Duties, Responsibilities and Powers

A practical overview of the corporate-rescue role introduced by the CAMA 2020

Introduction

The Companies and Allied Matters Act 2020 (“CAMA 2020”) reshaped Nigeria’s approach to corporate distress. For the first time, Nigerian company law, in line with international best practices,  made Corporate Resue the organising principle of its insolvency regime rather than the liquidation or sale of secured assets. The centrepiece of that reform is the office of the Administrator.

To appreciate the change, it helps to recall what came before. Under the receivership model, a secured creditor could appoint a Receiver/Manager whose primary function was to take possession of and realise the secured assets in order to repay the appointing creditor¹. The Receiver might run the business while a sale was arranged, but rescuing the company as a whole was never the goal. Administration inverts that priority: it asks first whether the company can be saved, and turns to realisation only as a last resort.

In doing so, CAMA 2020 brought Nigeria into closer alignment with international practice. The procedure bears a clear resemblance to administration under Schedule B1 of the United Kingdom’s Insolvency Act 1986², and shares its rehabilitative philosophy with Chapter 11 of the United States Bankruptcy Code and with the standards promoted by leading international bodies³. This article walks through what administration is, who can appoint an Administrator, and the Administrator’s objectives, responsibilities, management duties, fiduciary obligations and statutory powers, with comparative references interspersed through it.

What is administration?

Administration is a procedure in which a qualified insolvency practitioner, the Administrator, is appointed to take charge of the affairs of a financially distressed company, with the primary aim of rescuing it as a going concern wherever that is reasonably possible. Once appointed, the Administrator effectively steps into the shoes of management: the Administrator is both an officer of the court and an agent of the company, taking over the running of the business from the Board of Directors.

This dual character is important. It signals that the Administrator is not simply the appointing creditor’s representative, and that the procedure is conducted under judicial oversight rather than purely private control.

Who can appoint an Administrator?

• The holder of a floating charge: usually a secured creditor  may appoint an Administrator out of court⁴.
• The Company itself or its directors may appoint an Administrator. This is, in effect, a self-help mechanism for companies that recognise they are in difficulty and wish to seek protection early.
• The court may make an administration order, often on an urgent basis to secure swift intervention.

The availability of multiple routes: Creditor, Company/Directors and Court, mirrors the design of international best practices, and reflects a deliberate policy of making rescue accessible without always requiring full court proceedings.

The hierarchy of objectives (Section 444)

Perhaps the single most important provision governing the Administrator’s role is Section 444,  which sets out a ranked hierarchy of objectives. These are not interchangeable options; they must be pursued in order of priority.

1. Rescue the company as a going concern. This is the first and preferred objective: the Administrator must first try to rescue the company, in whole or in part, as a going concern.
2. A better result for creditors as a whole. If rescue is not reasonably practicable, the Administrator should aim to achieve a better outcome for the creditors collectively, than would be likely on an immediate winding up.
3. Realise property to pay secured or preferential creditors. Only as a last resort may the Administrator realise the company’s property, and even then, without unnecessarily harming the interests of the creditors as a whole.

This tiered structure embodies the law’s clear preference for rescue over destruction. It is materially similar to the objectives in Schedule B1 of the UK Insolvency Act 1986⁵, and reflects an international consensus that preserving a viable business usually generates more value for creditors, employees and the wider economy than piecemeal liquidation.

Statutory and procedural responsibilities

Alongside its objectives, administration imposes a set of process duties, i.e. procedural steps the Administrator must follow after appointment. These are mandatory, and failure to comply is an offence⁶.

• Notice of appointment. The Administrator must publish notice of the appointment at the Corporate Affairs Commission (CAC) within 14 days, giving public notice of the administration⁷.
• Notice to creditors and others. The Administrator must notify the company itself and all known creditors, and publish a notice of his appintment in the prescribed manner. Where the company is public, the Securities and Exchange Commission must also be notified⁸.
• Schedule of assets. A detailed inventory of the company’s assets must be prepared and submitted to the appointing party within 60 days.
• Statement of affairs. The Administrator may require company officers, former officers or employees to provide a sworn statement of the company’s financial position⁹.
• Statement of proposals. Within 30 days (extendable by the court), the Administrator must formulate proposals for achieving the purpose of the administration and circulate them to the CAC, the creditors and the members¹⁰.
• Creditors’ meeting. An initial meeting of creditors must be convened to consider and, where appropriate, approve the proposals; this is a key accountability mechanism¹¹.
• Ongoing reporting. The Administrator has a continuing duty to report to the creditors and the court on the progress of the administration¹².

A consistent theme runs through these obligations: time is of the essence. The recurring deadlines  (14 days, 30 days, 60 days) express the legislative expectation that the Administrator will act with urgency. This emphasis on speed and transparency is itself a hallmark of modern international rescue regimes.

Management and operational duties

These duties concern how the Administrator actually runs the company day to day.

• Assumption of control. Upon appointment, the Administrator takes custody and control of all of the company’s property and records. This is automatic, there is no waiting period¹³.
• Business management. The Administrator has a broad mandate to do anything necessary or expedient for managing the company’s affairs, business and property, including day-to-day operations¹⁴.
• Suspension of the board’s powers. The directors’ powers are suspended and transferred to the Administrator. The directors are not removed, but they may exercise management powers only with the Administrator’s written consent.
• Moratorium protection. Once administration begins, a protective “legal shield” descends over the company: winding-up petitions, other legal proceedings and enforcement actions against its property generally cannot proceed without the court’s permission¹⁵.

The moratorium is the Nigerian counterpart to the automatic stay under US Chapter 11 and the moratoria available in UK administration. Across these systems, a temporary freeze on creditor enforcement is treated as the indispensable precondition for any meaningful rescue, because it converts a chaotic race between individual creditors into an orderly, collective process.

Legal and fiduciary duties

Beyond the mechanics, the Administrator is bound by a set of ethical and legal obligations.

• Acting for the creditors as a whole. The Administrator must perform their functions in the interests of the creditors collectively, and not merely the party who made the appointment. Even where a secured creditor procured the appointment, the Administrator may not favour it at the expense of others¹⁶.
• Duty of efficiency. Functions must be performed as quickly and efficiently as is reasonably practicable. Administration is meant to be a time-bound intervention, not an open-ended state of affairs¹⁷.
• Court supervision. As an officer of the court, the Administrator can, including where the position is difficult or the law unclear, apply to the Federal High Court for directions, providing an external check on the Administrator’s powers.
• Investigation of past conduct. The Administrator has a discretionary mandate to investigate the company’s earlier transactions and affairs. This may uncover wrongful trading, fraudulent preferences or transactions at an undervalue, which can in turn expose former directors to personal liability.

The collective-interest principle and the duty of efficiency are common to well-regarded insolvency regimes internationally; these stress that an insolvency representative should be independent, act impartially in the interests of the estate and creditors generally, and remain subject to oversight. This is precisely the architecture that CAMA 2020 adopts.

The powers of an Administrator

To carry out these duties, the Administrator is armed with a wide catalogue of statutory powers. Section 497 directs the Administrator to the Tenth Schedule to the Act, which enumerates 23 distinct powers¹⁸. Among them:

• taking possession of company property and bringing proceedings to recover it;
• selling or otherwise disposing of company property, this is central to any restructuring or realisation strategy;
• borrowing money and granting security, to raise working capital;
• appointing professionals such as solicitors and accountants to assist;
• bringing or defending legal proceedings in the company’s name;
• maintaining insurance over the business and its property;
• using the company seal and executing deeds and documents as the company;
• drawing, accepting and endorsing bills of exchange and other negotiable instruments;
• engaging and dismissing employees and appointing agents;
• carrying on the business of the company;
• forming subsidiaries and transferring the whole or part of the business to them, this is a common “hiving down” technique;
• granting and accepting surrenders of leases, and taking new leases;
• negotiating arrangements and compromises on the company’s behalf;
• ranking and claiming in the insolvency of anyone who owes money to the company;
• presenting or defending a petition to wind up the company;
• changing the company’s registered office; and
• a catch-all power to do anything incidental to the other powers.

The breadth is deliberate. Taken together, these powers reach virtually every aspect of corporate management and restructuring, and they are discretionary, the Administrator decides whether and when to use each of them in service of the statutory objectives. This design echoes Schedule 1 to the UK Insolvency Act 1986, which similarly provides a comprehensive, self-contained toolkit so the rescue effort is not stalled by gaps in authority¹⁹.

Powers versus Duties: a fundamental distinction

A recurring point of practical importance is the distinction between the Administrator’s duties and powers.

• Duties are mandatory. They are obligations the Administrator must discharge, and a court can compel their performance. The procedural responsibilities and the Section 444 objectives fall here.
• Powers are discretionary. They are tools the Administrator may deploy, and courts generally allow flexibility over whether and how they are exercised.

The distinction matters when advising clients and when scrutinising an Administrator’s conduct: a challenge of a failure to perform a duty is different from a choice about how to exercise a power.

The Administrator as agent, and personal liability

Like a director, the Administrator owes duties to the company as its agent. Stepping into management’s shoes does not, of itself, make the Administrator personally liable for the company’s debts; personal exposure generally arises only where the Administrator acts improperly. This limited-liability framing is itself a feature of credible rescue regimes, since qualified professionals will only take appointments if the personal risk of acting in good faith is contained.

Conclusion

CAMA 2020’s administration regime represents a genuine shift in Nigerian insolvency regime, from a creditor-driven model focused on realising security, to a rescue-oriented model that tries first to keep viable businesses alive. Three principles capture its essence: the priority of rescue (the Section 444 hierarchy); the breadth of the Administrator’s discretionary powers, balanced against mandatory duties; and the overriding obligation to act impartially in the collective interest of all creditors rather than for any single class or appointor.

In its core architecture: ranked rescue objectives, a protective moratorium, a comprehensive schedule of powers, collective creditor treatment and court supervision, the Nigerian Insolvency regime sits comfortably within the international mainstream represented by UK administration, US Chapter 11, and the UNCITRAL and World Bank standards. What remains is for the jurisprudence to mature; the regime is still relatively new in Nigerian practice, and its contours will continue to be shaped as more cases come before the courts.

^1.Under CAMA 2020, a Receiver or Receiver/Manager’s primary function is to take possession of and realise the relevant security for the benefit of the appointor; rescuing the company is not the Receiver’s objective.

^2.UK Insolvency Act 1986, Schedule B1, introduced by the Enterprise Act 2002, which made administration the principal corporate-rescue procedure in the United Kingdom.

^3.See the UNCITRAL Legislative Guide on Insolvency Law and the World Bank Principles for Effective Insolvency and Creditor/Debtor Regimes, both of which favour reorganising a viable business over immediate liquidation.

^4.CAMA 2020, s. 452.

^5.Compare UK Insolvency Act 1986, Schedule B1, paragraph 3, which sets out a materially similar ranked set of objectives.

^6.Non-compliance with the procedural duties is an offence under CAMA 2020, s. 486(7).

^7.CAMA 2020, s. 483(3) — publication at the Corporate Affairs Commission within 14 days of appointment.

^8.CAMA 2020, s. 483(2).

^9.CAMA 2020, ss. 484–485.

^10.CAMA 2020, s. 486 — the statement of proposals must be produced within 30 days, a period the court may extend.

^11.CAMA 2020, ss. 487–488.

^12.CAMA 2020, s. 490(2).

^13.CAMA 2020, s. 504.

^14.CAMA 2020, ss. 496 and 505.

^15.CAMA 2020, s. 480.

^16.CAMA 2020, s. 444(3).

^17.CAMA 2020, s. 445.

^18.CAMA 2020, s. 497, applying the powers set out in the Tenth Schedule to the Act — 23 enumerated powers in total.

^19.Compare Schedule 1 to the UK Insolvency Act 1986, which similarly equips the office-holder with a comprehensive, self-contained list of powers.