provision of CAMA or by the unanimous agreement of all parties
affected thereby.

20
Ogbuanya, N.C.S. Essentials of Corporate Law Practice in Nigeria. (Novena Publishers
Limited 2013) 579.
21
CAMA 2020
 Benue State University Law Journal, 2023 | 399

A company, that intends to effect any arrangement may by special

resolution resolve that the company be put into members’ voluntary
winding up and that the Liquidators be authorized to sell the whole or
part of its undertaking or assets to another body corporate in
consideration or part consideration of fully paid shares, and distribute
the same in specie among the members of the company in accordance
with the rights in the liquidation. Any sale or distribution in pursuance
of a special resolution under this section shall be binding on the
company and all members thereof and each member shall be deemed to
have agreed with the transferee company to accept the fully paid shares,
debentures, policies, cash or other like interests to which he is entitled
under such distribution.22
Under section 715 of CAMA,23 which boarders on power of a
company to compromise with creditors and members, where a
compromise or arrangement is proposed between a company and its
creditors or any class of them, court may, on the application, in a
summary way, of the company or any of its creditors or members or, in
the case of a company being wound up, of the Liquidator, order a
meeting of the creditors or class of creditors, or of the members of the
company, or class of members, as the case may be, to be summoned in
such a manner as the court directs. If a majority representing not less
than three-quarters in value of the shares of members or class of
members, or of the interest of creditors or class of creditors, as the case
may be, being present and voting, either in person or by proxy at the
meeting in support of the compromise or arrangement, the compromise
or arrangement may be referred by the court to the Securities and
Exchange Commission which shall appoint one or more inspectors to
investigate the fairness of the said compromise or arrangement and to
make a written report thereon to the court within a time specified by the
court. If the court is satisfied as to the fairness of the compromise or
arrangement it will be sanctioned and shall thereafter be binding on all
the creditors or class of creditors or on the members.
A distinction can be drawn in respect of Arrangements and
Compromise under sections 714 and 715 of CAMA. While
Arrangements and Compromise under section 714 of CAMA portends
sale of company’s property during winding up, thereby bringing an end

22
Section 714 (1) CAMA 2020
23
CAMA 2020.
400 | Vol. 12. Issue 2, 2023

to the existence of the company, Arrangement and Compromise under

section 715 of CAMA is a corporate restructuring which will ordinarily
result in the rescue of the company from extinction as the restructured
company will bounce back to life in form of a new company. Winding
up for liquidation of the company under section 714 of CAMA brings an
end to the company since the assets are distributed to those entitled
under the rules of assets distribution when a company is dissolved.
It appears to this researcher that procedures for Arrangements and
Compromise under sections 714 and 715 of CAMA are cumbersome
and complex to apply for ailing company that requires restructuring to
rescue it to continue doing business. There are three different procedures
to follow, the convening of the meetings, the approval or investigation
by the Securities and Exchange Commission and the petition to the court
for the sanctioning of the scheme as approved by majorities during their
meetings. The CAMA provisions is similar to part 26 of Companies Act
of England which requires a majority in number representing 75 percent
in value of each class of creditors and each class of members present
and voting either in person or by proxy,24 for a scheme of arrangement.
The said Companies Act provision also involves obtaining the sanction
of the court to the scheme approved by the requisite majority of
creditors of each class at separately convened meetings ordered by the
court.25
However, the English Insolvency Act 1986 introduced a much
simpler procedure known as the Company Voluntary Arrangement
(CVA) by which distressed companies could negotiate simple
compromises or schemes of arrangements with their creditors.26
Under section 434 (1) of the Act27 a company’s Board of
Directors is empowered to arrange a composition of a company’s debts
with its creditors to enable it to vary the terms of its loans and enable the
company pay over an extended period to ensure its survival. The Act
refers to this as voluntary arrangement. It can also be called Company
Voluntary arrangement which is similar to the practice in England under
the English Insolvency Act 1986. This rescue mechanism enables an
Insolvent corporate entity to continue to carry on its business.

24
Companies Act 2006, S.899 13
25
Goode, R. Principles of Corporate Insolvency Law (Sweet & Maxwell 1997)2
26
Adebola, B. (n3) 54
27
CAMA 2020
 Benue State University Law Journal, 2023 | 401

While commending the intention of Arrangement and

Compromise as a form of restructuring corporate entities in financial
distress, this researcher has observed that the procedures for effecting
such Arrangement and Compromise under sections 714 and 715 of
CAMA are cumbersome and complex to apply for ailing company that
requires restructuring for rescue in order to continue doing business. The
above mentioned provisions of CAMA involves petition to court to
sanction the scheme. This may cause delay in effecting the Arrangement
and Compromise.

The Companies Winding Up Rules 2001 (CWR)

The Companies Winding up Rules 2001 governs the proceedings
in winding up of a company in Nigeria. The Companies Winding up
Rules 2001 replaced that of 1983. The 2001 rules applies to all
proceedings in every winding-up under the CAMA and the forms in the
appendix, where applicable shall be used,28 provided that the Chief
Judge of the Court may from time to time, alter any forms specified in
the appendix hereto or substitute new forms in lieu thereof. Where the
Chief Judge alters any form or substitutes any new form in lieu of a
form prescribed by these Rules, such altered or substituted form shall be
published in the Gazette. It is imperative to state here that where no
provision is made in the Companies Winding Up Rules, the Federal
High Court (Civil Procedure) Rules, 2009 becomes applicable by virtue
of Rule 183 of Companies Winding Up Rules, 2001 which provides that
in any proceedings in or before the court, where no provision is made by
these Rules, the Court’s (Civil Procedure) Rules shall apply. 29
Interestingly, there are three insolvency office holders who have duty to
render account of their activities during winding up proceedings.
There are several rules provided by the Companies Winding up
Rules 2001, aimed at checking insolvency office holders where winding
up is by the court. The insolvency office holders include Special
Manager, Official Receiver and Liquidators. The duty to render account
of stewardship is very vital in insolvency proceedings. Thus, Rule 3330
empowers the official receiver to bring application to the Federal High
Court for the appointment of a Special Manager. Such an application

28
Rule 2 of Companies Winding up Rules 2001
29
Rule 183 of Companies Winding Up Rules 2001
30
Companies Winding up Rules 2001
402 | Vol. 12. Issue 2, 2023

shall be supported by an affidavit and a report by the Official Receiver

which report shall either recommend amount of remuneration payable to
special manager or request the court to fix one. Every special manager
shall submit accounts to the Official Receiver and the Special Manager’s
account shall be verified by affidavit, in form 18 in the Appendix with
such variation as circumstances may require and when approved by the
Official Receiver, the total of the receipts and payments shall be added
by the official receiver to his accounts. Liquidators and Special
Managers shall give security upon appointment other than Official
Receiver.31 If a Liquidator or Special Manager fails to give the required
security within the time stated for that purpose in the order appointing
him, or any extension thereof, the Official Receiver shall report such
failure to the court who may thereupon rescind the order appointing the
Liquidator or Special Manager.32 A Liquidator is obliged to have given
the security upon appointment before all property is handed over by the
Official Receiver.33
A critical look at applications to be filed by the Official Receiver
or even verification of account requires an affidavit. It can be argued
that where an application for verification is not supported by the
affidavit as required by the Companies Winding up Rules 2001, such
application becomes incompetent and will be struck out. However, by
Rule 182 of the Rules,34 no proceedings under the Act and these Rules
shall be invalidated by any formal defect or by any irregularity, unless
the court before which an objection is made to the proceeding, is of the
opinion that injustice has been caused by the defect or irregularity and
that the injustice cannot be remedied by any order of that court. This
provision gives the Court discretionary power to form an opinion as to
when an injustice has been occasioned in the event of any defects or
irregularity, in that case the court may remedy the defect or irregularity
in the interest of justice. Rule 182 of the Rules which reserves to the
court the right to form an opinion as to when injustice has been
occasioned by an irregularity is inappropriate. This provision may turn
out to be a clog in the wheel of justice. There are no criteria to follow by
the court in determining whether injustice has been done by the
irregularity of an application not supported by an affidavit filed by the

31
Rule 42 of Companies Winding up Rules 2001
32
Rule 43 Companies Winding Up Rules 2001
33
Rule 149 Companies Winding Up Rules 2001
34
Companies Winding up Rules 2001
 Benue State University Law Journal, 2023 | 403

Official Receiver. The defect created in the rules by allowing the court
to form an opinion as to when injustice has been occasioned by the
irregularity is that the court might exercise the discretion wrongly and
only according to his sense of what amounts to justice. There is no
standard provision to follow by the court in determining whether
injustice has been done by the irregularity of an application not
supported by affidavit filed by the Official Receiver.

Winding up Procedures
A Company’s life time can be brought to an end through this
process known as winding up. Unlike other business and non-business
organizations, only companies undergo both winding up and dissolution
processes, others such as partnership, Business Name and Incorporated
Trustees only get dissolved. A statutory corporation is not subject to
winding up except as provided by the statute creating it or be dissolved
by a statute.35 In Kwara Investments Co. Ltd v Garuba,36 the Court held
that where a corporation is a creation of statute, only a statute can bring
to an end its existence.
Black’s Law Dictionary37 defines Winding up as: “Process of
settling the accounts and liquidating the assets of a partnership or
corporation, for the purpose of making distribution of net assets to
shareholders or partners and dissolving the concern.”
Winding up does not mean the end of a company but a process of
bringing the life span of the company to an end. The Company would
remain a corporate entity; but the running of the company will be
bestowed on the Liquidator who manages and administers the company
pending the ultimate dissolution of the company, by which time it will
no more be in existence. Therefore, winding up is merely a process to
end the company. In Tate Industries Plc v Devcom M.B Ltd,38 it was
stated that: “A winding up proceeding is signing the death warrant of a
company or pronouncement of the death of the company. It is very
serious matter”

35
Ogbuanya, N.C.S. Essentials of Corporate Law Practice in Nigeria (Noverna Publishers
Limited 2013)661
36
(2000) 10 NWLR (Pt. 674) CA 25-40 cited in Ogbuanya N.C.S
37
Black’s Law Dictionary. 6th Ed. 1601
38
(2004) 17 NWLR (Pt. 901) CA 182 @ 225, paras E-G
404 | Vol. 12. Issue 2, 2023

Ogbuanya39 defines winding up as: “The process by which a

company is liquidated and dissolved (dead) and its assets (if any)
distributed in accordance with certain rules of priority, for the benefit of
its creditors, members and the employees”
Apart from winding up as a process through which a company’s
life can be brought to an end, by the provision of section 8(a) (i) of
CAMA,40 the life of a company incorporated under the Act can also be
brought to an end by its name being struck off the register of Companies
and the Company shall be dissolved. A company can also be wound up
in accordance with the provisions of CAMA. Under CAMA,41 the
winding up of a company may be carried out through three methods to
wit – by the court; or voluntarily; or subject to the supervision of the
court. It has been held that by virtue of section 401 (1) of repealed
CAMA, Companies in Nigeria can only be wound up through those
three above mentioned ways.42 A company dies once the court orders
the dissolution of the company and not when it is being wound up or the
company can also die as provided under sections 8 (a) (i) and 692 of
CAMA 2020.43
The question that arises here is what are the statutorily required
winding up procedures which can bring the company’s life to an end?
By the provision of section 573 (1) of the Act,44 a winding up Petition
may be presented to the court for the winding up of a company either by
any of the following:
a.) The Company or a director;
b.) A Creditor, including a contingent or prospective creditor of the
Company;
c.) The Official Receiver;
d.) A Contributory;
e.) A trustee in Bankruptcy to, or a personal representative of a
creditor or contributory;
f.) The Commission under section 366 of this Act;

39
Ogbuanya, N.C.S. (n35)
40
See section 8 (a) (i) of CAMA 2020.
41
See section 564 of CAMA 2020.
42
See repealed CAMA, CAP C20 LFN 2004, decided in the case of Corporate Affairs Commission
v Davies (2000) 3 NWLR (Pt.647) 65
43
The Corporate Affairs Commission may strike off the name of a company from the register of
Companies.
44
CAMA 2020
 Benue State University Law Journal, 2023 | 405

g.) A Receiver if authorized by the instrument under which he was

appointed; or
h.) By all or any of those parties, together or separately.

In Nigeria, the Federal High Court is vested with the jurisdiction

to hear and determine every winding up Petition. Therefore, a petition
can only be validly presented when same is filed at the registry of the
Federal High Court located within the area of jurisdiction of the
registered office or head office of the company. Under Rule 18 of
Companies Winding Up Rules 2001, it is mandatory that every petition
must be verified by an affidavit referring to the petition and such
affidavit shall be made by the Petitioner, or by one of the petitioners, if
more than one or, in case the petition is presented by a company by
some director, secretary, or other principal officer thereof, and shall be
sworn and filed within four days after the petition is presented, and such
affidavit shall be sufficient prima facie evidence of the statements in the
petition.
A critical look at the provision of Rule 18 of Companies Winding
up Rules, shows that there must be a verifying affidavit in support of the
petition. However, the verifying affidavit which shall be deposed to by
either the petitioner or specific principal officers of the company, shall
be sworn to, and filed within four days after the petition is presented.
Thus, it means that the affidavit should not necessarily accompany the
petition but must be filed within four days after the petition had been
presented in court. It is submitted here that where the verifying affidavit
is filed with the petition at the same time, it will make the petition
incompetent, and this will result to striking out of the petition.
The verifying affidavit must also verify the petition, otherwise,
the petition will be struck out. In Farmat Shipping Line Ltd v
Establishment De Commerce General,45 notwithstanding the fact that
verifying affidavit was filed, the Supreme Court held that the verifying
affidavit did not refer to the petition but contains generally paragraphs
of an affidavit and the Supreme Court struck out the petition on that
basis.
Upon the presentation of the petition and verifying affidavit, same
is to be served on the company, unless presented by the company, at the
company’s registered office, if any and if there is no registered office

45
(1971) A.N.L.R 250 cited in Amupitan, J.O. (n13). 18
406 | Vol. 12. Issue 2, 2023

thereat, the principal or last known principal place of business of the

company, if such cannot be found, by leaving a copy with any member,
officer, servant of the company or in case no such member, officer or
servant can be found there, then by leaving a copy at such registered
office or registered place of business or by serving it on such member,
officer or servant of the company as the court may direct; and where the
company is being wound up voluntarily, the petition shall also be served
upon the Liquidator (if any), appointed for the purpose of winding-up
the affairs of the company.46 There shall be affidavit of service of any of
such petition as stated in form 5 and 6 in the Appendix. Service of
process in any winding-up matters shall be in accordance with the
procedure laid down for the service of civil processes in the court under
the Court’s (Civil Procedure) Rules.47
After the petition has been filed at the court, a court order is
required for the advertisement of the petition. The petition shall be
advertised fifteen clear days before the hearing. The advertisement of
the petition shall be once or as many times as the court may direct, in the
Gazette and in one National Daily Newspaper and one other newspaper
circulating in the state where the registered office, or principal or last
known principal place of business, as the case may be, of such company
is or was situate, or in such other newspaper as shall be directed by the
court.48 The advertisement shall also state the day and date on which the
petition was presented; the name and address of the petitioner; the name
and address of the petitioner’s solicitor; and a note at the foot thereof
stating that any person who intends to appear at the hearing of the
petition, either to oppose or support, must send notice of his intention to
the petitioner, or to his solicitor, within the time and manner prescribed
by the Rules and any advertisement of a petition for winding up of a
company by the court which does not contain such note shall be deemed
irregular. The advertisement of the petition shall be in form 9 or 10 as
prescribed by the Companies winding-up Rules 2001 with variations as
circumstances may require.49
It is important to state that though, by rule 19(2) (c), any
advertisement of a petition for winding up of a company by the court not
in compliance with provisions of the said Rule shall be deemed

46
Rule 17 Companies Winding Up Rules 2001
47
Rule 12 Companies Winding Up Rules 2001
48
Rule 19 (2) (b) of the Companies Winding Up Rules 2001
49
Rule 17 (2) (c) and Rule 19 (4) of the CWR 2001
 Benue State University Law Journal, 2023 | 407

irregular. Rule 182(1) of the Rules, however is to the effect that not
every irregularity or defect will invalidate a winding up proceeding
particularly where no injustice has been occasioned thereby. The court
has the discretion to determine whether injustice has been occasioned by
such defect or irregularity and where such injustice cannot be remedied
by an order of court, then such irregularity may invalidate the
proceedings. After the advertisement of the petition for winding up of a
company by the court, upon the application of a creditor, or of a
contributory or of the company, and upon proof by affidavit of sufficient
ground for the appointment of a provisional Liquidator, the court may
appoint a provisional Liquidator upon such terms as in the opinion of the
court shall be just and necessary.50 Basically, the purpose of appointing
a provisional Liquidator is to preserve the assets of the company
pending the determination of the winding up proceedings, especially
where the assets of the company could easily be tampered or wasted by
the principal officers of the company. The powers of the directors of a
company also cease to exist even with the appointment of the
provisional Liquidator.51
Under Rule 22 of Companies Winding Up Rules, after the hearing
at which the order to advertise the petition was made by the court, the
petitioner or his solicitor must on the next adjourned date satisfy the
court that the petition has been duly advertised, and affidavit verifying
the petition and affidavit of service if any are duly filed. Every person
who intends to appear on the hearing of a petition must give to the
petitioner notice of his intention to appear which must contain his
address and be signed by him or his solicitor.52 Prior to the date fixed by
the court for hearing of the petition, the petitioner or his solicitor must
prepare and file in the court’s registry, list of the names and addresses of
persons who intends to appear on the hearing of the petition and of their
respective solicitors,53 and the petitioner or his solicitor shall file the list
in the court registry prior to the hearing of the petition on the day
appointed for hearing.54
Upon the service of the petition, the respondent is required to file
an affidavit in opposition to the petition within ten days of the service of

50
Rule 21 (1) of the Companies Winding Up Rules 2001
51
Section 585 (9) of CAMA 2020
52
Rule 23 of the Companies Winding Up Rules 2001
53
Rule 24 (1) of the Companies Winding Up Rules 2001
54
Rule 24 (2) of the Companies Winding Up Rules 2001
408 | Vol. 12. Issue 2, 2023

the petition, or in the case of any other party within fifteen (15) days of
the date of advertisement of the petition and notice of filing of the
affidavit must be given to the petitioner or his solicitor on the day on
which the affidavit is filed.55 The Petitioner has five (5) days within
which to file his reply to the affidavit in opposition to the petition from
the date of receipt of such affidavit in opposition.56 After hearing the
petition for winding up of a company, the court may either by its order,
dismiss the petition or order that the company be wound up. Where the
court makes an order for the winding up of a company, a copy of the
winding up order is forwarded to the Corporate Affairs Commission by
the company or as may be prescribed by the court and the Corporate
Affairs Commission shall make a minute thereof in its books relating to
the company.57
Winding up is a collective proceeding. There are also non-
collective proceedings. The two terms are normally used to differentiate
corporate insolvency procedures internationally. While collective
proceedings deals with formal reorganizations of companies, like
Mergers & Acquisitions, Winding up and Arrangement & Compromises
which are procedures available to creditors and stakeholders in the
company, non-collective proceedings involves informal reorganizations,
like private arrangements and compromises with creditors. The
Companies and Allied Matters Act does not have provision for private
arrangements and compromises, but provides for receivership as a non-
collective proceeding. The court takes total control of all the assets of
the company in collective proceedings,58 as seen in receivership.
It is very imperative to state here that the procedures of winding
up of a company as stated above only brings the operational activities of
the company to an end, after which liquidation of the company follows
with the appointment of a Liquidator who will collect the assets of the
company for distribution to creditors in order of priority. Any surplus
funds shall be distributed to shareholders before the company will
finally and formally be dissolved. A copy of the order of dissolution
made by the court will then be forwarded by the Liquidator to the
Corporate Affairs Commission within fourteen (14) days of making of

55
Rule 25 (1) of Companies Winding Up Rules 2001
56
Rule 25 (2) of Companies Winding Up Rules 2001
57
Section 579 of CAMA 2020.
58
Idigbe, A. (n16) 8
 Benue State University Law Journal, 2023 | 409

the order.59 The process of winding up a company in the opinion of this

researcher is very technical and cumbersome. Thus, it appears that if
half of the efforts put in winding up a company are deployed to rescue
the business of the company by way of restructuring through
arrangement and compromise, the interest and wellbeing of the
company, creditors, contributories and shareholders of the company will
be better served. This will be in line with the international best practices
aimed at reviving ailing business of corporate entities instead of
liquidation of the companies.
This researcher has observed the unnecessary technicalities in the
rules which makes winding up proceedings difficult. For instance, it is
required under Rule 18 of Companies Winding up Rules that the
verifying affidavit in support of the petition must be filed within four
days after presentation of the petition, otherwise the petition becomes
incompetent if filed the same time with the petition. There is nothing
wrong in filing the petition with verifying affidavit the same time as
both are processes that should go together in the proceedings. Again, the
requirement by rules that an order of court is required for the
advertisement of the petition after it has been filed is unnecessary. It
means that the petition must have been filed before another application
is made to the court for an order for advertisement of the petition. This
will definitely occasion unnecessary delay in the proceedings, having
regards to the snail pace nature of judicial proceedings in Nigeria. While
this researcher is not averse to publication or advertisement of the
petition as required by the Rules, it would be better to include the
application for order of court for the advertisement of the petition, the
same time with filing of the petition.

Conclusion and Recommendations

The adverse impact of insolvency on corporate entities cannot be
overestimated. The increase incidence of corporate collapse is majorly
attributed to it. Thus, these challenges requires legislative intervention.
Companies must rise up to the challenges posed by corporate
insolvency. It is therefore recommended that:
1. Section 564 of CAMA which expressly provides for winding up
of company, be amended to reflect or look rescue friendly for
companies undergoing insolvency. Except in extreme cases where

59
Section 617 (2) CAMA 2020.
410 | Vol. 12. Issue 2, 2023

a corporate entity cannot be salvaged, legislation should

encourage saving of viable business.
2. The exercise of jurisdiction of Federal High Court under S. 570 of
CAMA in winding up of corporate entities, should be amended to
include where the company has subsidiary or operational
activities being carried out, as against only the head or registered
office or the company.
3. Amendment of Section 705(1)(b) for a person to be qualified to
act as insolvency practitioner, to include five years post
qualification experience with ascertainment of being in active
practice in matters relating to insolvency. A person may have five
years post qualification experience but redundant for years. In that
case, his experience may not be in tune with current practice and
procedures in insolvency matters.
4. Elimination of courts involvement in the cumbersome procedure
for effecting arrangement and compromise under sections 714 and
715 of CAMA. This will hasten the procedure if court
proceedings is not involved.
5. There should be amendment of section 182 of the winding up
rules which allow a court to exercise discretion to form an opinion
as to when injustice has been occasioned in application before the
court; to provide a standard or criteria in determination of whether
injustice has been done by the irregularity of such application not
supported by an affidavit filed by the official receiver. A criteria
to be followed up by a judge is necessary in the proceedings.
6. It is also recommended that the unnecessary technicality under
section 18 of the winding up Rules filing of verifying affidavit
within four days after presentation of the petition, otherwise the
application becomes incompetent; be amended to read that both
the verifying affidavit and petition can be filed concurrently, as
both are processes in the winding up proceedings.