Law Digest Winter 2012
www.nglawdigest.com
the recent Ugandan Insolvency Act 2011 (the “UIA 2011”) defines an IP as a person who is not an official receiver but who is qualified to act as an insolvency practitioner within the meaning of section 203 UIA 2011. The latter provision then provides an exhaustive list of persons who are IPs for the purpose of the Act and for the purpose of regulation. In contrast, the general insolvency system as provided under Nigerian company law, to wit, the Companies and Allied Matters Act 1990 (the “CAMA 1990”), provides no definition or basic list of all insolvency officers available (see section 567 CAMA 1990). The same situation obtains indeed even under special insolvency regimes created for certain key sectors of the economy such as banking (E.g. Nigerian Deposit and Insurance Corporation (NDIC) Act 2006; Asset Management Corporation (AMCON) Act 2010). In the absence of a clear definition, it would appear that anyone could claim to be an IP. Indeed practitioners in receivership and financial consultants/ advisers on assets restructuring lay claim to being IPs and are so appointed without any requirement as to qualification, registration or expertise.
The Nigerian and Ugandan legislative insolvency regimes used to be very similar in terms of their substantive operative law and conspicuous lack of statutory regulation of the insolvency profession. However, with the enactment of an Insolvency Act in Uganda in September 2011, things have improved in Uganda: Part VIII of its Insolvency Act 2011 titled Official receiver and “regulation of insolvency practitioners” however does not make provisions for issues like licensing, educational and experience qualifications. However its section 204 establishes more specific criteria for appointment of an IP in that it makes reference to eligibility of certain categories of professionals such as lawyers, chartered accountants or chartered secretary to practice as IPs.
“In the absence of a clear definition, it would appear that anyone could claim to be an IP. Indeed practitioners in receivership and financial consultants/ advisers on assets restructuring lay claim to being IPs and are so appointed without any requirement as to qualification, registration or expertise”
Legal framework for regulation of IPs in Nigeria From a combined reading of the provisions of sections 279 to 283 CAMA 1990 and 390, 393, 422 to 425 CAMA 1990, the implication of the appointment of an IP is that the powers of those who normally run the affairs of the company as a going concern cease or are suspended. In the twilight zone of the company, the IP assumes the rights of the directors pending such time as the company is rescued or liquidated. From the above, it becomes clear that IPs must be suitably qualified persons/ professionals who can be held accountable. The critical questions then are, who can be appointed as IP, what are the educational or licensing requirements as well as the level of experience expected from an IP? These are questions which legislation in many African countries failed to adequately answer. Certainly, CAMA 1990 also did not adequately address this issue. The stark absence of such regulation resonates all the more having regard to the fact that the 1999 Constitution of the Federal Republic of Nigeria (the “CFRN 1999”) under item 49 of Schedule 2 (Exclusive Legislative List) made pursuant to S.4 of the CFRN 1999 mandates the national legislator to make laws for the regulation of professional occupations.
36
What does CAMA 1990 provide? Nigerian CAMA makes several provisions regarding the powers/duties of the IPs but does not make any provisions regarding their qualifications, standard, ethics, and discipline to curb incidences of fraud/defalcation, incompetence and mismanagement having regard to the position of trust that they occupy and the control given to them over the assets of the insolvent company. Given the generic perception of receiver/manager as IPs, a review of the provisions of sections 387 to 400 of CAMA 1990 dealing with receivership and managership will show that attention is only given to the procedure for appointment of receiver/managers (including mandatory requirements of notification thereof to the public under section 387 to 392, 396 to 400), duties, powers and liabilities (sections 393 and 394 CAMA 1990), and the legal consequences of such appointment (subsection 393(4) CAMA) and not to the qualification or skill of the person to be so appointed. Under sections 387 to 389 CAMA 1990, appointment of a receiver is made having regard to the basic considerations that a) the IP must be found in law to be a capable person (i.e. exclusion of an infant or found by a competent court to be of unsound mind), b) the person appointed should not have had any problem with integrity or conflict of interest related issues. CAMA 1990 however is regrettably silent on issues such as professional competence and qualifications for appointment of the IP. Even though sections 392, 396, 397, 398 and 399 CAMA 1990 extensively deal with notification and reporting obligations of a receiver, it only imposes minor financial sanctions for breach of those