ADMINISTRATION OR RECEIVERSHIP? MAKING THE RIGHT CHOICE TOWARDS CORPORATE RESCUE.

Abstract

A company has the power to borrow money for the purpose of its business and to charge its undertakings and assets as security for the loan by way of a debenture instrument under the provisions of the Companies and Allied Matters Act 2020 (CAMA 2020). Such money advanced is with a promise for repayment between the borrowing company (the debtor) and the creditor, and the creditor is entitled to realize his security. Most debenture makes provision for the realization of security through the mechanism of receivership and administration. While receivership is an enforcement mechanism and one of the most common means of debt recovery; administration is a rescue mechanism whereby the business is being held together by the administration while plans are formed either, first, to rescue the company; or to sell the business and assets of the company in situations where it will produce a better result for creditors than an outright liquidation. Due to the introduction of administration to the insolvency regime in Nigeria under CAMA 2020, this paper examines receivership and administration and their mechanisms while considering which of these mechanisms facilitate the objective of corporate rescue while taking care of the interest of all stakeholders. This paper further examines critically the provisions of the Companies and Allied Matters Act 2020 and the United Kingdom’s Insolvency Act of 1986 on administration from a comparative perspective due to the insolvency regime in Nigeria being modeled after that of the United Kingdom. The paper posits that although the introduction of administration into the Nigerian insolvency regime is quite laudable; the provision on receivership, which has been part of the old Act - CAMA 1990, should not have been retained in CAMA 2020 alongside administration as this has created a loophole that can be exploited by secured creditors who may choose receivership which solely protects their interests, over administration. This paper advocates for the review of CAMA 2020 to remove receivership in its entirety from the law as an insolvency mechanism or limit its application while retaining administration