Tochukwu Onyiuke
The 21st century global business is being reshaped by a combination of resource pressures, shifting social values and ubiquitous technology, aimed at building businesses that cut across jurisdictions. However, so many of these businesses may get entangled in unpaid debts, so much so that their liabilities outweigh their assets, leading to what could easily be referred to as “corporate insolvency”. The creditors may eventually resort to insolvency proceedings wherein orders of the court are secured to appoint an insolvency practitioner to take control of the insolvent company and sell or liquidate its assets to maximise the returns for creditors.
But without adequacy of insolvency laws and regulations, it will be difficult to realise and distribute assets to creditors, especially when the assets of the insolvent company are scattered across jurisdictions. One of the challenges being currently faced with Nigeria’s standing in relation to corporate insolvency is the inadequacy of the country’s insolvency laws and regulations on cross-border insolvency.
For now, the Companies and Allied Matters Act, enacted as a decree in 1990, provides the general legal framework for corporate insolvency. But the provisions of CAMA have been inadequate in addressing issues bordering on cross-border insolvency; netting; cooperation between domestic and foreign courts; coordination of concurrent proceedings or communication of information in insolvency.
At the moment, there is no specific legislation in Nigeria for the recognition of foreign insolvency proceedings, orders, or judgments as well as for cooperation between domestic and foreign courts, coordination of concurrent proceedings or communication of information. Nigeria only has a limited framework for recognition and enforcement of an international monetary judgment, which must be final and conclusive, unchallenged on appeal and conditioned on reciprocity.
This legislative framework creates a dual regime for commonwealth countries and other countries. Foreign insolvency orders would scarcely fulfill such requirements while foreign judgments are recognised and enforced through a process of obtaining leave of court and registration of the decision.
The question that then arises is how do companies that have businesses spread across different jurisdictions in the world deal with such business failure? In line with international best practices, perhaps one cost-effective way of dealing with multi-jurisdictional debt by an organisation in corporate insolvency is to: (a) institute one main insolvency proceeding in the main jurisdiction (where the business is incorporated) and (b) seek the recognition/co-operation of the insolvency proceeding instituted in the main jurisdiction in other foreign jurisdictions.
In line with this legal proposition, the United Nations Commission on International Trade Law developed the UNICTRAL Model Law on Cross-Border Insolvency to facilitate the adoption and implementation of a more unified cross-border insolvency regime.
The incorporation of the UNICTRAL Model Law on Cross-border Insolvency in RE HIH CASUALTY AND GENERAL INSURANCE LTD [2008] 1 WLR, 852 explained the universalist ideology for cross-border insolvency.
It is important to mention that UNCITRAL recently published its model law on Recognition and Enforcement of Insolvency Related Judgments. UNCITRAL recommends that all states give favourable consideration to the MLREIJI when revising or adopting legislation relevant to insolvency.
The procedure for the recognition and enforcement of final and conclusive cross-border insolvencies order or judgment duly obtained in courts of England, Scotland and Northern Ireland will be enforceable in Nigeria without retrial or examination of the merits of the case provided that it satisfies the requirements of and it is registered in accordance with Reciprocal Enforcement of Judgment Ordinance Cap 175 LFN & Lagos 1958.
The old concept of registration of judgment in Nigeria does not address the immediate need of the insolvency practitioner to quickly realise the assets in insolvency. This is due to the fact that after registration of the judgment, the insolvency practitioner may have to initiate other proceedings here to achieve his aim. This will jeopardise the opportunity for the insolvency practitioner to realise all realisable assets in the shortest possible time. Related News
Our current laws, including the CAMA, lack the capacity to move with innovative legal trend to address the issues of cross-border insolvency and make asset realisation easy for foreign corporations, unlike the trend in foreign jurisdictions. For instance, a cross-border insolvency order obtained in South Africa can be recognised in the UK courts under the Cross-Border Regulations 2006. Likewise, a cross-border insolvency order obtained in the UK can be recognised in South Africa. With these cross-border judicial recognitions, it becomes easy for a foreign court to give recognition to insolvency orders. South Africa admitted the UNICTRAL Model Law as the Cross-Border Insolvency Act 42 of 2,000 on December 8, 2000. The easy recognition of the cross-border insolvency orders across jurisdictions appears to be the innovation brought by the UNICTRAL Model Law on Cross-border Insolvency.
There is the unanswered question of whether the order of a foreign court declaring a foreign corporation insolvent and appointing a liquidator or trustee is a judgment per se and having the attributes or qualification for registration in Nigeria under the Reciprocal Enforcement of Judgment Ordinance. Where such an order cannot be termed a judgment per se for purposes of the ordinance, the propriety of the process of enforcing such an order should then be called into question. Amongst this and more, there is a bill passed by the National Assembly seeking an amendment to CAMA and waiting for the President’s approval to address this anomaly.
The bill was expected to provide direction to Nigerian courts with respect to international insolvency as the bill incorporated provisions recognising foreign insolvency orders and provides assistance to foreign representatives, e.g. trustees, liquidators, etc.
One of the great innovations of the model law which was incorporated into the CAMA bill was the “Letter of Request” introduced in many insolvency jurisdictions to assist with cross-border insolvencies via requesting an order from the original insolvency court to assist other courts in foreign jurisdictions where the trustee or liquidator is to realise assets.
It is expected that when the bill is finally passed into law, foreign courts can seek the assistance of the Federal High Court in Nigeria by letters of request for the realisation of assets, likewise the Federal High Court can do same to foreign courts.
However, it is suggested that the bill should be further revised taking into consideration the provisions of the recently adopted MLREIJ, especially the procedure for seeking recognition and enforcement of an insolvency-related judgment as set out in Article 11 of the MLREIJ. An important part of the CAMA bill is that on the provisions for business rescue and insolvency, amongst others. This is good especially where all that might be needed in cash flow insolvency is the business rescue/restructuring and nothing more.
There is no doubt that Nigeria has a lot of catching up to do, seeing as the UNICTRAL has now adopted the MLREIJ whilst Nigeria is yet to even adopt the Model Law. The importance of developing our cross-border insolvency legislation cannot be overemphasised.
Onyiuke, a lawyer, wrote from Lagos
