Before 2020, Nigerian insolvency law was largely focused on liquidation. Companies in financial distress had few options other than winding up, which often led to job losses, wasted assets, and reduced creditor recovery. The Companies and Allied Matters Act 2020 (CAMA 2020) marked a major reform by introducing modern business rescue mechanisms—Company Voluntary Arrangements (CVAs) and Administration—modelled on the United Kingdom’s Insolvency Act 1986. These procedures are intended to help viable but distressed companies restructure their debts and continue operating rather than being dissolved.¹
Under Sections 434–442 of CAMA 2020, a Company Voluntary Arrangement (CVA) allows a company and its creditors to agree on a plan to settle debts over time, supervised by a licensed insolvency practitioner.² The process begins with a proposal made by the directors, administrator, or liquidator. Once filed in court, the proposal is considered by both shareholders and creditors at separate meetings. If 75% in value of the creditors vote in favour, the arrangement becomes binding on all, including dissenting creditors.³ The CVA takes effect as a contractually binding compromise, allowing the company to continue trading under agreed terms. This process provides flexibility and reduces the stigma associated with insolvency.
The Administration procedure, governed by Sections 443–549 of CAMA 2020, goes a step further.⁴ It empowers an independent administrator appointed by the court, the company, or its creditors, to manage the company to rescue it as a going concern.⁵ Once appointed, the administrator gains control of the company’s affairs, and a statutory moratoriumtakes effect, preventing creditors from enforcing debts or taking legal action without the court’s permission.⁶ The administrator’s primary duty, under Section 444, is to rescue the company as a going concern; if that is not possible, to achieve a better result for creditors than liquidation would provide.⁷
These reforms represent a shift from punishment to preservation. By giving companies breathing space, CAMA 2020 encourages rehabilitation over liquidation. In practice, however, the effectiveness of these mechanisms depends on institutional capacity, creditor cooperation, and regulatory oversight. Nigeria still faces serious challenges in these areas. Many directors and creditors remain unaware of the rescue options available, and few licensed insolvency practitioners have the experience to manage complex restructurings.⁸
In addition, CVAs and administration proceedings require active court involvement, but Nigeria’s judiciary remains overburdened. Delays in approving proposals or appointing administrators can erode business value and discourage creditors. The lack of specialised insolvency divisions within the Federal High Court further complicates efficient resolution. Comparatively, the UK’s system allows out-of-court appointments by holders of floating charges, which speeds up rescue operations, something Nigeria’s law only partially achieves under Section 453, which allows secured creditors to appoint administrators in limited cases.⁹
Another issue is the absence of clear regulatory guidance from the Corporate Affairs Commission (CAC) on implementation. Although the CAC is responsible for registering insolvency practitioners and supervising compliance, its role in practical oversight remains underdeveloped.¹⁰ Without clear rules on professional conduct, transparency, and reporting, rescue mechanisms risk being misused by directors seeking to delay inevitable liquidation.
Furthermore, Nigeria’s economy poses structural challenges. High inflation, unstable exchange rates, and weak investor confidence mean that even rescued companies may struggle to regain profitability. The success of a CVA or administration depends not only on legal procedure but also on access to financing during the restructuring process. Currently, CAMA 2020 does not expressly provide for debtor-in-possession financing, unlike U.S. Chapter 11 proceedings, which allow companies to obtain new credit during restructuring.¹¹ This limitation can hinder meaningful recovery efforts.
Despite these challenges, the introduction of CVAs and administration is a progressive step. Recent cases, such as Ariori & Co. Ltd v Mutual Benefits Assurance Plc, show a growing judicial recognition of the importance of business rescue principles.¹² Courts are increasingly willing to interpret insolvency rules in ways that preserve companies and protect jobs. The Nigerian Bar Association’s Section on Business Law (NBA-SBL) has also begun advocating for clearer insolvency regulations and specialised court divisions to handle business recovery cases efficiently.¹³
For these reforms to succeed, three actions are necessary. First, the CAC must issue detailed regulations and create a public register of qualified insolvency practitioners as required under Section 705 of CAMA 2020.¹⁴ Second, training and capacity building for judges and insolvency professionals must be prioritised. Third, Nigeria should consider enacting a Business Rescue Code similar to South Africa’s Companies Act 2008, which emphasises restructuring over liquidation.¹⁵
In conclusion, CAMA 2020 represents a significant step toward modernising Nigeria’s insolvency landscape. The introduction of Company Voluntary Arrangements and Administration provides struggling companies a chance to recover while balancing the interests of creditors. However, the true effectiveness of these mechanisms depends on practical implementation, institutional support, and cultural acceptance of business rescue over liquidation. With stronger enforcement, judicial efficiency, and creditor education, Nigeria can transform these statutory innovations into effective tools for sustainable corporate recovery.
References (OSCOLA style)
- K. Akintola, Creditor Treatment in Corporate Insolvency Law (Edward Elgar Publishing, 2020) 170.
- Companies and Allied Matters Act 2020 (CAMA), ss 434–442.
- Ibid s 440.
- Ibid ss 443–549.
- Ibid s 448.
- Ibid s 451.
- Ibid s 444.
- Akintola (n 1) 175.
- CAMA, s 453.
- O.C. Onyinye, “Company Voluntary Arrangement Under CAMA 2020: A Review.” (2023) 19(2) Unizik Law Journal, 41-54.
- United States Bankruptcy Code, Chapter 11, 11 USC §1107–1108.
- Ariori & Co. Ltd v Mutual Benefits Assurance Plc (2023) LPELR-60712(CA).
- B. Adebola, K. Olude and S. Mba, “Comprehending and Resolving the Challenges of the Nigerian Insolvency Law in Practice: The Performance Improvement Approach’ (2025) 25 Journal of Corporate Law Studies 145–183.
- CAMA, s 705.
- South African Companies Act 2008, ss 128–154.