NIGERIA Law and Practice Contributed by: Ben Unaegbunam, Omolola Coker, Sanford Mba, Promise Osimhen, Chidera Chikere and Oluwaseun Denagan, Dentons ACAS-Law (Adepetun, Caxton-Martins, Agbor & Segun)
7. Bankruptcy and Insolvency 7.1 Impact of Insolvency Processes
• Enforcement proceedings are instituted in Nigeria within 12 months from the date of the judgment. A foreign arbitration award will also be recognised in Nigeria following an application to the court for that purpose, provided that none of the limited grounds for non-recognition applies. Such grounds include: • A party to the arbitration agreement does not have capacity, or the arbitration agreement is invalid under the chosen law or Nigerian law. • Proper notice of the appointment of an arbitrator or of the arbitral proceedings was not provided, or a party was unable to present its case. • The award deals with a dispute not contemplated by or falling within the terms of the submission to arbitration, or contains decisions beyond the scope of that submission. • The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or the law of the country where the arbitration took place. • The award has not yet become binding on the parties or has been set aside or suspended by a competent court in the country where, or under the law of which, the award was made. • The subject matter of the dispute is not capable of settlement by arbitration under Nigerian law, or recognition or enforcement of the award would be contrary to Nigerian public policy. Once a foreign judgment has been duly registered in Nigeria, it has the same effect as a judgment originally obtained in Nigeria. 6.4 A Foreign Lender’s Ability to Enforce Its Rights Outside the conditions detailed in 6.3 Foreign Court Judgments , and the requirement to perfect a security interest as detailed in 4.1 Withholding Tax , there are no matters that specifically impact a foreign lender’s ability to enforce its rights under a loan or security document.
Commencement of insolvency proceedings has a significant impact on a lender’s right to enforce its loan, security, or guarantee. When a winding-up peti- tion is filed or a company enters administration, the primary effect is the imposition of a statutory morato- rium on enforcement actions which prevent creditors from commencing or continuing legal proceedings, enforcing security interests, or taking possession of a company’s assets without the leave of the court or the consent of the liquidator. However, a holder of a fixed charge may take action to enforce and realise the security interest. Insolvency also poses the risk of fraudulent preferences for securities or guarantees concluded within the prescribed statutory limit as stat- ed in 5.7 Rules Governing the Priority of Competing Security Interests . 7.2 Waterfall of Payments The priority of payments on a company’s insolvency is set out in CAMA. CAMA provides that secured credi- tors shall rank in priority to all other claims, including any preferential payment or any other debts, inclusive of winding-up expenses. The waterfall of payments is generally as follows: • Secured Creditors Holding Fixed Charges Over Specific Assets: They are paid first from the pro- ceeds of the sale of those assets, provided their security interests were validly created and perfect- ed prior to insolvency. • Costs and Expenses of the Insolvency Process: These include remuneration for liquidators, admin- istrators, or receivers, as well as court-approved expenses incurred in preserving and realising the company’s assets. • Preferential Debts: These include amounts owed to employees (such as wages and salaries up to a statutory limit), unpaid taxes, and certain pension contributions. • Secured Creditors Holding Floating Charges: They are paid from the remaining assets subject to the floating charge after the preferential debts have been settled.
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