The Need for a Cross-Border Insolvency Legislation in Nigeria

Share This Post

Share on facebook
Share on linkedin
Share on twitter
Share on email
Share on whatsapp
Share on print


The phenomenal growth in international trade and investments in the 21st Century has increased the incidence of corporate entities having businesses, assets, debtors and creditors in several jurisdictions. Many businesses 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.

Corporate insolvency has become quite complex, especially in the increasingly globalized world of the 21st Century. Hence, the need for cutting-edge insolvency laws and regulations that will make it easier to realise and distribute assets to creditors, especially when the assets of the insolvent company are scattered across several jurisdictions.

One of the challenges Nigeria faces in relation to corporate insolvency is the inadequacy of the country’s insolvency laws and regulations on cross-border insolvency.[1] 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, among other requirements, must be final and unchallenged on appeal.[2]

This article examines the challenges associated with the absence of a specific legislation on cross-border insolvency, and the significance of developing a functional cross-border insolvency legal framework in Nigeria.

  1. The Existing Insolvency Framework in Nigeria

The Companies and Allied Matters Act[3], along with the Company Winding up Rules 2010, regulated corporate insolvency in Nigeria prior to the enactment of Companies and Allied Matters Act, 2020 (CAMA 2020). CAMA 2004 made provisions for various insolvency processes that could be commenced by or against an insolvent company, such as receivership, winding-up proceedings, and arrangement and compromise which practically focused more on business liquidation than business rescue. There were no provisions in CAMA 2004 relating to more business rescue inclined processes like administration of companies, netting under insolvency framework and companies voluntary arrangements. However, with the enactment of the CAMA 2020 and the Insolvency Regulation 2022, provisions have been made for these, and a more definitive legal framework for insolvency proceedings in Nigeria appears to be on the horizon, emphasizing the need to have a modern insolvency regulation that prioritizes reorganisation and restructuring of business entities and their operations, with a view to rehabilitating them to ensure economic stability and financial propriety as opposed to corporate death via winding up.

  1. The Gaps

In line with international best practices, 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 primary jurisdiction (where the business is incorporated) and (b) seek the recognition/co-operation of the insolvency proceeding instituted in the primary jurisdiction in other foreign jurisdictions.[4]

There is currently no law in Nigeria that deals specifically with the recognition and enforcement of cross-border insolvencies, or any authority specifically set up to deal with issues that arise out of cross-border insolvencies. 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.[5]

Nigeria is yet to adopt the UNICTRAL Model Law on Cross-border Insolvency[6] (whether fully or partially), the Hague Convention[7] or any other convention that provides a platform for judicial assistance in cross border judicial proceedings. As such, the reliefs afforded by these international legal instruments/conventions are not available in Nigeria.

The UNICTRAL Model Law makes ample provisions that adequately address cross-border insolvency issues. Adopting the UNICTRAL Model Law will benefit Nigeria in many ways. The advantage afforded by the UNICTRAL Model Law is that a liquidator may apply to a court (whose country has adopted the UNICTRAL Model Law) outside his country of appointment for certain judicial reliefs without necessarily having to institute a fresh action in that country. The procedure envisaged involves: (i) instituting one main insolvency proceeding typically in the company’s country of incorporation and then (ii) seek the recognition of the proceeding and the assistance of the courts in other jurisdictions that have adopted the UNICTRAL Model Law where the company has assets.

Under Chapter III Article 15 of UNICTRAL Model Law on Cross-border Insolvency, a foreign representative may apply to the court (wherein he seeks recognition/enforcement) for recognition of the foreign proceeding in which the foreign representative has been appointed. Article 21 highlights the nature of assistance that may be provided by the court following recognition under the law. For ease of reference, the provisions have been reproduced below:

  1. “Upon recognition of a foreign proceeding, whether main (where the debtor has its centre of main interests) or non-main (where the debtor merely has an establishment), where necessary to protect the assets of the debtor or the interests of the creditors, the court may, at the request of the foreign representative, grant any appropriate relief, including:
  • Staying the commencement or continuation of individual actions or individual proceedings concerning the debtor’s assets, rights, obligations or liabilities, to the extent they have not been stayed under paragraph 1 (a) of article 20;
  • Staying execution against the debtor’s assets to the extent it has not been stayed under paragraph 1 (b) of article 20;
  • Suspending the right to transfer, encumber or otherwise dispose of any assets of the debtor to the extent this right has not been suspended under paragraph 1 (c) of article 20;
  • Providing for the examination of witnesses, the taking of evidence or the delivery of information concerning the debtor’s assets, affairs, rights, obligations or liabilities;
  • Entrusting the administration or realization of all or part of the debtor’s assets located in this State to the foreign representative, or another person designated by the court;
  • Extending relief granted under paragraph 1 of article 19;
  • Granting any additional relief that may be available to [liquidators, provisional liquidators, official receivers, administrators or administrative receiver etc.] under the laws of this State.
  1. Upon recognition of a foreign proceeding, whether main or nonmain, the court may, at the request of the foreign representative, entrust the distribution of all or part of the debtor’s assets located in this State to the foreign representative, or another person designated by the court, provided that the court is satisfied that the interests of creditors in this State are adequately protected.”
  2. Efforts made towards Enactment of Cross-border Insolvency Laws in Nigeria

In an effort to keep up with the ever-changing regulatory landscape of insolvency laws in the international community, particularly the UNICTRAL Model Law, the Nigerian legislature took steps to enact a new insolvency law- that is, the “Bankruptcy and Insolvency Bill 2016”. The bill was passed by both Houses of the National Assembly. However, the President of the Federal Republic on January 18 2019, declined his assent to the Bankruptcy and Insolvency Bill of 2016 on the grounds that “the relationship between the corporate insolvency provisions of the Bill and existing provisions of winding up and insolvency under the Companies and Allied Matters Act needs to be clarified to avoid confusion in respect to the applicable governing corporate insolvency”.[8]

  1. Highlights of the provisions of Bankruptcy and Insolvency Bill 2016 on Cross-Border Insolvency

The Bill made provisions for insolvency proceedings to be commenced or continued by a foreign representative in Nigeria by providing that:

A foreign representative may commence and continue proceedings pursuant to section(s) 2 and 5 to 8 and section 23(1) in respect of a debtor as if the foreign representative were a creditor, trustee, liquidator or receiver of property of debtor.[9]

Furthermore, the Bill empowers the Nigerian Courts to seek aid or assistance of foreign authorities in relation to insolvency proceedings by providing that:

  • The Court may seek the aid and assistance of a Court, tribunal, or other authority in a foreign proceeding by order or written request or otherwise as the Court considers appropriate.
  • On application by a foreign representative in respect of a foreign proceeding commenced for the purpose of effecting a composition, an extension of time or a scheme of arrangement in respect of a debtor or in respect of the bankruptcy of a debtor, the Court may grant a stay of proceedings against the debtor or the debtor’s property in Nigeria on such terms and for such period as is consistent with the relief provided for under section(s) 49 to 52 in respect of a debtor in Nigeria who files a notice of intention or a proposal or who becomes bankrupt in Nigeria.”[10]

The bill also provides that an application to the Court by a foreign representative does not submit the foreign representative to the jurisdiction of the Court for any other purpose except with regard to the costs of the proceedings. It, however, includes a proviso that the Court may make any order under this part conditional on the compliance by the foreign representative with any other order of the Court.[11]

Section 242 of the bill provides that a foreign representative is not prevented from making an application to the Court under this part by reason only that proceedings by way of appeal or review have been taken in the foreign proceeding, and the Court may, on an application where such proceedings have been taken, grant relief as if the proceedings had not been taken. Thus, a foreign representative is not prevented from making any such application due to a pending appeal.

The Bill was expected to provide direction to Nigerian courts with respect to international insolvency as the Bill incorporated provisions recognizing foreign insolvency orders and provides assistance to foreign representatives e.g., trustees, liquidators, etc., but quite unfortunately, the bill did not see the light of the day.

  1. Recommendations

It is suggested that the Bill should be further revised taking into consideration the provisions of the UNICTRAL Model Law, especially the procedure for seeking recognition and enforcement of an insolvency-related judgment as set out in Article 11 of the UNICTRAL Model Law as well as the nature of assistance that may be provided by the court upon recognition as set out in Article 21 of the UNICTRAL Model Law.

The provisions of Article 18 of the UNICTRAL Model Law on the need to inform the court of certain subsequent information should also be considered in the revised Bill. It states that:

“From the time of filing the application for recognition of the foreign proceeding, the foreign representative shall inform the court promptly of:

  • Any substantial change in the status of the recognized foreign proceeding or the status of the foreign representative’s appointment; and
  • Any other foreign proceeding regarding the same debtor that becomes known to the foreign representative.”

Moreso, another important provision that should be considered in the revised Bill is the provision of Article 22 of the UNCITRAL Model Law on the adequate protection of the interest of creditors and other interested persons including the debtor.

Lastly, it is also suggested that Nigeria should endeavor to domesticate the UNICTRAL Model Law on Cross-Border Insolvency.

  1. Conclusion

Nigeria stands to benefit enormously from the reform of its insolvency laws, particularly in attracting more direct foreign investment and revenue for the government, wherein liquidation becomes the very last option resorted to after restructuring and other business rescue options have failed. The importance of developing our cross-border insolvency legislation cannot be overemphasized as this will give assurances to foreign investors that the country’s insolvency proceedings are in line with global best practices.


For further information on this article and area of law, please contact

Emmanuel Bassey, Uche Matthew, and Jeremiah Aderinto, at:

S. P. A. Ajibade & Co., Lagos

By telephone: (+234 1 270 3009; +234 1 460 5091), Fax (+234 1 4605092)

Mobile: +234 703 805 9736, +234 815 088 2839, +234 806 644 4001, +234 815 119 1865, +234 807 855 8661, +234 908 735 5889

Email:,, and


[1]     Tochukwu Onyiuke, Punch (30 July 2020), ‘Why Nigeria Must Develop Cross-Border Insolvency Law’, (accessed 28 March 2022).

[2]     See, Reciprocal Enforcement of Judgments Ordinance, 1922 and Foreign Judgment (Reciprocal Enforcement) Act of 1961. Section 3 of the Foreign Judgment (Reciprocal Enforcement) Act 1961 empowers the minister of justice to extend the right to register and enforce a foreign country’s judgment in Nigeria to any country which accords reciprocal treatment to judgments given in Nigeria.

[3]     CAP. C20. Laws of the Federation of Nigeria (LFN), 2004 (CAMA 2004).

[4]     The United Nations Commission on International Trade Law (“UNICTRAL”) developed the UNICTRAL Model Law on Recognition and Enforcement of Insolvency Related Judgments (MLREIJ) to facilitate adoption of this practice.

[5]     The Reciprocal Enforcement of Foreign Judgments Ordinance, 1922 contained in Cap. 175, Laws of the Federation of Nigeria and Lagos, 1958 & The Foreign Judgment (Reciprocal Enforcement) Act, Cap. F35, Laws of the Federation of Nigeria, 2004.

[6]     United Nations Commission on International Trade Law on Cross-Border Insolvency,1997.

[7]     The Hague Convention on Choice of Court Agreement, 2005.

[8]     Queen Esther Iroanusi, Premium Times, 30 July 2020, ‘Buhari rejects five bills, gives reasons’ (accessed 01 June 2022).

[9]     Section 239, Bankruptcy and Insolvency Bill, 2016.

[10]    Section 240, Bankruptcy and Insolvency Bill, 2016.

[11]    Section 241, Bankruptcy and Insolvency Bill, 2016.

Subscribe To Our Newsletter

Get updates and learn from the best

More To Explore