A. INTRODUCTION
Nigeria’s business landscape has always been dynamic, but in recent years it has become increasingly volatile. Currency fluctuations, inflationary pressures, tightening access to credit, and shifts in regulatory policies have all combined to push many Companies closer to financial distress. As the risk of being insolvent increases, businesses are finding themselves at critical crossroads where well-structured interventions determine whether they survive or collapse.
Traditionally, Nigerian insolvency practice leaned heavily on familiar mechanisms such as liquidation and receivership. These tools remain important for creditor recovery, and in many cases, they are necessary to bring finality to a distressed Company’s affairs. However, they often come at a cost: the dismantling of operations and loss of business. Consequently, employees are not retained, leading to significant layoffs, while shareholders and investors suffer irreversible financial setbacks, ultimately weakening the overall efficiency of the local economy.
Recognising these gaps, the Companies and Allied Matters Act 2020 (CAMA 2020) introduced modern, rescue-oriented options to complement the existing framework. Administration, being the most notable, is a process designed to give distressed but viable companies breathing space to restructure under the supervision of an Independent Administrator. This article examines how Administration works under CAMA 2020, its objectives, key features, commercial benefits, and practical considerations, while highlighting why it is becoming an increasingly important tool for Nigerian businesses, creditors, and investors.
B. UNDERSTANDING ADMINISTRATION UNDER CAMA 2020
Administration, as introduced under Chapter 18 of CAMA 2020, is Nigeria’s first true business rescue framework. In simple terms, it is a process that allows a financially distressed company to be placed under the management of an independent professional, called an Administrator, whose duty is to manage the Company through its crisis, protect its value, and either return it to viability or secure a better outcome for its stakeholders than outright liquidation or loss of the business.
Unlike liquidation, which often marks the end of a Company’s journey, administration is designed to offer a second chance. It recognises that financial distress does not always mean the end of the road. With breathing space, smarter debt management, structured repayments to creditors, and professional oversight, many businesses can restructure, reassure creditors, and repay them, ultimately becoming more attractive to new investors.
Conveniently, Section 444 of CAMA 2020 sets out the three statutory objectives of administration:
1. Rescuing the company as a going concern – ensuring that the company survives and continues trading, rather than being wound up.
2. Achieving a better result for the Company’s creditors – securing higher recoveries than creditors would ordinarily receive if the company were simply liquidated.
3. Realising assets to pay secured or preferential creditors – but only where outright rescue is not feasible, ensuring value is still maximised.
At the heart of this process is the Administrator, who must be a qualified insolvency practitioner. Once appointed, the Administrator assumes control of the Company’s affairs, business, and assets. Importantly, the Administrator is independent, not acting solely for directors, shareholders, or creditors, but is legally bound to balance the interests of all stakeholders in a way that preserves value and confidence.
C. KEY FEATURES THAT MAKE ADMINISTRATION ATTRACTIVE
One of the most attractive selling points of administration under CAMA 2020 is that it offers businesses in distress a chance to restructure without immediately collapsing under the weight of their financial pressure. Unlike liquidation, which strips down and dissolves the Company, administration creates breathing space for management and stakeholders to work towards recovery. Some of its most attractive features include:
1. Moratorium Protection
Once a company enters Administration, a legal moratorium automatically takes effect under Section 480 CAMA. This means that ongoing lawsuits, enforcement actions, or other creditor petitions for liquidation are temporarily suspended. No new legal proceedings can be brought against the Company without the consent of the Court or the Administrator. This breathing space shields the Company from aggressive recovery actions and allows time to focus on restructuring and stabilisation.
2. Flexibility in Appointment
Administration is not a one-size-fits-all process. Following the provisions of Sections 448 – 459 CAMA, an Administrator may be appointed by:
a. the Court, upon application by creditors, the Company, the Liquidator of a Company, or even its directors;
b. the holder of a floating charge; or
c. the Company or its directors themselves. In this instance, the Administrator is appointed out of Court.
d. the liquidator of a Company
This flexibility ensures that distressed businesses have multiple entry points into the rescue process, whether initiated internally or externally, depending on what best serves their survival prospects.
3. Preservation of Assets
Liquidation and Receivership typically leads to the sale of assets at a depressed market value, the death of the Company, and termination of employment. Administration, on the other hand, prioritises continuity. The Administrator is responsible for managing the Company’s affairs in a manner that protects assets and sustains operations, thereby safeguarding jobs and maintaining stakeholder relationships. These are all leveraged to restore viability. The emphasis on continuity makes administration far more business-friendly than traditional insolvency routes.
4. Restructuring Opportunity
Administration empowers the Administrator to take proactive steps to restructure debts, renegotiate contracts, and streamline operations. In some cases, the Administrator may prepare the Company for equity infusion, mergers, or strategic acquisitions. These tools can restore solvency and make the Company attractive to investors, ensuring that the business emerges stronger and better positioned for future growth.
5. Stakeholder Confidence
Perhaps most importantly, administration signals to investors, creditors, regulators, and the wider market that the Company is being managed under a structured, professional, and transparent rescue process. This can help to rebuild confidence in the business, protect brand reputation, and create the right conditions for fresh capital injection or even future partnerships.
D. COMMERCIAL AND INVESTOR BENEFITS OF ADMINISTRATION
The appeal of administration goes beyond its statutory provisions; its real value lies in the commercial outcomes it delivers for different stakeholders. Unlike liquidation, which often represents a zero-sum game, administration seeks to balance interests and preserve long-term value.
i. For Creditors
Administration offers creditors a structured way to protect their interests when a Company begins to show signs of financial distress. Under CAMA 2020, creditors may apply to the Court for an administration order if the Company meets the statutory test of being unable to pay its debts as set out in Section 572 of CAMA 2020. This gives creditors a direct and proactive role in initiating a rescue and recovery, rather than simply waiting for losses to crystallise. Once administration begins, the statutory moratorium prevents piecemeal enforcement, ensuring that the company’s assets are preserved under the control of an independent administrator. For secured creditors, this means their collateral retains value, while unsecured creditors benefit from transparent proposals for repayment that often ensure returns.
ii. For Companies
Administration provides distressed businesses with an opportunity to restructure without the finality of liquidation. By restructuring debts, renegotiating terms with creditors, and streamlining operations under professional oversight, Companies can regain stability. This process also positions them to attract new investments. For directors and management, it represents a chance to reset and pursue recovery under structured supervision.
iii. For Investors and Shareholders
Shareholders and investors are often the silent casualties of an insolvent Company, watching their equity wiped out. Under administration, however, there is renewed confidence that governance, restructuring, and asset management are being handled in a professional, transparent, and balanced manner. This improves the Company’s attractiveness to both existing and potential investors, and enhances the chances of a turnaround that preserves or even grows shareholder value in the long run.
E. THE FUTURE OF BUSINESS RESCUE IN NIGERIA
Looking ahead, administration is likely to become a cornerstone of Nigeria’s business rescue framework. As more Companies and creditors begin to test its provisions under CAMA 2020, confidence in the process will grow. Over time, we can expect administration to shift from being viewed as a “last resort” to becoming a proactive strategy for preserving Company value and stabilising businesses before insolvency deepens. Importantly, institutional support is beginning to align with this shift.
In March 2025, the Federal High Court established an Insolvency Unit to improve the effectiveness of insolvency proceedings. However, as Nigeria’s economy becomes more complex and globally connected, its business rescue framework must keep pace. Beyond Administration and Company Voluntary Arrangements (CVAs), future reforms are likely to embrace tools such as pre-pack administration and out-of-court work-out options, which allow Companies and creditors to resolve financial distress informally and with better flexibility. With many Nigerian businesses now operating across multiple jurisdictions, the next frontier for business rescue lies in cross-border coordination. Embracing international best practices and conventions, such as the UNCITRAL Model Law on Cross-Border Insolvency, would provide a framework for seamless recognition of foreign proceedings, reassuring creditors that their interests are safeguarded globally. More importantly, it signals to investors that Nigeria is positioning itself as a secure and competitive destination for investment.
F. CONCLUSION
Administration is not a mark of failure but a strategic tool for recovery. It gives distressed Companies the headroom to restructure, preserve value, and reposition for growth. Creditors benefit from stronger prospects of repayment through a transparent and professionally supervised process, while investors gain confidence that the company is being managed professionally with long-term value in mind. As the practice evolves in Nigeria, businesses and creditors alike need to consider administration as a viable, value-preserving option. While challenges exist, the right expertise can ensure that the process is navigated effectively and that the maximum benefits are realised.
Sesugh Famave is a Senior Associate at Stren & Blan Partners and supervises the Firm’s Insolvency and Debt Recovery Practice Group. Babatunde Oyewole and Lynda Agukwe are both Associates in the Firm’s Insolvency and Debt Recovery Practice Group.
Stren & Blan Partners is a full-service commercial Law Firm that provides legal services to diverse local and international Clientele. The Business Counsel is a weekly column by Stren & Blan Partners that provides thought leadership insight on business and legal matters.
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