By Ogbonna Chukwumerije and Edwin Ugboaja
Continued from yesterday
Futility of winding-up proceedings against firm under receivership
To demonstrate this point, we rely on the case of Krans V. Bright Oridami 1956 SC. 84 VOL. 9 PG 474, where it was held that the properties, whether movable or immovable, of a company under receivership cannot be attached, not even by a duly issued writ of execution. Also, in the case of Habib Nigeria Bank Limited v. Wahab Opomulero & Ors (2000) 15 NWLR (Pt. 690)315, the Court held that the amount realised from the sale of the assets of a company under a receivership is not attachable.
The court lacks jurisdiction to attach company property under receivership
It is worthy of note that a court has no jurisdiction to decide or issue a writ for the attachment of a judgment debtor’s properties, which form part of the properties under receivership. See Kadzi International Ltd. V. Kano Tannery Company Ltd & Ors (2003) LPELR-5782 (CA). In that case, the learned trial court, upon being aware that the properties on which a writ of execution was issued are properties under receivership, and on application by the judgment debtor, immediately set aside the writ of execution and held that the court lacked jurisdiction to have attached the properties in the first instance.
In Kadzi International Ltd V. Kano Tannery Company Ltd & Ors (supra), the learned trial judge, upon being aware of his lack of jurisdiction to have issued a writ of execution on the properties under receivership, immediately set aside the writ of execution. Also, in the case of Intercontractors Nigeria Ltd. V. N.P.F.M.D (1988) LPELR-1520(SC) it was held that it is only the assets of the company which are outside the receivership that an unsecured creditor can proceed against.
This issue was well appreciated by the learned author Dr O. Orojo in his book “Company Law and Practice in Nigeria’’ at page 443 where he opined that a Receiver/Manager will continue to deal with the assets of a company comprised under the Receivership in the name of the company despite the fact that the company has gone into liquidation.
In a recent case handled by the writer, it was argued that hearing a winding-up petition against a company already under receivership would be an exercise in futility, since the appointment of a Receiver/Manager under an all-assets debenture prevents the liquidator from proceeding against the company’s assets. Relying on the settled principle that courts should not act in vain, the argument urged the court to recognise the practical limitations of winding-up proceedings in such circumstances.
In its ruling, the court affirmed that while a winding-up petition may be initiated against a company in receivership, the proceedings should be stayed until the receivership concludes, thereby reinforcing the view that pursuing winding-up during receivership is largely ineffective.
The argument of the writer would have been different if the Receiver/Manager was appointed over a fixed asset of the company. In this circumstance, it would be appropriate to commence winding-up proceedings against the company but it should be noted that the asset under the Receivership cannot be proceeded against as stated by Dr Orojo. Hence in the event that a liquidator is appointed pursuant to the winding up order, the assets of the company cannot be proceeded against by the said Liquidator.
The legal remedy of unsecured creditors
The Companies and Allied Matters Act, 2020 provides important protections for unsecured creditors by ensuring transparency and accountability during receivership, even though such creditors lack priority or security. Section 561 of CAMA requires every receiver or manager to submit periodic financial reports to the Corporate Affairs Commission, detailing all receipts and payments made under their control.
These reports must be filed within one month after every six-month period from the date of appointment, as well as upon cessation of office, allowing regulators and liquidators to monitor the management of company assets and safeguard creditors’ interests. For unsecured creditors, such financial transparency is vital, as their claims can only be satisfied from whatever remains of the company’s assets after secured debts are settled.
In addition, Section 562(1)(b) of CAMA strengthens enforcement by empowering the court to compel a receiver/manager to comply with their statutory duties where they fail to submit required documents or accounts. Upon application, the court may order the default to be remedied within a specified timeframe, reinforcing fiduciary responsibility. Taken together, these provisions ensure that receivers and managers are held to strict standards of financial disclosure and accountability, thereby enabling unsecured creditors to participate meaningfully in insolvency proceedings and preventing mismanagement of company assets.
Section 562 of CAMA enhances the protection of unsecured creditors by granting them access to judicial remedies where a receiver or manager fails to perform statutory duties, such as filing required documents, rendering proper accounts, or remitting funds due to the company. It allows unsecured creditors to apply to court for orders compelling compliance, thereby enabling timely intervention in cases of delay, negligence, or suspected mismanagement and facilitating recovery of funds for the company’s estate. When read alongside the reporting obligations under CAMA, these provisions ensure transparency, prevent secrecy, and strengthen accountability in receivership, offering meaningful protection to unsecured creditors within Nigeria’s insolvency framework.
Conclusion
“I don’t care if it is a white cat or a black cat, if it can catch mice, it’s a good cat.” stated Deng Xiaoping, the famous Chinese leader who led major economic reforms in China in the late 20th century in demonstrating the principle of effect and means.
The concomitant effect of all that has been said in this regard is that, in the peculiar circumstances where a company is already under receivership, initiating winding-up proceedings against that same company would be nothing short of flogging a dead horse. This is because the target, aim, and objectives of winding up a company and placing it under receivership are cut from the same cloth and cannot be meaningfully separated. In essence, both processes pull in the same direction, and their functions are so closely intertwined that pursuing both simultaneously may only lead to a duplication of efforts and unnecessary legal entanglement.
Concluded.
Chukwumerije is an associate partner at Pinheiro LP, while Ugboaja is a junior associate.
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