AN APPRAISAL OF THE ROLE OF MORATORIUM MECHANISM IN BUSINESS RESCUE IN NIGERIA

Abstract

One of the Key changes introduced by CAMA 2020 is theintroduction of a business rescue, which aims to provide analternative to liquidation for distressed companies. Businessrescue is designed to allow companies to restructure theiraffairs and avoid liquidation, preserving value for allstakeholders including shareholders, creditors, andemployees. It is a significant departure from the traditionalinsolvency law framework in Nigeria, which had a strongemphasis on liquidation. A central feature of the businessrescue is the moratorium mechanism, which temporarilysuspends creditor claims and legal proceedings against thecompany. The moratorium is intended to provide companieswith the necessary breathing space to restructure theiraffairs and avoid the costs and uncertainties associated withliquidation. Despite its importance, the moratoriummechanism has been subject to much debate among legalscholars, practitioners, and policymakers, due to itspotential impact on the rights and interests of stakeholders.This paper, using a doctrinal research methodology,examines the role of the moratorium mechanism in businessrescue under CAMA 2020, with a focus on its effectiveness inachieving the objectives of business rescue. The paper foundthat while the moratorium is an essential tool in businessrescue, its effectiveness depends on several factors, such asthe financial health of the company and willingness ofcreditors to cooperate. The paper also identified areas ofimprovement, including the need for clearer guidance on thescope and application of the moratorium. Based on thesefindings, the paper makes recommendations to enhance theeffectiveness of the moratorium and the overall businessrescue process in Nigeria.