Academic journal article Canadian Social Science

The Legal Regime of Bankruptcy and Winding Up Proceedings as a Tool for Debt Recovery in Nigeria: An Appraisal

Academic journal article Canadian Social Science

The Legal Regime of Bankruptcy and Winding Up Proceedings as a Tool for Debt Recovery in Nigeria: An Appraisal

Article excerpt

Abstract

Nigeria does not have a comprehensive policy or law on bankruptcy. Individuals are declared bankrupt while corporate bodies are insolvent in the event of individuals' inability to meet his/her total liability. A corporation may be wound up if it is unable to pay for its debt. Bankruptcy and insolvency are used in our legal theory. But the paper examines legislation on bankruptcy laws and its proceedings which have to be amended to meet the current global economic growth, so that investors may have confidence on our legal system in order to recover their debts in case of corporate insolvency or regulation legislated upon bankruptcy. Bankruptcy deals with the creditor and debtor when the debtor is unable to pay the debt of a creditor and declares bankrupt. The article recommends corporate insolvency leading to winding up and liquidation of a corporate entity and settlement of all other related issues including cross-border claims and counter claim settlement and cross-border corporate insolvency should be codified and our jurisdictions should allow the debtor and the creditor to renegotiate on the basis of their respective rights and obligations at any time using ADR mechanisms.

Key Words: Bankruptcy; Winding up; Liquidation; Debt recovery; Jurisdictions; Creditor and debtor; Insolvency; Negotiations; Litigation and ADR mechanisms

INTRODUCTION

Bankruptcy is a legal status of an insolvent person or an organization as well as an individual who cannot pay up the debts they owe to creditors. In most jurisdiction bankruptcy is ordered by a court order or often times initiated by the debtor to be declared bankrupt. The term bankruptcy is not same as insolvency because in some countries including the United Kingdom, bankruptcy is limited to individuals, and others forms of insolvency proceedings like liquidation, winding up and administration are applicable to companies. However in the United States of America the term bankruptcy is used more formally to insolvency proceedings.

In modern times, the law and debt restructuring provides for the principal focus of modern insolvency legislation and business debt restructuring practices no longer rests on the elimination of insolvent entities. But the restructuring of the financial and organizational method of debtors experience in financial distress calls for the support and renegotiation of their business and services for the substance of the developing economy.

1. DEFINITION OF BANKRUPTCY

Bankruptcy Law is designed to provide relief and pretention to debtors who have gotten over their heeds. It also provides a fair means of distributing a debtor's assets among all creditors. This, the law attempts to protect the rights of both the debtor and the creditor. In Nigeria Bankruptcy refers to the inability of an individual to pay his debts. A person cannot declare himself bankrupt except by the court after considering a petition brought before it for that purpose. It is only the court that has the power to declare an individual bankrupt.

It is only after a petition has been heard or ordered by a court declaring a debtor his inability to pay his debts owed to the creditors, the person or the debtor cannot be declared bankrupt until the court makes an adjudication order to that effect and appoints a trustee in bankruptcy to take over his properties or estates. The individual person who is bankrupt, corporate entity or organization does not have enough assets and liability to cover the debts owed. The debtors files court proceedings to aid or grant them payment reschedule or wipe-out the debts totally. However, in some cases, the debtor shall give control of all the assets to the court appointed trustee in bankruptcy.

Bankruptcy is a legal proceeding by which the affairs of a bankrupt person are turned over to a trustee or receiver for administration under the bankruptcy laws.

Bankruptcy Act is to make provisions for declaring as bankrupt any person who cannot pay his debts of a specified amount and to disqualify him from holding certain elective and other public offices or from practicing any regulated profession (except as an employee). …

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