Upon such appointment, the directors of the company must refrain from the running and management of the company. Such remedies include rescission of a transaction and damages. It is important to mention, however, that an alternative structure was advised by the Central Bank in which the existing bank would change its status to a HoldCo, while a subsequent company is incorporated to assume its assets, liabilities and responsibilities. The main thrust of this study was an empirical assessment of the effect of corporate restructuring in the banking industry and economic growth in Nigeria from 1990-2009. Commercial Banks in Nigeria. The directors of a company can lawfully act on its behalf until a liquidator is appointed either by the company, creditors or by the court. In addition, they did not take Nigeria into consideration. If the court is satisfied as to the fairness of the compromise or arrangement, it shall be binding on all shareholders and creditors. It is my first port of call for Rest of World merger control questions.Juan Rodriguez - Sullivan & Cromwell LLP, London, © 2002-2021 Copyright: ICLG.com | Our Privacy, Unlock 3 FREE PDF chapters by registering with us FREE Africa. 3.2 What formal rescue procedures are available in your jurisdiction to restructure the liabilities of distressed companies? For voluntary winding up, the creditor, shareholders or directors may be involved at various stages. That drastic solution is, In order to have a full understanding of what. Miyetti Law, The International Comparative Legal Guides and the International Business Reports are published by: Global Legal Group, ICLG's Merger Control is a tremendously useful source. Informal workouts serve as a timely alternative to recovery of funds pursuant to coordinated negotiations to avoid unnecessary liquidation of viable companies. It may be in the form of an Employee’s buy-out or a Management buy-out. ICLG - Restructuring & Insolvency Laws & Regulations - The creditors, however, retain the power to fill vacancies for the position of liquidator occasioned by either death, resignation or otherwise. In a takeover, a company which later becomes a holding company acquires the issued share capital of another company in order to have control over the management of the acquired company. Corporate restructuring is a redesigning process that is practised all over the world. Save my name, email, and website in this browser for the next time I comment. Although, in certain circumstances, an exemption may be granted by the President of the Federation. On the other part, to “restructure” an organization or system means to change the way it is organized, usually in order to make it work more effectively. Bulls Capital Limited has a good and successful history in restructuring and insolvency, and also ensuring a reliable team of accounting, tax, company law and advisory specialists give best advice to our clients so they can arrive at a favorable result. Under merger and acquisition, the Act is clear on the responsibility of the acquiring company to bear tax responsibilities of the acquired company. Here, the members of a General Meeting are empowered to resolve by way of special resolution that the company should be wound up and that the liquidator appointed and authorized to sell the whole or part of its undertaking or assets to another corporate body. Ahead of the 2023 general elections, the Northern Elders Forum, NEF, Coalition of Northern Groups, CNG, Arewa Consultative Forum, ACF … Is any protection given to rescue financing? Winding up procedures in general have no effect on existing contracts, except if such contracts are deemed fraudulent and as such they are rendered invalid. Unlike Purchase & Assumption, the company/investor is not taking up all the liabilities of the failing/failed company, but is allowed to inspect the books, assets, business operations/activities of the failing company with a view to pick or choose out those aspects it could save by integrating them into its own business activities. On the other hand, the grounds for members’ voluntary winding up are the effluxion of the lifespan of the company or the happening of a predefined occurrence after which the company was to be wound up as provided in its article of association, and where the company decides by a special resolution that it be wound up voluntarily. Similar studies, which link corporate restructuring to the creation of shareholder value, also did not take Nigeria into consideration. corporate restructuring. This compensation may be assessed by reference to the contract rights (remuneration and benefits) which would have accrued over the remaining term of the contract, and such compensation shall not be taxed. Restructuring and insolvency in Nigeria The global response to Covid-19 has made bankruptcy risk one of the most pressing challenges for business. Things to investigate during the conduct of legal due diligence includes: Prior to the enactment of the FCCPA, the regulatory body for mergers and acquisitions in Nigeria was the Securities and Exchange Commission and the legal framework was the Investments and Securities act. Restructuring & Insolvency > D. debenture holders under a floating charge and other unsecured creditors. Also, a liquidator can disclaim contracts which are burdensome to the company in liquidation. Section 524 of the CAMA provides that the company can be revived in the future if an application is made to void the dissolution by an interested party or the liquidator. e.g. It is instructive to begin by pointing out that even though mergers and acquisitions are sometimes used interchangeably, they do have some distinctions. The new provision curbed the formation of short-term group relationships created for the purpose of enjoying tax concessions as a business reorganisation strategy. Where they are unrelated, they are treated as distinct entities and are liable to commencement and cessation tax. The 2019 finance bill has been passed by both chambers of the national assembly, but is still waiting for final presidential assent. Restructuring pursues the profitability, liquidity and solvency objectives of an organization. Register with us FREE, Juan Rodriguez - Sullivan & Cromwell LLP, London. 2 Act, 2019 provides that, upon the acquisition of rights by the Corporation in an eligible bank asset, the Corporation shall acquire all rights applicable to the assets notwithstanding that only equitable rights are created in the assets and the Corporation is entitled to exercise the powers of a legal estate holder in a charge or legal mortgage. Simply put, any corporation that fails to embrace growth and development will be left behind by its peers. isochukwu@yahoo.com. The respective laws i.e. Put differently, directors have duties to make a declaration of solvency or otherwise and to exercise due care, skill and diligence in the discharge of obligations. Your email address will not be published. The stock market collapsed by 70% in 2008 to 2009. Practice Areas > June 2, 2009. Dripping from the foregoing, therefore, we can safely conclude that corporate restructuring is the process of reorganizing a corporation or a business entity in order to make it work more effectively. While it is not untrue that corporate growth and development can also be achieved through brand development, management shakeup and similar options, drastic situations require drastic solutions. On the other hand, the winding up for dissolution of a company brings the company to a permanent end since the assets are distributed to those entitled according to the rules of distribution of assets of a dissolved company. Will termination and set-off provisions be upheld? (INTERNAL AND EXTERNAL RESTRUCTURING OPTIONS). 3.3 What are the criteria for entry into each restructuring procedure? Is there any court involvement? Due to the limited nature of insolvency provisions, creditors and companies often resort to the court for interpretation of the legal provisions. 2.2 Which other stakeholders may influence the company’s situation? The statutes that govern restructuring and insolvency in Nigeria include: the Asset Management Corporation of Nigeria Act 2010 (as amended in 2015); the Federal High Court (Civil Procedure) Rules 2019. is an acquisition by the management team (usually the directors and officers) of the Company of controlling shares of the Company or its subsidiaries by buying controlling shares. Therefore, a restructuring procedure does not affect the company’s contracts except that such contracts made restructuring grounds for termination. Also, shareholders can influence winding up proceedings by voting and passing a resolution in general meetings on whether or not winding up proceedings should be commenced. Section 508 of the CAMA imposes duties on directors to keep account of their books. AAAChambers © 2019 - All Rights Reserved. The options available to financially distressed companies are: receivership; liquidation; and arrangement and compromise. 3.6 How is each restructuring process funded? Where they are related entities, the FIRS may provide tax waivers. Jennifer Douglas-Abubakar Compromise is essentially an arrangement by a company with its creditors and/or members or a class of them, to accept less than they are actually entitled to in full and final satiscations of the obligations which the company owes to them. To what extent can creditors and/or shareholders block such procedures or threaten action (including enforcement of security) to seek an advantage? : Horizontal is one involving direct competitors. Section 566 of the CAMA empowers the company to make provisions for the benefits of employees/past employees in a cessation or transfer of its business. For a corporation to survive in Nigeria today, it must be possessed with sufficient drive for growth. In the case of an acquisition, or a merger of unrelated parties, Section 29 of the Act provides that the company formed, or the acquiring company must file commencement tax returns, while the acquired company pays cessation tax returns. Through restructuring, a company can eliminate financial harm and improve the business. Restructuring and Insolvency. The assumed company does not go through the formal winding-up process but is dissolved through a judicial sale of its assets and liabilities to the purchasing company. In cases where members of a group are involved in insolvency proceedings, they may elect to appoint the same insolvency officers to save costs and avoid a multiplicity of processes. Will termination and set-off provisions be upheld? What protections are there for those who are forced to perform their outstanding obligations? The grounds for a creditor’s voluntary winding up is an inability on the part of the directors of the company to issue a declaration of solvency pursuant to Section 462 of the CAMA. It is instructive to note that the provisions of Section 493 of the CAMA ranks secured and unsecured creditors above the members of the company during the winding up proceedings. Both informal work-out and internal restructuring are managed by the directors and shareholders of the company, sometimes with the influence of the creditors. The study assesses corporate restructuring and organizational productivity in Nigeria The interest of the dissenting 10% can be acquired at a price to be fixed by a court-appointed independent share valuer. CORPORATE RESTRUCTING: ARRANGEMENT OR COMPROMISE IN NIGERIA. Court ( FHC ) up procedures commence entities involved in the same line of business words that make up phrase! 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