PROBLEMAS EN LA ENSEÑANZA.

The liquidator plays a prominent role in the winding up of a company. The duties and powers of a liquidator in the winding up of a company are enormous and challenging.

Upon the making of a winding up order, the court appoints a liquidator for the purpose of conducting the proceeding in winding up a company and performing such duties in reference thereto.

1. Appointment of a Liquidator

On the making of a winding up order, the court may appoint a liquidator(s) for the purpose of conducting the proceedings in winding up a company and to perform such duties connected with the winding up proceedings.⁵³⁷ However, if the court fails or neglects to appoint a liquidator(s), the official receiver shall by virtue of his office become the liquidator.⁵³⁸ Where the official receiver acts as the liquidator, he shall summon separate meetings of creditors and contributories for the purpose of

532 CAMA, op cit, s. 433 (2).

533 Ibid, s. 425 (1).

534Ibid, ss. 425 (1), 427 (1).

535 CWR, op cit, r. 142 (1).

536 CAMA, op cit, s. 433 (1).

537Ibid, s. 422 (1).

538CAMA, op cit, s. 422 (3) (b).

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determining whether or not to apply to the court for an order appointing a liquidator in his place.⁵³⁹ If at the separate meetings of creditors and contributories, it was resolved that a liquidator be appointed in place of the official receiver, such official receiver or the chairman of the meeting shall make a report of the result of the separate meetings to the court in Form 20 in the Appendix to the Rules.⁵⁴⁰ Further to the report, the court will appoint a liquidator and make necessary orders to give effect to the resolution of the separate meetings.⁵⁴¹ Upon the appointment of a liquidator, he shall not act in that capacity until he has notified his appointment to the Corporate Affairs Commission⁵⁴² and given security in the prescribed manner to the satisfaction of the court.⁵⁴³

However, if there is a difference in the resolutions of the meetings, the court on application of the official receiver will fix a date for hearing of the resolutions and determinations, which hearing shall be advertised by the official receiver in such manner as the court shall direct in so far as the advertisement shall be published not less than seven days before the date of hearing.⁵⁴⁴ Upon the consideration of the resolutions and determinations of the meetings, the court may, by order in Form 21 in the Appendix to the Rules, appoint a liquidator. Subsequently, the order of the appointment of the liquidator shall be given to the official receiver, who shall then transmit it to the Registrar General of the Corporate Affairs Commission. Upon receipt of the order of the appointment of the liquidator, the Registrar General of the

539CAMA, op cit, s. 433 (1).

540 CWR, op cit, r. 41 (1).

541 CAMA, op cit, s. 433 (2); CWR, ibid, r. 41.

542 Companies Regulation 2012, reg 43 (1) (3).

543 CAMA, op cit, s. 422 (3) (d); CWR, op cit, r. 42.

544 CWR, ibid, r. 41 (2) (3).

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Corporate Affairs Commission, subject to the liquidator giving security, shall cause notice of the appointment to be gazetted.⁵⁴⁵

Furthermore, the notice of appointment of a liquidator has to be advertised by the liquidator as directed by the court immediately after his appointment and the provision of required security.⁵⁴⁶ Where a liquidator dies, resigns or is removed, another liquidator may be appointed in his place in the same manner as in the case of a first appointment.⁵⁴⁷

While there is no specific provision on the qualifications for a person to be appointed liquidator, certain persons are disqualified from being appointed as liquidator or to act as liquidator of a company.⁵⁴⁸ It appears from the wordings of section 509 (1) of the CAMA that the disqualification provision as provided thereunder is only applicable to persons to be appointed or to act as liquidator of a company being wound up by or under the supervision of the court or in a voluntary winding up. In Federal Mortgage Bank of Nigeria v Nigerian Deposit Insurance Corporation,⁵⁴⁹ the court held that the appointment of the N.D.I.C as a liquidator does not conflict with the provision of section 509 (1) (c) of the CAMA in that a body corporate shall not be appointed a liquidator. Relying on section 38 (3) of BOFID, the court further held that N.D.I.C can be appointed, in the public interest as a provisional liquidator and the provision of section 509 (1) (c) of the CAMA is therefore deemed to have been amended to that extent.⁵⁵⁰ This position of the Supreme Court of Nigeria

545 Companies Regulation, op cit, reg 43 (1) (c); CWR, op cit, r 41 (5). However, in practice, it is the responsibility of the liquidator to notify his appointment to the Corporate Affairs Commission.

546 CWR, ibid, r. 41 (7).

547 CAMA, op cit, s. 422 (1) (5); CWR, ibid, rr. 41 (8), 163.

548 CAMA, ibid, s.509 (1); Orojo, op cit, p. 477; A Aliyu & M D Saulawa, „The Role of a Liquidator in Winding up Proceedings in Nigeria: Examining the Inadequacies under Companies and Allied Matters Act (CAMA)‟, PHJBL 2.1 (2016).227.

549 [1999] 2 N.W.L.R (pt 591) 333.

550 H Y Bhadmus, Corporate Insolvency Law and Practice in Nigeria (Enugu: Chenglo Limited, 2009) p. 137.

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is to say the least, unsatisfactory. The appointment of a provisional liquidator is different from that of a liquidator. Section 509 of the CAMA expressly provides for disqualification of persons for appointment as liquidator. Further, the amendment of the provision of a statute cannot be deemed or implied but must be an express Act of parliament. Hence, in this study, it is submitted that it must be an inadvertent omission on the part of the draftsmen to have excluded or omitted the application of the disqualification provision to persons to be appointed liquidator or to act as a liquidator of a company in a winding up by the court. This position is re-enforced by the fact that the disqualification provision under section 509 (1) of the CAMA is in tandem with international best practices that disqualifies bodies corporate from being appointed or to act as liquidators.

2. Effects of the Appointment of a Liquidator

The appointment of a liquidator attracts the following effects on:

i. Power of Directors

The appointment of a liquidator puts an end to the powers of directors‟.⁵⁵¹ However, the directors may continue to exercise powers if the Court by order sanctions the continuance thereof.⁵⁵² Put in another way, the appointment of liquidator of a company signifies the divesture of the powers of its Board of Directors and the investiture of such powers on the liquidator. When this happens, the Board is said to be funtus officio.⁵⁵³

ii. Contractual Capacity of the Company

The powers of the company to deal with its assets and of the continued performance of its obligations, contractual or not, comes to an end and by reason of

551 CAMA, op cit, s. 422 (9); Federal Mortgage Bank of Nigeria v Nigerian Deposit Insurance Corporation, supra, at 529; M O Sofowora, Modern Nigerian Company Law (2^ndedn, Lagos: Soft Associates, 2002) p. 522.

552 Anakwenze v TAPP Industry Ltd, supra.

553 Gbedu v Itie & ors, supra, 260.

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the appointment of a liquidator and the powers conferred on him, the capacity of the company to sustain its contractual obligations is negated.⁵⁵⁴

Furthermore, the company ceases to carry on its business as same can only be done by the liquidator with the sanction of the court or of the committee of inspection, in so far as it is necessary for the beneficial winding up of the company.⁵⁵⁵

iii. Commencement and continuation of action against the company Upon the appointment of a liquidator, no action or proceedings shall be proceeded with or commenced against the company without the leave of the court.⁵⁵⁶ In this study, we reiterate the arguments canvassed under the effects of appointment of a provisional liquidator as it relates to commencement and continuation of action against the company. Suffice it to say that the provision of section 417 of the CAMA does not debar the company in liquidation from commencing or continuing with actions or proceedings against third parties.⁵⁵⁷

iv. Contract of employment

Contrary to the postulations that the appointment of a liquidator automatically terminates every contract of employment,⁵⁵⁸ the correct position of the law is that the effect of the appointment of liquidator on a contract of employment depends on whether the winding up is compulsory or voluntary.⁵⁵⁹ Where it is a compulsory winding up, the prevailing position of the law was succinctly stated in Gbedu v Itie &

ors,⁵⁶⁰ that:

554 CAMA, op cit, s. 425 (1) (e) (f); Gbedu v Itie & ors, supra, at261, paras C-D.

555 CAMA, ibid, ss. 425 (1) (b), 494 (6) (a); Gbedu v Itie & ors, ibid, 260, paras F-H; Palmer‟s Company Law, Volume 3 (London: Sweet & Maxwell) p 15134/1.

556 CAMA, ibid, s. 417; Onwuchekwa v NDIC, supra; Atojuv Triumph Bank Plc, supra.

557 Onwuchekwa v NDC, supra 1631.

558 Orojo, op cit, pp. 451, 474; Ola, op cit, p. 467; Sofowora, op cit, p. 232.

559 Gbedu v Itie & ors, supra, at 264, paras A-B.

560 Ibid, at 261 – 262, paras A-B.

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A contract of service is a contract in which both parties have continuing obligations: whilst the employee has an obligation to work, the company has a duty to remunerate him for such exertions by way of the payment of his wages. However, a winding up order hampers a company‟s capacity to sustain its aforesaid obligations. It, simply, comes to this. A winding up order drains the company of its powers: powers of dealing with its assets and of the continued performance of its obligations! By that winding up order, a new officer: an officer of the court [the liquidator] inherits these powers. The servant must, then, be deemed to know the legal effect of a winding up order. In consequence, such an order operates as a notice to him that the company cannot continue its obligations to him under his contract of service and thus constitutes a breach going to the root of their contract.

Simply put, while the making of a winding up order serves as notice to employees of the wound up company that their contract of employment will not be continued, on the appointment of liquidator, the employees are discharged from the date of the winding up order. However, the employees of the wound up company are entitled to make a claim under the winding up proceedings.⁵⁶¹

561 CAMA, op cit, ss. 494, 518.

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