It is no longer news that the provisions of the new Companies and Allied Matters Act (CAMA), 2020, which repealed and replaced the erstwhile Companies and Matters Act (CAMA), 1990 introduced several innovations aimed at improving business operation in Nigeria and the protection of the interests of various stakeholders, one of which is the Company Voluntary Arrangement (CVA) provided in chapter 17.
A Company Voluntary Arrangement according to insolvency practitioners is best described as an out of court administrative provision with the Court acting as a gate keeper and intervener where necessary but with the initiative being left to the company and appointed restructuring practitioner who essentially act as midwife and nurse to birth and monitor implementation of the restructuring plan conceived at the court sanctioned meeting between the Company and her creditors.
A CVA allows a financially distressed company to conceptualise a debt restructuring, rescheduling or deferral in a proposal, to present same to the target creditors and enter into an agreement with its creditors regarding the repayment of all or a part, of its debts over an agreed period of time. Whilst the scope of things that can be done and agreed are virtually limitless, the law requires assent, consent or acceptance by a substantial majority of target creditors of the same class, but also consent of preferential and secured creditors where the proposal being made would affect their statutorily protected rights.
Since the introduction of this business rescue mechanism in Nigeria on 7th August, 2020 and the coming into force of the law on January 1, 2021, the Nigerian Federal High Court only recently had an opportunity to review a live case and make relevant judicial pronouncement, and directions regarding CVA application in Nigeria. This was in the case of FHC/L/CS/1250/2021- Re: Seyi Akinwunmi & Okorie Kalu where the Nominees appointed by the Tourist Company of Nigeria (TCN) filed ex-parte originating application praying the Honourable Court for an order sanctioning their appointment as Nominees of a proposed CVA for a leading hospitality company. The Joint Nominees – represented by Okorie Kalu[1] of PUNUKA Attorneys and Solicitors in court- made a detailed analysis and presentation to Honurable Justice Lifu of the Federal High Court on their report recommending the commencement of the CVA process. A prayer was accordingly made to the court for an order summoning separate meetings of creditors of the company on the one hand and the meeting of the company on the other hand for the consideration of the company’s proposal on the restructuring and liquidation of certain outstanding obligations.
Having listened to the arguments canvassed by Okorie Kalu the Nominees’ counsel on record, Honourable Justice Lifu of the Federal High Court, Lagos division on the 15th day of November, 2021 sanctioned the appointment of Mr. Seyi Akinwunmi and Mr. Okorie Kalu as Nominees of Tourist Company of Nigeria (“the Company”) in respect of the proposed CVA and further ordered a meeting of creditors of the company on the one hand, and company’s meeting on the other hand for the purpose of considering the company’s proposal for a voluntary arrangement.
In granting the application, the Honourable court remarked, “it must be appreciated that the lawmakers have introduced these novel steps for the purpose of fostering seamless and less cumbersome mechanisms in insolvency with the primary purpose of rescuing businesses through the instrumentality of the company voluntary arrangement, which has become expedient considering the present global economic meltdown and recession occasioned by the covid-19 pandemic. The present application reveals that there is a need for the TCN i.e. Tourist Company of Nigeria to restructure its obligations to enable it keep afloat as a going concern.”
The Honourable Court further charged the company and its Nominees to duly comply with the other requirements outlined in CAMA with respect to the conducts of the meetings and notifications especially having regards to the fact that the instant CVA is the precedent setting CVA in Nigeria and a template for other CVAs in the country. The Court had earlier noted the absence of specific Insolvency procedural rules to the new law as is obtainable in the UK but nevertheless proactively reviewed and gave necessary directives. This recent pronouncement is an excellent development for the insolvency and restructuring practice and the bold support given by the Federal High Court will go a good mile in saving Covid 19 impacted businesses and other viable Distressed businesses and save employment.
[1] Appeared with Ebele Umeche and Akinwunmi Ajiboye
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