INSOLVENCY AND CORPORATE RE-ENGINEERING SERVICES

Companies facing financial challenges and difficulties needs to act quickly and proactively in order to preserve the value of the business and avoid going bankrupt.

According to investopedia, insolvency  occurs when a business organization can no longer meet its financial obligation to its lenders or creditors when the debts come due. Insolvency may arise due to poor cash flow management or increase in expenses incurred by the business organization.  There are two forms of insolvency namely:

Cash flow insolvency: This type of insolvency occurs when a business organization has enough assets to pay its lenders or creditors, but they lack the appropriate form of payment to pay it off.  Take for example an organization may have the plant and machinery with valuable motor vehicles but lacks enough liquid assets to pay the debt when it falls due

Balance sheet insolvency: This type of insolvency occurs when a business organization doesn’t have enough assets to pay off its debt. This often leads to bankruptcy of the business organization

At Qeeva Advisory Limited, we ensure that we meet the demands of our clients through workable solutions in order to meet the needs of the clients. Our team at Qeeva Advisory Limited consists of Lawyers, Chartered accountants, strategic experts, estate valuers, and tax practitioners to meet the needs of our clients.

Any secured creditors or lenders that are looking for a better security realization can count on our efficient and effective services. Companies that are also facing financial challenges that will lead to involuntary liquidations or personal liability should also seek our services.

In Nigeria, an incorporated entity becomes insolvent only when the court has declared it.

There are various laws applicable directly and indirectly to insolvency generally in Nigeria. These include the following.

Primary Legislation

  • The CAMA CAP C20 Laws of the Federation of Nigeria (LFN) 2004;
  • the Companies Winding-Up Rules 2001 (made subject to the CAMA, above);
  • the Bankruptcy Act as amended by Decree 109 of 1992 CAP B2 LFN 2004;
  • the Bankruptcy Rules, made pursuant to the Bankruptcy Act;
  • the ISA 2007;
  • the Securities and Exchanges Commission Rules (made subject to the ISA above);
  • the Secured Transactions in Movable Assets Act (the Collateral Registry Act) 2017; and
  • The Credit Reporting Act 2017.

Secondary Legislation

  • The Banks and Other Financial Institutions Act 1991;
  • the AMCON Amendment Act 2015;
  • the Failed Banks (Recovery of Debts) and Financial Malpractices in Banks Act CAP F2, LFN 2004;
  • the Insurance Act CAP I17 LFN 2004;
  • the Economic and Financial Crimes Commission Establishment Act 2004;
  • the Mortgage Institutions Act, CAP M19, LFN 2004; and
  • The Nigeria Deposit Insurance Corporation Act CAP N102, LFN 2004.

The CAMA makes provisions for the appropriate procedures to be taken in the event of insolvency. Under this statute, winding-up proceedings can be instituted voluntarily by:

  • a company or its shareholders;
  • creditors;
  • a contributory;
  • a trustee or personal representative;
  • an official receiver;
  • a receiver authorised by a debenture; or
  • The CAC ( Corporate Affairs Commission)

In Nigeria, Section 401 of the Companies and Allied Matters Act provides the three major procedures used to liquidate (also known as winding up) an insolvent company in Nigeria:

  • Court-ordered winding up
  • A court ordered winding up occurs when
  • The company resolved by special resolution to be liquidated by the court;
  • The company defaults in holding statutory meetings or filing statutory reports;
  • The company has fewer than two members;
  • The company is unable to pay its debts; or
  • The court finds that it is just and equitable to do so.

A court ordered winding up occurs when the business organization or company decides to pass an order to wind up the company and makes a request for the court to supervise the procedure. The court may now order the company to be wound up while supervising the procedure and make provision to creditors, contributors and others with the right to apply to the court.

Voluntary winding up

Voluntary winding up occurs when the members of the company decides among themselves that the company should be wound up.  This occurs

The fixed term set out in the articles of association expires or the articles allow them to wind up the company voluntarily under certain conditions, provided that the company passes a resolution in the general meeting; or

The company resolves by special resolution that it should be wound up voluntarily.

Voluntary winding up may either be

Members’ voluntary winding up

Section  464-470 of the Company and Allied Matters Act states that member’s  voluntary winding up  occurs when the company is solvent and can pay its full debt within such period not exceeding 12 months from the commencement of the winding up

Procedure for a company voluntary winding up by members

  • The company at a general meeting would pass a special resolution proposing to wind up the company, and at this meeting would appoint one or more liquidators for the process. The appointed liquidator may be a professional such as an accountant with the good knowledge of the winding up laws and procedures.
  • Section 458 (2) states that company shall give notice of the special resolution passed to the Corporate Affairs Commission within 14 days of its passage and also advertise it in the official gazette or in two daily newspapers.
  • Section 462 (1),(2)(a) states that a statutory Declaration of solvency must be made by the directors or majority of the directors within 5 weeks immediately preceding the date of the passing of the special resolution for winding up the company
  • Section 464(2) states that the company must thereafter cease to carry out business after the resolution for winding up has been passed, and the powers of the directors’ ceased upon the appointment of the liquidator unless the company in a general meeting or the liquidator allows the continuance of it.
  • In the event the winding up process last for more than a year, the liquidator is to hold a meeting at the end of each year, and these meetings should be called to notice by publishing it in the official gazette and in some newspapers printed in Nigeria.
  • Section 468 (3) states that the liquidator is to hold final meetings upon liquidation of the company and a copy of the accounts/returns of the meeting sent to the Corporate Affairs Commission within 7 days of the meetings for registration.
  • Section 470 (3) states that as soon as the affairs of the company are fully wound-up the liquidator is to prepare, send and convene a meeting for the purpose of laying before it the financial accounts of the winding up, thus showing how the winding up was conducted and result of any trading during this period.
  • Section 470(8) states that the liquidator is required to preserve all books or papers or documentation of the company on his activities as a liquidator for a period of 5 years before any destruction or otherwise directed by the commission in such event shall not destroy same until the CAC consents in writing.
  • Section 470 (4) states that the liquidator shall within 28 days after this meeting sends to the Corporate Affairs Commission the copies of the accounts and a statement of holding of meeting and dates for registration.
  • The liquidator is thereafter to finally apply for dissolution order and send same to the commission. It should be noted that the company is deemed dissolved after 3 months of the registration of the accounts/returns with the Corporate Affairs Commission in accordance with the Sections 478(4)

Creditors’ voluntary winding up

Section 472-478 of the Company and Allied Matters Act states that creditor’s voluntary winding up occurs when the company is insolvent and the creditors of the company would take charge of the liquidation process

Procedure for a company voluntary winding up by creditors of the company

  • Section 472(1) of the Act states that both the Company and its Creditors would hold separate meetings to propose for a winding up of the company. In this case, the company must call the meeting of the creditors on the same day or the next day after.
  • Section 473(1) of the Acts states that the Creditors and the Company at their respective meetings may nominate a person to be the liquidator of the winding up process. However, the person nominated by the Creditors will be the liquidator if different persons were nominated at the two meetings. Meanwhile, any director, member, or creditor may apply to the court to order otherwise
  • The Creditors at their meeting may, if they think fit, appoint a committee of inspection of not more than 5 persons. The Company may also appoint not more than 5 persons to the committee but the creditor may reject such persons so appointed by the Company.
  • Section 477 of the Act states that the liquidator shall within 14 days of his appointment publish it in the official gazette and 2 daily newspapers and he is to deliver same to the commission for registration a Notice of his appointment.
  • The liquidator shall make publications of notice of the final meeting and the account of the liquidation is laid before and approved by the meeting. And after this meeting, the liquidator must within 7 days sends a copy of the account and return holding of the meeting to the Corporate Affairs Commission.
  • Section 478(4) of the Act states that the company is subsequently deemed dissolved after 3 months of the registration of the accounts and return to the commission. However, the Court upon an application by the liquidator, member, or creditor can defer the date, which the dissolution is to take effect.

OUR INSOLVENCY AND CORPORATE RE-ENGINEERING SERVICES

At Qeeva Advisory Limited, we offer the following insolvency and corporate services

  • Restructuring Advisory
  • Restructuring and Corporate Insolvency in Nigeria
  • Turnaround Advisory
  • Borrower Representation
  • Financial Advisory Service for Post-Restructuring
  • Agent Management
  • Winding Up:Voluntary Winding Up: Members Voluntary Winding Up or Creditors Voluntary Winding Up
  • Receivership and Management
  • Receivership
  • Management
  • Security recovery and Realization
  • Negotiations with secured creditors
  • Security Enforcement: Strategies and Implementation, Security Reviews, Recovery Proceedings
  • Investigations
  • Winding Up by the Court
  • Business Diagnostics
  • Organizational Audits
  • Corporate Re-engineering: Review of Business Process with Cost-cutting in mind
  • The organizational audit which questions the business model, its structures, and strategies and proposes solutions to present context.
  • Design of re-structuring plans with short-term and long-term options.
  • Acting as Intermediary in Trust relationships
  • Assets Tracing
  • Operational & Financial Restructuring for Distresses Companies
  • Lender-led Restructuring
  • Scheme of Arrangement
  • Advising Boards & Non-Executive Directors
  • Sale of Assets
  • Protection against claims for seizure
  • Protecting directors and officers from liability claims.
  • Negotiating arrangements or plans of reorganization with creditors
  • Designing strategies for recovering assets or combating fraud
  • Financial debt restructuring
  • Exchange offer and debt/equity conversions
  • Equity capital raising and restructuring
  • Insolvency proceedings
  • Insolvency litigation
  • Liquidation and receivership

Qeeva Advisory Limited is one of the leading corporate insolvency company in Nigeria. We offer Insolvency and Corporate Reengineering services to various companies, lenders, banks, and equity investors. We have professionals and experts that deploy their skills and experience of company law, employment law, tax law, property law, commercial law, various court processes, insolvency processes, and restructuring practices that provides variation of services to our clients depending on their specification

For more information;Call 08023200801, 08075765799, Email: info@qeeva.com