Vol 8 (2011) - Issue 4

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The Duty of the Nigerian Receiver to 'Manage' the Company

1. Introduction

The Companies and Allied Matters Act, (CAMA), governs insolvency matters in Nigeria. In s. 393, CAMA sets out the main duty of the receiver: to realise the debt on behalf of the person who appoints him. But in s. 390, CAMA instructs the receiver to manage the company over which he has been appointed, in the interest of the company, and for the benefit of all interests concerned. At first blush, these provisions appear contradictory. This may explain why Nigerian courts have been inconsistent in interpreting their relationship. Moreover, the courts have equivocated on the duty of the receiver to manage a company upon appointment. In concert, these result in inconsistencies and uncertainty in the law and practice of receivership in Nigeria.

This paper examines the Nigerian receiver’s duty to manage the company. It analyses the letter of the law and the court’s decisions. The paper traces the history of s. 390, and explains its purpose in the legislation; as stated by the law makers. It examines the decisions of the judges in light of the purposive analysis of s. 390. The paper argues that the Nigerian receiver has a positive duty, not just to receive, but also to manage a company for all interests concerned.



2. Receivership in Nigeria

The Companies and Allied Matters Act (CAMA) is the primary source of corporate insolvency legislation in Nigeria. It permits companies to borrow money for the purpose of their business, or to fulfil any of their objectives. CAMA also permits companies to secure the loans obtained, by their properties. The loan may be secured by a fixed charge, a floating charge, or a hybrid charge of both. Upon default, the secured creditor may appoint a receiver, or a receiver and manager to realise unpaid debt. Usually, a receiver is appointed where the loan agreement is secured by a fixed charge; while a receiver and manager is appointed when the loan agreement is secured by charges including a floating charge over a part or the whole of the company’s assets.



2.1. The duty to receive S. 393 sets out the main duty of the Nigerian receiver, which is to receive:

'(1) A person appointed a receiver of any property of a company shall subject to the rights of prior incumbrancers, take possession of and protect the property, receive the rents and profits and discharge all outgoings in respect thereof and realise the security for the benefit of those on whose behalf he is appointed, but unless appointed manager he shall not have power to carry on any business or undertaking.

(2) A person appointed manager of the whole or any part of the undertaking of a company shall manage the same with a view to the beneficial realisation of the security of those on whose behalf he is appointed.'



2.2. The duty to manage

Where he is appointed manager, CAMA instructs the receiver, in s. 390, on how to perform his main duty: (1) [I]f appointed manager of the whole or any part of the undertaking of a company he shall be deemed to stand in a fiduciary relationship to the company and observe the utmost good faith towards it in any transaction with it or on its behalf.