Company Voluntary Arrangement (Nigeria)

A Company Voluntary Arrangement (CVA) in Nigeria is a formal insolvency rescue mechanism introduced by the Companies and Allied Matters Act 2020 (CAMA 2020), Part 15, which enables a financially distressed company to propose a binding composition or arrangement with its creditors as an alternative to winding up or receivership. The CVA allows the company to continue trading while paying creditors over an agreed period, typically from future trading income, asset realisations, or third-party funding.

The CVA procedure under CAMA 2020 was modelled partly on the UK's Insolvency Act 1986 framework but adapted for the Nigerian corporate environment. Under Section 434 of CAMA 2020, the directors of a company may propose a CVA where the company is unable to pay its debts as and when they fall due. A licensed insolvency practitioner — registered with the Corporate Affairs Commission (CAC) under the Insolvency Regulations 2022 made under CAMA 2020 — must be appointed as the supervisor to implement the arrangement once approved.

For the CVA to become binding on all unsecured creditors, it must be approved by a majority of at least 75% in value of the creditors present and voting at a creditors' meeting, and by a simple majority of members present and voting at a shareholders' meeting, as prescribed under CAMA 2020. Secured creditors — including banks holding a fixed charge or a debenture registered under CAMA 2020, Part VII — are not bound by a CVA without their specific consent, as their security rights are protected.

A CVA in Nigeria should be distinguished from a Scheme of Arrangement under Section 715 of CAMA 2020, which requires court sanction and is used for more complex restructurings involving both secured and unsecured creditors; from Administration under CAMA 2020, Part 14, which involves appointment of an administrator by the court; and from a Creditors' Voluntary Liquidation under CAMA 2020, Part 16, which involves dissolution of the company.

The legal framework governing the Company Voluntary Arrangement (Nigeria) in Nigeria draws on several key statutes and regulatory bodies. Under Nigerian law, the Companies and Allied Matters Act 2020 (CAMA) regulates corporate entities through the Corporate Affairs Commission (CAC). The Labour Act (Cap L1 LFN 2004) and the National Industrial Court of Nigeria (NICN) govern employment disputes. The Nigeria Data Protection Regulation (NDPR) 2019 and the Nigeria Data Protection Commission (NDPC) protect personal data. The Federal Inland Revenue Service (FIRS) administers tax obligations under the Companies Income Tax Act. The Federal High Court and state High Courts have jurisdiction over civil matters. Parties executing a Company Voluntary Arrangement (Nigeria) in Nigeria should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Companies and Allied Matters Act (CAMA) 2020 sets the foundational requirements.

A Company Voluntary Arrangement in Nigeria is an appropriate restructuring tool when a company faces financial distress but remains viable as a going concern if given relief from its debt obligations.

A CVA is needed when a company has accumulated significant trade creditor debt — such as unpaid supplier invoices — and cannot service all debts immediately but has a sustainable core business capable of generating cash flow over a 3 to 5 year period to repay a proportion of the debt.

A CVA is required when a company facing a tax liability assessed by the Federal Inland Revenue Service (FIRS) or a state Internal Revenue Service wishes to propose a structured payment plan to the revenue authority as an alternative to enforcement action or winding-up proceedings.

A CVA is needed when a company that has received a winding-up petition before the Federal High Court under CAMA 2020, Part 16, wishes to propose a creditor arrangement to stay the petition and allow the business to continue trading under the supervision of a licensed insolvency practitioner.

A CVA is appropriate when a retail or hospitality business in Nigeria — such as a chain of stores or restaurants — needs to restructure its lease obligations by proposing a rent reduction arrangement with landlords and other creditors to avoid closure of profitable locations.

A CVA is required in the banking sector when a company that has defaulted on a loan from a bank licensed under BOFIA 2020 needs to propose a debt-for-equity swap or instalment repayment plan as an alternative to the bank exercising its power of sale over charged assets under the debenture.

Parties in Nigeria should prepare a Company Voluntary Arrangement (Nigeria) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under Nigerian law, the Companies and Allied Matters Act 2020 (CAMA) regulates corporate entities through the Corporate Affairs Commission (CAC). The Labour Act (Cap L1 LFN 2004) and the National Industrial Court of Nigeria (NICN) govern employment disputes. The Nigeria Data Protection Regulation (NDPR) 2019 and the Nigeria Data Protection Commission (NDPC) protect personal data. The Federal Inland Revenue Service (FIRS) administers tax obligations under the Companies Income Tax Act. The Federal High Court and state High Courts have jurisdiction over civil matters. Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.

A valid CVA proposal for a Nigerian company under CAMA 2020, Part 15 must contain the following essential elements.

Company Details: Full legal name, RC number from the CAC, registered address, principal business activity, date of incorporation under CAMA 2020, and current financial position including total assets, total liabilities, and cash flow position.

Supervisor's Details: Name, registration number, and firm details of the licensed insolvency practitioner appointed as CVA supervisor under the CAC Insolvency Regulations 2022. The supervisor must be independent of the company and its directors.

Statement of Affairs: A detailed statement prepared by the directors showing the company's assets and liabilities, the estimated realisable value of assets, and the names and amounts owed to all creditors — distinguishing between secured creditors (with debentures registered under CAMA 2020, Part VII), preferential creditors (employees under the Labour Act and FIRS under the CITA), and unsecured creditors.

Proposed Terms: The specific terms of the arrangement — including the percentage of debt to be paid, the payment period (typically 3 to 5 years), the source of funds for payments, and whether the arrangement involves continued trading, asset sales, or third-party investment.

Comparison with Alternatives: A comparison showing what creditors would receive under the CVA versus what they would receive in a liquidation, demonstrating that the CVA offers better value for creditors.

Voting Requirements: Confirmation that the proposal will be put to a creditors' meeting requiring 75% in value approval and a members' meeting requiring a simple majority, as required by CAMA 2020, Section 434.

Supervisor's Report: The licensed insolvency practitioner's statement that in their professional opinion, the proposed CVA has a reasonable prospect of success and that the arrangement is fair and reasonable to creditors.

Additional compliance elements for a Company Voluntary Arrangement (Nigeria) used in Nigeria include: Under Nigerian law, the Companies and Allied Matters Act 2020 (CAMA) regulates corporate entities through the Corporate Affairs Commission (CAC). The Labour Act (Cap L1 LFN 2004) and the National Industrial Court of Nigeria (NICN) govern employment disputes. The Nigeria Data Protection Regulation (NDPR) 2019 and the Nigeria Data Protection Commission (NDPC) protect personal data. The Federal Inland Revenue Service (FIRS) administers tax obligations under the Companies Income Tax Act. The Federal High Court and state High Courts have jurisdiction over civil matters. Forms-legal.com provides this template as a starting point for Nigeria-compliant documentation.