Business Recovery Under CAMA 2020: What Directors Need to Know Before It’s Too Late

The Companies and Allied Matters Act 2020 (CAMA 2020) transformed Nigeria’s business recovery landscape by introducing formal restructuring mechanisms that previously existed only in theory. For company directors facing financial distress, understanding these mechanisms — and acting early — can mean the difference between recovery and liquidation.

The CAMA 2020 Framework: CAMA 2020 introduces Company Voluntary Arrangements (CVAs), the Administration procedure, and modernised receivership provisions that align Nigeria more closely with UK insolvency practice. These mechanisms create structured pathways for business rescue that protect value for shareholders, creditors, employees, and other stakeholders.

Company Voluntary Arrangements: A CVA allows a company to propose a binding repayment arrangement to creditors without entering formal insolvency. With the support of a licensed insolvency practitioner, directors can propose terms that allow the business to continue trading while addressing its debt obligations. CVAs require 75% creditor approval by value and, once approved, bind all unsecured creditors.

Administration: Where a business requires more intensive intervention, Administration provides a moratorium on creditor actions while an Administrator develops and implements a rescue plan. Administration can achieve rescue of the business, a better outcome for creditors than immediate liquidation, or realisation of assets in an orderly manner.

Director Duties: Under CAMA 2020, director duties shift significantly when a company approaches insolvency. Directors must prioritise creditor interests over shareholder interests when insolvency is imminent. Trading wrongfully — continuing to incur obligations when insolvency is inevitable — creates personal liability for directors.

When to Act: Our Phoenix practice’s experience consistently shows that businesses that engage professional advice early — typically when cash reserves cover less than 90 days of operations or when a major creditor has issued a statutory demand — achieve significantly better outcomes than those that delay until crisis point. Early engagement preserves options; delay eliminates them.