Introduction

Closing down a company in Nigeria is a significant decision that requires following a structured legal process known as winding up. Governed by the Companies and Allied Matters Act (CAMA) 2020 and the Insolvency Regulations 2022, the winding-up procedure is overseen by the Corporate Affairs Commission (CAC). This article outlines the key steps and considerations involved in winding up a company in Nigeria, providing a detailed roadmap for business owners and stakeholders.

What is Winding Up?

Winding up refers to the process of closing a company, liquidating its assets, and distributing the proceeds among creditors and shareholders. The process ensures that the company’s operations are brought to a formal end in a legally compliant manner. Winding up can be either voluntary or involuntary, depending on the circumstances, and is carried out with a focus on fairness and transparency.

Types of Winding Up

In Nigeria, there are two primary types of winding up:

1. Voluntary Winding Up

This occurs when the members or shareholders of a company decide to close it down of their own accord. Voluntary winding up can be further classified into two categories:

• Members’ Voluntary Winding Up: This type of winding up occurs when a company is solvent and its members believe it can pay its debts within a specified period. It is one of the most straightforward and commonly used liquidation processes, often concluding within 4 to 6 months, provided there are no unexpected challenges.
• Creditors’ Voluntary Winding Up: This occurs when a company is insolvent, and its directors declare the company’s inability to pay its debts. A creditors’ voluntary winding up can last for years, depending on how quickly the liquidator, creditors, and members can resolve the company’s financial issues.

2. Compulsory Winding Up

Compulsory winding up is initiated by a court order, typically due to the company’s inability to pay its debts. Creditors, shareholders, or regulatory authorities may petition the court for a compulsory winding-up order.

Voluntary Winding Up Process

Steps for Members’ Voluntary Winding Up

The following are the steps involved in the voluntary winding up of a company in Nigeria:

1. Special Resolution: The members pass a special resolution at a general meeting, indicating their intent to wind up the company voluntarily. A 75% majority vote is typically required for this resolution.
2. Statutory Declaration of Solvency: The directors must make a statutory declaration of solvency, confirming that the company can pay its debts in full within a specified period. This declaration must accompany the special resolution.
3. Appointment of Liquidator: After the resolution and declaration are made, a liquidator is appointed by the members to oversee the winding-up process, realize assets, and distribute the proceeds. Only an accredited insolvency practitioner can be appointed as a liquidator.
4. Publication in Newspapers: The special resolution appointing the liquidator must be published in at least two national newspapers, particularly in areas where the company’s head office is located.
5. Notification to the Corporate Affairs Commission (CAC): The company must notify the CAC within 14 days of passing the special resolution and filing the statutory declaration of solvency.
6. Commencement of Liquidation: The liquidator commences the liquidation process by notifying the CAC of their appointment and may also inform other relevant agencies. An interim account of the company may be prepared if necessary.
7. Realization & Distribution of Assets: The liquidator realizes the company’s assets, disposing of them if necessary. Since the company is solvent, any remaining assets are distributed to members according to the ratio of shares held by each.
8. Final Account: Upon concluding the process, the liquidator prepares a final account and notifies the CAC accordingly.
9. Final Meeting: The liquidator holds a final meeting to brief members on the findings and provide them with the account. The minutes of this meeting must be published in two national newspapers, and the CAC must be notified before the winding up is officially completed.

Steps for Creditors’ Voluntary Winding Up

1. Board Meeting: The directors convene a board meeting to assess the company’s financial situation and propose a winding-up resolution.
2. Creditors’ Meeting: A meeting is held with creditors, allowing them to appoint a liquidator of their choice.
3. Notification to CAC and Publication: The company must notify the CAC within 14 days of passing the winding-up resolution. Additionally, the resolution must be published in the official gazette and two national newspapers.
4. Creditors’ Committee: A creditors’ committee may be formed to work with the liquidator in overseeing the winding-up process.
5. Process: The process mirrors that of members’ voluntary winding up, except that creditors must follow a statutory hierarchy of payment when distributing the company’s assets before it is finally wound up.

Compulsory Winding-Up Process

1. Petition to the Court: The winding-up process is initiated by filing a petition with the court. The petition can be filed by the company, creditors, members, or regulatory authorities.
2. Court Hearing: The court schedules a hearing to consider the petition. If the court is satisfied that grounds for winding up exist, it may issue a winding-up order.
3. Appointment of Official Receiver: Upon issuing the winding-up order, the court may appoint an official receiver or liquidator to manage the winding-up process.
4. Notification to CAC: The official receiver or liquidator must notify the CAC of the winding-up order within 14 days.

Conclusion

Winding up a company in Nigeria is a legally intricate process that requires strict adherence to the provisions outlined in CAMA and the Insolvency Regulations. Whether through voluntary or compulsory means, the process involves several critical steps, including passing resolutions, appointing liquidators, notifying regulatory bodies, and, in some cases, court involvement. Legal advice and the services of a qualified and accredited liquidator are essential to navigate this complex procedure successfully. As companies face various challenges, understanding the winding-up process is crucial for stakeholders seeking to close a chapter in a responsible and lawful manner.

For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Inner Konsult Ltd at www.innerkonsult.com at Lagos, Ogun state Nigeria offices, or www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.