Relations between Tasks

144

contributory for any balance against his estate,⁶²⁸

d) Draw, accept, make and endorse any bill of exchange or promissory note in the name and on behalf of the company,⁶²⁹

e) Raise on the security of the assets of the company any money requisite;⁶³⁰ f) Take out in his official name, letters of administration to the estate of any

deceased contributory and to do in his official name any other act necessary for obtaining payment of any money due from a contributory or his estate which cannot be conveniently done in the name of the company,⁶³¹

g) Appoint an agent to do any business which the liquidator is unable to do himself,⁶³² and,

h) Do all such other things as may be necessary for winding up the company and distributing its assets.⁶³³

145

b) The liquidator exercises his powers in the administration and distribution of the assets of the company, subject to directions and approvals of the

creditors or contributories at any general meeting or by the committee of inspection.⁶³⁷ However, in the case of conflict between directions given by the creditors or contributories at any general meeting and that of the Committee of Inspection, the directions of the creditors or contributories shall override that of the Committee of Inspection.⁶³⁸

c) The requirements for payments by liquidator of money received by him into the Company‟s Liquidation Account,⁶³⁹ audit and investigation of the books of account kept by the liquidator.⁶⁴⁰

d) The requirements for the release of a liquidator.⁶⁴¹

e) The right of any creditor or contributory to apply to the court with respect to any exercise or proposed exercise of any of the liquidator‟s powers.⁶⁴² 5. Cessation of office of the Liquidator

The liquidator ceases to act in a winding up proceedings or vacates the office, if:

a) He resigns his appointment⁶⁴³

b) He is removed by the court or Committee of Inspection⁶⁴⁴

c) He is released⁶⁴⁵ subject to compliance with the requirements of the Rules,⁶⁴⁶ and,

636 CAMA, op cit, ss. 425 (1) (3), 427 (3), 453 (1).

637Ibid, s. 427 (1).

638 Ibid, s. 427 (1).

639 Ibid, s.428 (1).

640 Ibid, ss. 429, 432; CWR, op cit, rr. 157, 158.

641 CAMA, ibid, s. 431; CAC v Davis, supra.

642 CAMA, ibid, s. 425 (3).

643 Ibid, s. 422 (5); CWR, op cit, r. 150.

644 CAMA, ibid, s.422(5).

645 Ibid, s. 431; CWR, op cit, r. 177.

646 CWR, ibid, r. 163.

146

d) He is fixed with a Receiver‟s Order in Bankruptcy.⁶⁴⁷ 2.15 Distribution of Assets of the Company

Once the liquidator has collected in the company‟s assets, they must be distributed in an orderly manner to those entitled to them.⁶⁴⁸ There are certain basic rules guiding the distribution of assets. Foremost is that the assets are devoted to first, paying the expenses of the liquidator,⁶⁴⁹ then to the preferred creditors,⁶⁵⁰ the general unsecured creditors, the deferred creditors and if there is anything left, to the members, according to their entitlements associated with their class rights.⁶⁵¹ If the assets are not sufficient to pay all of a particular class in this hierarchy in full, then they share pro rata.⁶⁵²

2.16 Completion of Winding up

Winding up is completed by the distribution of assets, filing of the final accounts as in Form 72 in the Appendix to the Rules and the order dissolving the company has been reported by the liquidator to the Corporate Affairs Commission.⁶⁵³

It is important to state that if a winding up is not completed within a year; the liquidator must send to the Corporate Affairs Commission, at specific intervals, a prescribed statement giving particulars as to the position of the liquidation⁶⁵⁴ and a creditor or contributory may examine the statement and take copies or extracts on payment of a fee.⁶⁵⁵

647CWR, op cit, r. 151.

648 Okafor v Igwilo, supra at 54.

649 CAMA, op cit, s. 494 (5); CWR, op cit, r. 167.

650 CAMA, ibid, s. 494 (1) - (4).

651Ibid, s. 446.

652 Orojo, op cit, p. 499.

653 CWR, op cit, r. 168 (a).

654 CAMA, op cit, s. 516 (1).

655 Ibid, s. 516 (2).

147

2.17 Dissolution of a Company: Meaning and Consequences.

While winding up of a company involves a liquidation of the company so that its assets are distributed to those entitled to receive them, liquidation is quite distinguishable from dissolution, which is the end of the legal existence of a company.⁶⁵⁶ When a company is under a winding up proceedings, it is not dead but still alive though sick.⁶⁵⁷ Thus, the life of a company comes to an end when the court orders dissolution of the company upon an application by the liquidator.⁶⁵⁸ However, the court may at any time within two years after dissolution of a company, on the application of the liquidator or any interested person, make an order declaring the dissolution void and the winding up proceedings to be of no effect.⁶⁵⁹

It is important to state that dissolution of a company may occur without liquidation. This usually occurs in circumstances of a smooth transition to the company‟ legal successor through transformation of legal entities, that is, by a merger, division, change of the legal form of the business corporation, a transfer of assets to its shareholders or a cross-border relocation of the registered office.⁶⁶⁰

656 Amolegbe Re, supra, at 94; Progress Bank (Nig) Plc v O.K. Contact Point Holdings Ltd, supra at 531 – 532; Spring Bank Plc v ACB International Plc [2016] 18 N.W.L.R (pt 1544) 245 at 255, paras C – F.

657 Onwuchekwa v NDIC, supra; C.C.B (Nig) Plc v Mbakwe [2000] F.W.L R (pt 14) 2351.

658 CAMA, op cit, s. 454.

659 Ibid, s. 524 (1); Abekhe v NDIC, supra; Musa v Elaidiamkhem [1994] 3 N.W.L.R (pt 334) 544.

660Spring Bank Plc v ACB International Bank Plc,supra, at 255 – 260.

148

CHAPTER THREE

RECEIVERSHIP AS A MODE OF ENFORCEMENT OF SECURITY

In order to carry out its business, a company ordinarily requires capital. The needed capital can be equity capital or debt capital. In most cases, equity capital is never sufficient for the flotation of a company; hence, there is understandably a resort to debt capital. The powers of a company to carry out its business through debt capital are provided in the CAMA.⁶⁶¹ Debt capital is in most cases, secured, as unsecured credits often turn out to be a hoax, disappointment and loss to the creditor.⁶⁶² Thus, the essence of security in debt capital transactions is priceless. In the case of credits advanced to a company, security can be in the form of mortgage or charge of its undertaking, property and uncalled capital or any part thereof, creation and issue of debentures, debenture stock and other securities.⁶⁶³

It is usual for companies in Nigeria to obtain debt capital by issuing debentures, which debentures are secured either by a fixed charge mostly on the specific or ascertained company properties or by a floating charge over the whole or a specific part of the company‟s undertakings and assets or by both.⁶⁶⁴ Notwithstanding the comfort afforded creditors by the provision of security in debt capital transactions, the enforcement of such security are not usually seamless. Worse still, as examined in chapter two of this study, resort to winding up of a company may not ultimately be a beneficial mode of resolving insolvency issues.⁶⁶⁵ Hence, there is need to utilise other

661 Companies and Allied Matters Act (CAMA), Cap C20, Laws of the Federation of Nigeria, 2004, s.

166.

662 I O Smith, Nigerian Law of Secured Credits (Lagos: Ecowatch Publications (Nigeria) Limited, 2001) p. 1.

663 CAMA, op cit, s. 166.

664 Ibid, s. 173 (2); Smith, op cit, p. 297.

665 O Ajayi, Legal Aspects of Finance in Emerging Markets (London: London: LexisNexis Butterworths Tolley, 2005) p. 603.

149

alternatives to winding up. One of the prominent alternatives to winding up of a company in Nigeria is Receivership.

The institution of receivership is one created by the agreement of parties to secured credit arrangements and also by virtue of the provisions of statute.⁶⁶⁶ Thus, in the realm of corporate law, the appointment of a receiver and/or manager is provided as one of the potent remedies available to a debenture holder in the enforcement or realisation of securities.⁶⁶⁷ Although a receiver and a manager is usually given similar meaning,⁶⁶⁸ there are some fine distinctions between a receiver and a receiver/manager. Where the person appointed is mainly to stop the business, collect the debts, receive rents and realise debts, he is only a receiver but where the person appointed is reserved with powers to manage and continue the business of the company as a going concern, he is not only a receiver but also a manager.⁶⁶⁹

In this chapter of the study, the focus would be on a thorough examination of the law and practice relating to receivership in Nigeria.

3.1 Jurisdiction over Receivership Proceedings

The court with exclusive jurisdiction to appoint a receiver and/or manager for companies in Nigeria is the Federal High Court.⁶⁷⁰ However, where the subject matter of receivership would not entail recourse to either the CAMA or any enactment

666 Conveyancing Act 1881, s. 27; Property and Conveyancing Law 1959, s. 131 (Western Region of Nigeria); CAMA, op cit, Part XIV, ss. 387 to 400.

667 CAMA, op cit, s. 209 (1).

668 Ibid, s. 567 (1).

669 Uwakwe v Odogwe [1989] 5 N.W.L.R (pt 123) 562 at 589; PIP Ltd v Trade Bank (Nig) Plc [2009] 13 N.W.L.R (pt 1159) 577 at 637 – 8; Ponson Enterprises Nig Ltd v Njigha (2001) FWLR (pt 16) 1685;

Palmer‟s Company Law, Volume 3 (London: Sweet & Maxwell) Pt 14, p. 14068; J E O Abugu, Company Securities: Law and Practice (2^nd edn, Lagos: MIJ Professional Publishers Limited, 2014) p.

227.

670 Constitution of the Federal Republic of Nigeria (CFRN) 1999, s. 251 (1) (e); Bank of Industry Limited v Awojubagbe Light Ind. Ltd [2016] 1 N.W.L.R (pt 1493) 280 at 327 – 8.

150

regulating the operations of companies, a State High Court and not the Federal High Court has jurisdiction in such instance of receivership.⁶⁷¹

3.2 Appointment of Receiver and/or Manager

A receiver and/or manager may be appointed either by the court or out of court, that is, under the express powers of the debentures or trust deed.⁶⁷² In this study, the discussion would be on each mode of appointment.