Corporate Rescue and the Nigerian Insolvency System Bolanle Adenike Adebola A thesis submitted to University College London (UCL) for the degree of Doctor of Philosophy November 2012 DECLARATION I, Bolanle Adenike Adebola, confirm that the work presented in this thesis is my own. Where information has been derived from other sources, I confirm that this has been indicated in the thesis. Bolanle Adenike Adebola 2 ABSTRACT Foremost insolvency practitioners are agitating for the reform of the Nigerian corporate insolvency law, and in particular, its rescue system. They seek to transplant the corporate rescue model of either the United States or of England and Wales into the Nigerian insolvency system. On the premise that the present system, as well as the proposed models should be clearly understood before reforms are executed, this thesis examines the three rescue models in focus. Very little is written on the existing Nigerian rescue system. Utilising an analytical and empirical method, the thesis educes a robust and, it argues, representative picture of the Nigerian corporate rescue law and practice. It finds that the Nigerian rescue system comprises an informal and a formal phase. A company is more likely to be rescued at the informal phase, which is being developed by stakeholders to mitigate the substantive and institutional challenges that beset the formal phase. The formal rescue law is inadequate because itsregimesare not fit for purpose.The greatest challengeit faces, it is argued, isadministrative. Institutional failings have injected the tardiness and uncertainty that now characterise the Nigerian rescue system. The thesis proposes an analytical framework by which the rescue systems of Nigeria, the US and England and Wales, as well as other corporate rescue models, can be examined. From the analysis it presents, prospective reformers can identify the core elements of corporate rescue and how these are administered by their preferred models. They can also observe how these elements are administeredbythe Nigerian rescue model. It is expected that the robust findings presented in the thesis will contribute considerable value to the on-going insolvency reform debate in Nigeria. ACKNOWLEDGMENTS I am most grateful to God for strength, support and lots of answered prayers. My heartfelt gratitude goes to Professor Fletcher, my primary supervisor. The thesis would not have been possible without his help, support and patience while I explored the subject. His encyclopaedic knowledge made corporateinsolvency law even more fascinating. I am thankful for his kind but firm guidance, and especiallyfor the pastoral care he afforded me throughout my study. I am grateful to Professor Stevens and Professor Lowry who read drafts of the thesis and made very useful recommendations, and toProfessor Diduck, who made important suggestions about my methodology and offered me a lot of pastoral support. To Aled Griffitths, who tutored me in Bangor and continued to support me during the PhD, I say diolch yn fawr. I would like to acknowledge the support of Seyi Akinwunmi, Anthony Idigbe (SAN), and Abiodun Layonu (SAN), who gave me access to their files and papers they have written on the Nigerian Insolvency Law, and facilitated many of the interviews that comprise the empirical chapter. I am grateful to the Faculty of Laws and the UCL graduate school for various funds I received during the course of the PhD. Profound thanks to my dad for his support. His favourite statement, ‘PhDs are not meant to be easy; if they were, we would all have one’, steered me through many difficult moments. My gratitude goes to my mum for coming over frequently to care for me, and to my 4 siblings,who perhaps, by now, can write theses on insolvency law. I am also grateful toTolu and Tutu, who proof-read the thesis. I thank my friends, who supported me, called and mailed me, listened to my arguments, challenged my opinions, and prevented this somewhat solitary adventure from being lonely. As I have journeyed away from home, I have met many people, very often strangers, that I now call family. So, to my special-found family, I say thank you. 5 TABLE OF CONTENTS Declaration ............................................................................................................................................................. 2 Abstract................................................................................................................................................................... 3 Acknowledgments .................................................................................................................................................. 4 CHAPTER 1 INTRODUCTION .......................................................................................13 Overview .............................................................................................................................................................. 13 1.1 The Challenge ............................................................................................................................................. 13 1.2 The Structure............................................................................................................................................... 17 1.3 Methodology............................................................................................................................................... 22 1.4 Contribution ................................................................................................................................................ 22 1.5 Introduction to the Nigerian Legal System ................................................................................................. 23 1.6 The Relationship between Nigeria and the United Kingdom...................................................................... 25 1.7 Sources of Nigerian Law............................................................................................................................. 27 1.8 Nigerian Company and Insolvency Law..................................................................................................... 30 1.9 The Nigerian Law Reform Commission ..................................................................................................... 32 1.10 Structure and Goals ................................................................................................................................ 33 1.11 The Commission and CAMA................................................................................................................. 35 1.12 The Commission and the Insolvency Provisions.................................................................................... 39 Conclusion............................................................................................................................................................ 41 6 CHAPTER 2 DIMENSIONS OF CORPORATE INSOLVENCY LAW .........................43 Overview .............................................................................................................................................................. 43 2.1 The Exclusive Interest Perspective ............................................................................................................. 46 2.1.1 Insolvency Law: A Collectivized Debt-collection Device ................................................................ 47 2.1.2 Merely a Collectivised Debt-collection Device? ............................................................................... 49 2.2 Inclusive Interest Perspective...................................................................................................................... 54 2.2.1 Insolvency Law: Failure Remedying Device..................................................................................... 55 2.2.2 Failure Remedying Device? .............................................................................................................. 57 2.3 The Multi-Dimensional Perspective............................................................................................................ 59 2.3.1 Capital, Management and Creditors .................................................................................................. 60 2.3.2 The Purpose of Insolvency Law ........................................................................................................ 65 2.3.3 Insolvency Law and General Law ..................................................................................................... 66 2.3.4 Insolvency Law and Insolvency Issues.............................................................................................. 68 Conclusion: Dimensions of Insolvency Law ........................................................................................................ 70 CHAPTER 3 UNDERSTANDING CORPORATE RESCUE ..........................................72 Overview .............................................................................................................................................................. 72 3.1 Defining Corporate Rescue ......................................................................................................................... 73 3.1.1 Business Sale..................................................................................................................................... 77 3.1.2 Company Rescue ..............................................................................................................................