Corporate Affairs Commission (CAC) as liquidator? (2)

Akinwande-Tomori writes from The Law Union (barristers, solicitors, arbitrators and notaries public), Lagos.

One of the circumstances in which the court will make an order for winding up where it is just and equitable is when a company was formed for a fraudulent or illegal purpose as stated in the result of the investigation made on the companies earlier stated. Also, by law, the Commission falls under the category of persons who may petition for winding-up as is the case here.

However, before the Commission can file a petition for the winding up of a company, the company must have been investigated and inspected, and an inspector’s report must have been submitted to that effect (S. 320 CAMA). Also, the contents of the report must be such that in the view of the Commission, a civil or criminal proceedings be instituted against the company with the approval of the Attorney-General of the Federation, and which also in the opinion of the court will be just and equitable to wind up the company (S. 408(e)CAMA).

Following from the above, the companies winding-up rules of May 2001 make provisions for rules and procedures that will govern the winding-up of a company, and according to Rule 183 of the rules, where no provision is made by the rules in any winding-up proceedings, the Federal High Court (Civil Procedure) Rules will apply.

Therefore, to commence winding-up proceedings, the following are statutory requirements that must be followed:

· The Petition: Winding-up proceedings is commenced by way of PETITION in the prescribed Form Nos. 2, 3, or 4 or as the circumstances may require (Rule 15). The facts on which the petition is based must be clearly and sufficiently set out and filed in court. The court with jurisdiction on winding-up proceedings is the Federal High Court as earlier stated. The petition must be verified by an affidavit referring to it (Rule 18). The affidavit is sufficient prima facie evidence of the statements in the petition and if not challenged will be taken as established (Wema Bank (Nigeria) Ltd v. Jimfat (Nigeria) Ltd (1978) FRCR 19). The rule also provides that if the affidavit does not refer to the petition, the petition will be struck out.

· Advertisement: After filing the petition, the petitioner must obtain the order of the court for advertisement (Rule 19). The petition must be advertised 15 clear days before the hearing and as many times as the court may direct in the Federal Gazette and in one national newspaper and one other newspaper where the registered office or last known business address is or was. The advertisement shall be in Form 9 or 10 or a variation as it must be necessary (Rule 19(4)). If a petition is not advertised within the time or in the manner prescribed by law (Rule 19(2)), it shall be struck out, unless the court for sufficient reason otherwise orders.

· Service: The petition together with the advertisement must be served on the company at its registered office, and where not available, then at the principal or last known principal place of business.

In view of the above, certain pertinent questions have, however, risen from the court’s decision in appointing the CAC as a provisional liquidator in this instance and they are:

1. Why is the CAC, a body that regulates the affairs of companies in Nigeria, appointed as a provisional liquidator?

2. Can a corporate body be appointed a liquidator?

3. Can a petitioner be appointed as a liquidator?

My submission

According to US Legal Definitions (US legal.com), a liquidator is a person who is appointed when a company is in the process of winding up and is responsible for collecting all the assets of a company and settling all claims against the company. A liquidator can be appointed by unsecured creditors, shareholders or on a court order.

The Black’s Law (9th Edition) defines a liquidator as a person appointed to wind up a business’ affairs, especially by selling off its assets.

A provisional liquidator is, however, not defined but described as one who is appointed by the court after the presentation of the petition and before the making of a winding-up order and oftentimes appointed as a liquidator. Belgore J.S.C. in N.D.I.C. v. F.M.B. Ltd. (1997) 4 NWLR (Pt. 501) 519 stated: “Unless a different definition is provided in the law, the ‘Liquidator’ certainly includes ‘Provisional Liquidator’. In the absence of any separate definition, all powers of a Liquidator are exercisable by a Provisional Liquidator.”

The CAC is established by virtue of S.1 and S.2 of CAMA, and also states that ‘…it shall be a body corporate’, while S.7 (1) of CAMA provides that the CAC is the body that regulates the affairs of companies in Nigeria, one of which is the winding-up of companies under the Act.

Some of the ways by which the CAC regulates and supervises the winding-up of companies are:

· S.323 and S. 410 of CAMA grants the CAC powers to commence a winding-up proceedings against a company.

· S.326 of CAMA grants the CAC powers to appoint inspectors to investigate the affairs of a company where a report has been made against such company.

· S.429 of CAMA grants the CAC powers to audit the liquidator’s account in a winding-up proceedings.

· S.428 (1) of CAMA grants the CAC powers to direct the payment of monies received by the liquidator into the public fund of the federation kept by the CAC.

· S.468 (3) of CAMA – by virtue of this section, the CAC regulates the affairs relating to the final meeting and dissolution of the company.

· S.509 of CAMA – This section states the persons disqualified to be appointed as liquidators, one of which is a body corporate.

The real issue here is not whether a liquidator has been appointed, but who has been appointed as a liquidator.

Who then polices the policeman?

It is my opinion that though the door to what constitutes a just and equitable ground is for the court to decide depending on the circumstances in each case, but can the court in appointing the CAC as provisional liquidator be acting just and equitably? If that were to be the case, then suffice it to say that the CAC can decide that a company should not be in existence for whatever reasons and therefore institute a winding-up proceedings against such company, and also be appointed as liquidator of the same. Where then lies fairness?

In light of the above stated sections of the Act, and the powers vested in the CAC with regards to winding-up proceedings, it is my view that the draftsman in drafting these sections intended for the liquidator and the CAC to be different persons and not one and the same person. A liquidator is meant to be a person who is and will be unbiased in the performance of his duties, and as such, the CAC as a body corporate, or the petitioner should not be appointed as a liquidator in a winding-up proceeding as it will be against the rules of natural justice, equity and good conscience.

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