THE AMBIVALENT NATURE OF COMPANIES AND ALLIED MATTERS ACT 2020 ON CORPORATE RESCUE: A LOOK AT COMPANY VOLUNTARY ARRANGEMENTS

Abstract

A company is a corporate entity recognised by law and clothed with legal personality to do all that is within its constitution and objects, including to borrow money. However, a company can become insolvent and unable to pay its debts due to several reasons. Where this occurs, there are several routes in the statute that such company in trauma can explore. This routes ranges from corporate rescue mechanisms to options that see to the dissolution of the company. Prior to Companies and Allied Matters Act (CAMA 2020), most companies in trauma ended up being wound up or dissolved due to the law that did not encourage the objective of corporate rescue. With CAMA 2020 came improvements to certain aspects of company regulations, particularly that of corporate insolvency. It came with the introduction of the corporate rescue culture, one of which includes the Company Voluntary Arrangements (CVA). CVA as a rescue mechanism is a debtor in possession procedure that ensures the debtor is left in control of its affairs by allowing its directors to retain control of the company while it continues its business as a going concern under the supervision of an insolvency practitioner. The provision of CAMA 2020 on CVA is like that of the United Kingdom (UK) Insolvency Act. This paper examines CVA as a mechanism of corporate rescue. It further comparatively examines the legislations in Nigeria and UK on CVA while highlighting the similarities. This paper then posits that although the embodiment of the rescue culture in CAMA 2020, particularly CVA in Chapter 17 of CAMA 2020, is laudable and a lofty achievement; the lack of provision for moratorium in the Act when CVA is put in motion has made the provision of CAMA 2020 ambivalent, confusing and capable of different conjectures such that it can be used by secured and preferential creditors to defeat the rescue objective while also putting the insolvency practitioner (the nominee) in a precarious position. This paper therefore calls for an urgent review of the Act to address this anomaly.