Administrators in Nigeria Under The Companies and Allied Matters Act 2020

Insolvency Law :-Administrators Under The Companies & Allied Matters Act of Nigeria (CAMA) 2020

The Companies & Allied Matters Act 2020 (CAMA) introduced a new concept in insolvency practice known as “Administration” which involves the appointment of an administrator as priority option against the previously common practice of appointing a manager/receiver.

This concept is founded on the rationale espoused by the CAMA focused on the salvation of companies involved in insolvency or deep debt as against receivership that was thought of in many circles as giving too many opportunities for company mismanagement. The concept of Administration is what will thus constitute the focus of this article, particularly concerning the topics of :-

– The objectives of administration.

– Who is eligible to be appointed  as an administrator.

– The statutory methods of appointing an administrator.

– The powers of an administrator.

– How administrations are brought to an end.

What is the purpose of administration under the act?

Administration as an insolvency concept has the following functions :-

– Rescuing an insolvent company, either as a whole or part of its undertakings, as a going concern.

– Achieving a better result for the company’s creditors as a whole than would be likely if the company was wound up.

– Realising property in order to make a distribution to one or more secured or preferential creditors.

How exactly are administrators appointed?

Administrators can be appointed by :-

– An order of court upon an application.

– By a holder of a floating charge.

– By a company or its directors.

What is the required standard of performance for an administrator under the act?

The Companies & Allied Matters Act states that the practice standard for an administrator is the expectation on him to perform his functions as quickly and efficiently as is reasonably practicable.

What is the status of an administrator under the act?

An administrator is described by the CAMA 2020 as an officer of the court, whether or not he is appointed by the court.

What are the general restrictions on the appointment of administrators if any?

Not just anybody can be appointed as an administrator. The CAMA 2020 states that a person to be appointed as an administrator must :-

– Be a qualified Insolvency practitioner.

– Be appointed subject to the relevant provisions of CAMA 2020 regarding the replacement of/the appointment of additional administrators.

– Be appointed by a resolution for winding up.

–  Be appointed by a winding up order of court.

It should be noted that a person shall not be appointed as an administrator of a company which effects or carries out contracts of insurance except with the leave of the relevant insurance regulator.

What does the act say on the appointment of administrators by orders of court?

The relevant provisions of CAMA 2020 state that a court can make an order for the appointment of an administrator regarding to a company upon being satisfied that  :-

– A company is or is likely to become unable to pay its debts.

– A given administration order is likely to achieve the primary purpose of administration which is rescuing the company. 

What does the act say regarding applications to court for Administrator appointment orders?

The relevant provisions of CAMA state that applications for orders of appointment for administrators can be made by :-

– A company.

– The directors of the company.

– One or more creditors of the company(which includes both contingent and prospective creditors). 

– The designated officer of the Federal High Court appointed to act as a receiver under CAMA or any other law.

The court, when presented with an application for an administration order, can then do either of the following :-

– Grant the application order sought.

– Dismiss the application.

– Adjourn hearing the application conditionally or unconditionally.

– Make an interim order. 

– Treat the application as a winding up petition and make any consequent order which the court would make in a winding up suit pursuant to the relevant provisions of CAMA.

– Make any other order deemed by the court as appropriate to make. 

When does the act disallow the appointment of an administrator?

The appointment of an administrator should not be made :-

– On purported floating charges deemed unenforceable.

– If a provisional liquidator of the company has been appointed under the relevant provisions of CAMA.

– If a receiver in respect of a company sought to be brought under administration has already been in office before the commencement of the CAMA 2020. 

What does the act say regarding the power of a company or its directors to appoint an administrator?

The relevant provisions of CAMA 2020 , while providing for the appointment of administrators by companies or their directors, also stated that an administrator of a company shall not be appointed in this manner within 12 months beginning with the date on which an administrator validly appointed by a company or its directors completes his term. 

This also applies for the period of 12 months beginning with the date on which an administration by a voluntary arrangement in respect of a company ends where it was made:-

– During a moratorium for the company.

– Where it ends prematurely.

Is there any regulatory requirement to give notice of an administrator’s appointment by a holder of a floating charge?

Yes there is. A person who appoints an administrator of a company under the relevant provisions of CAMA shall file with the Corporate Affairs Commission (CAC),:- 

– A notice of appointment.

– A statutory declaration that the person making the appointment is a holder of a floating charge.

– Any other document required.

What are the general powers of an administrator?

An administrator can :-

– Do anything necessary or expedient for the management of the affairs, business and property of the company under administration.

– He can remove a director of a company or appoint a new one, whether or not it is to fill a vacancy.

– Perform all additional powers specified in the 11th schedule of CAMA 2020. 

When is an administration order by court deemed to be fully commenced under the act?

An administration order is deemed fully commenced upon full compliance with the relevant provisions of CAMA 2020 concerning the qualifications for appointing an administrator (specifically Section 447 of CAMA 2020). 

What is the effect of an administrator appointment when there is a pending winding up suit against the company supposedly under administration?

The act renders invalid, any appointment of an administrator made where:-

– A winding up petition against the company is pending in court.

– A concurrent or prior applicant for an administration order is still pending in court.

– An appointed receiver of the company is still in office.

Can the conduct of an administrator in the discharge of his official duties be challenged?

Yes, it can. The relevant provisions of CAMA provide that a creditor or member of a company in administration may apply to court claiming that the administrator :-

– Is acting in a manner that is unfairly harming the interests of the applicant.

– Is proposing to act in a manner that would unfairly harm the interests of the applicant, whether alone or in common with all or some other members of the company.

– Is not performing his functions quickly or efficiently.

Upon receiving such an application, the court can then choose to :-

– Grant the application

– Dismiss the application

– Adjourn the application

– Make consequent & corrective orders on the administrator.

What does the law about the removal of administrators?

An administrator under the act can be removed by an order of court.

What does the CAMA 2020 say on cessation of administration ?

An administration term ceases :-

– On the grounds of proven misfeasance of the administrator.

– At the end of the period of one year beginning with the date on which the administration term took effect.

However, an administration term can be extended for a specified period by an order of court upon the application of the administrator or a maximum term of 6 months by consent.

What does the act say about the resignation of an administrator?

An administrator can resign where appointed by court order, by giving a written notice to the court or by notice in writing where appointed by the holder of a floating charge or a company to the floating charge owner, the company, or its directors respectively.