The sections, word for word
Every section on this subject, exactly as printed in the Official Gazette (Act No. 3 of 2020). The explanation follows beneath.
Section 654. Liquidator to give notice of appointment
(1) The liquidator shall, within 14 days after his appointment, publish in the Federal Government Gazette or in two daily newspapers and deliver to the Commission for registration a notice of his appointment in such form as the Commission may from time to time approve.
(2) If the liquidator fails to comply with the requirements of subsection (1), he is liable to a penalty as prescribed by the Commission in the regulation.
Section 655. Debts of all descriptions may be proved
In every winding-up (subject, in the case of insolvent companies, to the application in accordance with the provisions of this Act of the law of bankruptcy), all debts payable on a contingency, and all claims against the company, present or future, certain or contingent, ascertained or sounding only in damages, shall be admissible to proof against the company, a just estimate being made, so far as possible, of the value of such debts or claims as may be subject to any contingency or sound only in damages, or for some other reasons do not bear a certain value.
Section 656. Application of bankruptcy rules in certain cases
In the winding-up of an insolvent company registered in Nigeria, the same rules shall prevail and be observed with regard to the respective rights of secured and unsecured creditors and to debts provable and to the valuation of annuities and future contingent liabilities as are in force for the time being under the law of bankruptcy in Nigeria with respect to the estates of persons adjudged bankrupt, and all persons who in any such case would be entitled to prove for and receive dividends out of the assets of the company may come in under the winding-up and make such claims against the company as they respectively are entitled to by virtue of this section : Provided that nothing in this section shall affect the power of any secured creditor to realise or otherwise deal with his security during the winding-up of an insolvent company registered in Nigeria.
Section 657. Preferential payments
(1) In a winding-up, there shall be paid in priority to all other debts—
(a) all local rates and charges due from the company at the relevant date, and having become due and payable within 12 months immediately before that date, and all pay-as-you-earn tax deductions and other assessed taxes, property or income tax assessed on or due from the company up to the annual day of assessment next before the relevant date, and in the case of pay-as-you-earn tax deductions not exceeding deductions made in respect of one year of assessment and, in any other case, not exceeding in one year’s assessment ;
(b) deductions made from the remuneration of employees and contributions of the company under the Pension Reform Act ;
(c) contributions and obligations of the company under the Employees’ Compensation Act ;
(d) all wages or salaries of any clerk or servant in respect of services rendered to the company ;
(e) all wages of any workman or labourer, whether payable for time or for piece of work, in respect of services rendered to the company ; and
(f) all accrued holiday remuneration becoming payable to any clerk, servant, workman or labourer (or in the case of his death to any other person in his rights) on the termination of his employment before or by the effect of the winding-up order or resolution.
(2) Where any compensation under the Employees’ Compensation Act is a weekly payment, the amount due in respect thereof shall, for the purpose of subsection (1) (e), be taken to be the amount of the lump sum for which the weekly payment could, if redeemable, be redeemed, if the employer made an application for that purpose under the Act.
(3) Where any payment on account of wages or salaries has been made to any clerk, servant, workman or labourer in the employment of a company out of the money advanced by some persons for that purpose, that person shall in a winding-up have a right of priority in respect of the money so advanced and paid up to the amount by which the sum in respect of which that clerk, servant, workman or labourer would have been entitled to priority in the winding-up has been diminished by reason of the payment having been made.
(4) The debts shall—
(a) rank equally among themselves after the expenses of the winding-up and shall be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions ; and
(b) if the assets of the company available for payment of general creditors are insufficient to meet them, have priority over the claims of holders of debentures under any floating charge created by the company and be paid accordingly out of any property comprised in or subject to that charge.
(5) Subject to the retention of such sums as may be necessary to discharge the costs and expenses of the winding-up, the debts shall be discharged immediately if the assets of the company are sufficient to meet them.
(6) Notwithstanding the foregoing and any other provisions of this Act and any other law applicable in Nigeria where it relates to settlement of claims in the winding-up of a company, claims of—
(a) secured creditors, as defined under this Act, shall rank in priority to all other claims, including any preferential payment under this Act or any other debts inclusive of expenses of winding-up ; and
(b) the equity holders shall rank last.
(7) In this section, “the relevant date” means—
(a) in the case of a company ordered to be wound up compulsorily which had not previously commenced to be wound up voluntarily, the date of the winding-up order ; and
(b) in any other case, the date of the commencement of the winding-up.
Section 661. Avoidance of attachments on winding-up subject to supervision of the Court
Where a company is being wound up subject to the supervision of the Court, any attachment, sequestration or execution put in force against the estate or effects of the company after the commencement of the winding-up, is void.
Section 662. Effect of floating charge
Where a company is being wound up, a floating charge on the undertaking or property of the company created within three months of the commencement of the winding-up shall, unless it is proved that the company immediately after the creation of the charge was solvent, be invalid, except to the amount of any cash paid to the company at the time of or subsequently to the creation of, and in consideration for, the charge, together with interest on that amount at the current bank rate.
Section 663. Disclaimer of onerous property
(1) Where any part of the property of a company which is being wound up consists of—
(a) unprofitable contracts ; or
(b) any other property that is unsaleable, or not readily saleable, or is such that it may give rise to the performance of any onerous act or a liability for the payment of any sum of money, the liquidator, notwithstanding that he has endeavoured to sell it or has taken possession of the property or exercised any act of ownership in relation thereto, may, with the leave of the Court, and subject to the provisions of this section, in writing signed by him, within 12 months after the commencement of the winding-up or such extended period as may be allowed by the Court, disclaim the property : Provided that, where the property has not come to the knowledge of the liquidator within one month after the commencement of the winding-up, the power under this section of disclaiming the property may be exercised at any time within 12 months after he has become aware thereof or such extended period as may be allowed by the Court.
(2) A disclaimer under this section shall operate to determine, as from the date of the disclaimer, the rights, interest and liabilities of the company, in or in respect of the property disclaimed, but shall not, except it is necessary for the purpose of releasing the company from any liability, affect the rights or liabilities of any other person.
(3) The Court, before or on granting leave to disclaim under subsection (1), may require such notices to be given to persons interested, and impose such terms as a condition of granting leave, and make such other order in the matter as the Court deems just.
(4) The liquidator is not entitled to disclaim any property under this section in any case where an application in writing has been made to him by any person interested in the property requiring him to decide whether or not he will disclaim, and the liquidator has not, within 28 days after the receipt of the application or such further period as may be allowed by the Court, give notice to the applicant that he intends to apply to the Court for leave to disclaim, and, in the case of a contract, if the liquidator, after such an application, does not within that period or further period disclaim the contract, the company is deemed to have adopted it.
(5) The Court may, on the application of any person who is, as against the liquidator, entitled to the benefit or subject to the burden of a contract on such terms as to payment by or to either party, of damages for the non-performance of the contract, or otherwise as the Court deems just, and any damages payable under the order to that person may be proved by him as a debt in the winding-up.
(6) The Court may, on an application by any person who claims any interest in any property disclaimed under this section, or is under any liability not discharged by this Act in respect of any disclaimed property, and on hearing any such persons as it thinks fit, make an order for the vesting of the property in or the delivery of the property to any persons entitled thereto, or to whom it may seem just that the property should be delivered by way of compensation for such liability, or a trustee for him, and on such terms as the Court deems just and on any such vesting order being made, the property comprised therein shall vest in the person therein named in that behalf without any conveyance or assignment for the purpose.
(7) Where the property disclaimed is of a leasehold nature, the Court shall not make a vesting order in favour of any person claiming under the company, whether as an under- lessee or as a mortgagee by demise, a mortgage by way of legal charge or mortgage, as the case may be, except upon the terms of making that person—
(a) object to the same liabilities and obligations as those to which the company was subject under the lease in respect of the property at the commencement of the winding-up ; or
(b) if the Court deems fit, subject only to the same liabilities and obligations as if the lease had been assigned to that person at that date, and in either event if the case so requires, as if the lease had comprised only the property comprised in the vesting order, and any mortgagee or under-lessee declining to accept a vesting order upon such terms shall be excluded from all interest in and security upon the property, and if there is no person claiming under the company who is willing to accept an order upon such terms, the Court shall have power to vest the estate and interest of the company in the property in any person liable, either personally or in a representative character, and either alone or jointly with the company, to perform the lessee’s covenants in the lease, freed and discharged from all estates, encumbrances and interests created therein by the company.
Section 664. Persons injured
Any person injured by the operation of a disclaimer under section 663 is deemed to be a creditor of the company to the amount of the injury, and may accordingly prove the amount as a debt in the winding-up.
Section 665. Supplies of gas, water, electricity, etc.
(1) This section applies in the case of a company where—
(a) the company enters administration ;
(b) a company voluntary arrangement approved under Chapter 17 has taken effect ;
(c) the company goes into liquidation ; or
(d) a provisional liquidator is appointed.
(2) If a request is made by or with the concurrence of the officeholder for the giving, after the effective date, of any of the supplies mentioned in the next subsection, the supplier—
(a) may make it a condition of the giving of the supply that the office-holder personally guarantees the payment of any charges in respect of the supply ;
(b) shall not make it a condition of the giving of the supply, or do anything which has the effect of making it a condition of the giving of the supply, that any outstanding charges in respect of a supply given to the company before the effective date are paid.
(3) For the purpose of subsection (2), “the officeholder” means the administrator, the nominee, the supervisor, the liquidator or the provisional liquidator, as the case may be.
(4) The supplies referred to in subsection (2) are a supply of—
(a) gas by a gas supplier within the meaning of legislation regulating the provision of gas, if applicable ;
(b) electricity by an electricity supplier within the meaning of legislation dealing with the provision of electricity ;
(c) water by a water provider refer to legislation if applicable ; and
(d) communications services by a provider of a public electronic communications service.
(5) The “effective date” for the purposes of this section, is the date on which the—
(a) company entered administration ;
(b) voluntary arrangement took effect ;
(c) company went into liquidation ; or
(d) provisional liquidator was appointed.
(6) In subsection (4) (d), the term, “communications services” does not include electronic communications services to the extent that they are used to broadcast or otherwise transmit programme services within the meaning of the Nigerian Communications Commission Act.
Section 666. Restriction of rights of creditor as to execution, etc., on winding-up of company
(1) Where a creditor issues execution against any goods or land of a company, or attaches any debt due to the company, and the company is subsequently wound up, the creditor shall not be entitled to retain the benefit of the execution or attachment against the liquidator in the winding-up of the company, unless he has completed the execution or attachment before the commencement of the winding-up : Provided that—
(a) where any creditor has had notice of a meeting having been called at which a resolution for voluntary winding-up is to be proposed, the date on which the creditor so had notice shall, for the purposes of this subsection, be substituted for the date of the commencement of the winding-up ;
(b) if a person purchases in good faith under a sale by the sheriff any goods of a company on which an execution has been levied, he shall acquire a good title to them against the liquidator ; and
(c) the rights conferred by this subsection on the liquidator may be set aside by the Court in favour of the creditor to such extent and subject to such terms as the court deems fit.
(2) For the purposes of this section, an execution against goods shall be taken to be completed by seizure and sale, and an attachment of a debt is deemed to be completed by receipt of the debt, and an execution against land is deemed to be completed by seizure and, in the case of an equitable interest, by the appointment of a receiver.
Section 667. Duty of sheriff as to goods taken in execution
(1) Subject to the provisions of subsection (3), where any goods of a company are taken in execution and before the sale thereof or the completion of the execution by the receipt or recovery of the full amount of the levy, notice is served on the sheriff that a provisional liquidator has been appointed or that a winding-up order has been made or that a resolution for voluntary winding-up has been passed, the sheriff shall, on being so required, deliver the goods and any money seized or received in part satisfaction of the execution to the liquidator, but the costs of the execution shall be a first charge on the goods or money so delivered, and the liquidator may sell the goods, or a sufficient part thereof, for the purpose of satisfying that charge.
(2) Subject to the provisions of subsection (3), where under an execution in respect of a judgment for a sum exceeding N100,000, the goods of a company are sold or money is paid in order to avoid the sale, the sheriff shall deduct the costs of the execution from the proceeds of the sale or the money paid, and retain the balance for 14 days and if within that time notice is served on him of a petition for the winding-up of the company having been presented or of a meeting having been called at which there is to be proposed a resolution for the voluntary winding-up of the company and an order is made or a resolution is passed, as the case may be, for the winding-up of the company, the sheriff shall pay the balance to the liquidator, who shall be entitled to retain it as against the execution creditor.
(3) The rights conferred by this section on the liquidator may be set aside by the Court in favour of the creditor to such extent and subject to such terms as the Court deems fit.
(4) In this section and section 666 of this Act—
(a) “goods” includes chattels personal ; and
(b) “sheriff” includes any officer responsible for the execution of a writ or other process.
Section 678. Enforcement of duty of liquidator to make returns
(1) If a liquidator makes default in filing, delivering or making any return, account or other document, or in giving any notice which he is by law required to file, deliver, make or give, and fails to make good the default within 14 days after the service on him of a notice requiring him to do so, the Court may, on an application made to the Court by any contributory or creditor of the company or by the Commission, make an order directing the liquidator to make good the default within such time as is specified in the order.
(2) Any order under this section may provide that the costs of any expenses incidental to the application shall be borne by the liquidator, and nothing in this section shall be taken to prejudice the operation of any enactment imposing penalties on a liquidator in respect of any such default.
Section 679. Notification that a company is in liquidation
(1) Where a company is being wound up, whether by, or under the supervision of, the Court or voluntarily, every invoice, order for goods or business letter issued by, or on behalf of, the company or a liquidator of the company, or a receiver or manager of the property of the company, being a document on or in which the name of the company appears, shall contain a statement that the company is being wound up.
(2) If default is made in complying with the provisions of this section—
(a) the company,
(b) any officer of the company,
(c) any liquidator of the company, and
(d) any receiver or manager, are liable to a penalty as prescribed by the Commission in the regulations.
Section 680. Exemption from stamp duty
(1) In the case of a winding-up by the Court or a creditors’ voluntary winding-up —
(a) every assurance relating to any property of the company, or to any mortgage, charge or other encumbrance or any right or interest in any property, in any event forming part of the assets of the company and which, after the execution of the assurance, either at law or in equity is, or remains part of the assets of the company ; and
(b) every power of attorney, proxy paper, writ, order, certificate, affidavit, bond or other instrument or writing relating solely to the property of any company which is being so wound up, or to any proceeding under any such winding-up, shall be exempted from duties chargeable under any law or enactment relating to stamp duties.
(2) In this section, “assurance” includes any deed, conveyance, instrument, discharge, assignment or surrender.
Section 681. Books of company to be evidence
Where a company is being wound up, all books and papers of the company and of the liquidators shall, as between the contributories of the company, be prima facie evidence of the truth of all matters purported to be recorded.
Section 682. Disposal of books and other papers of company
(1) Where a company is being wound up and is about to be dissolved, the books and papers of the company and of the liquidators may be disposed of in the following manner—
(a) in the case of a winding-up by, or under the supervision of, the Court in such way as the Court directs ;
(b) in the case of a members’ voluntary winding-up, in such a way as the company by special resolution directs ; and
(c) in the case of a creditors’ voluntary winding-up, in such way as the Committee of Inspection or, if there is no such committee, as the creditors of the company, may direct.
(2) After five years from the dissolution of the company no responsibility shall rest on the company, the liquidators, or any person to whom the custody of the books and papers has been committed, by reason of any book or paper not being forthcoming to any person claiming to be interested therein.
(3) Provisions may be made by general rules for enabling the Commission to prevent, for such period (not exceeding five years from the dissolution of the company) as it may consider proper, the destruction of the books and papers of a company which has been wound up, and for enabling any creditor or contributory of the company to make representations to it and to appeal to the Court from any direction which may be given by it in the matter.
(4) A person who acts in contravention of any general rule made for the purposes of this section or any direction of the Commission, is liable to a penalty as prescribed by the Commission in the Regulations.
Section 683. Information as to pending liquidations and disposal of unclaimed assets
(1) Where a company is being wound up, and the winding-up is not concluded within one year after its commencement, the liquidator shall, at such intervals as may be prescribed until the winding-up is concluded, send to the Commission a statement in the prescribed form containing the prescribed particulars with respect to the proceedings in, and position of, the liquidation.
(2) Any person stating himself in writing to be a creditor or contributory of the company is entitled, by himself or his agent, at all reasonable times and on payment of the prescribed fee, to inspect the statement, and receive a copy or extract of the statement, but a person who falsely states himself to be creditor or contributory is liable to contempt of Court, and is punishable on the application of the liquidator or official receiver.
(3) If a liquidator fails to comply with the requirements of this section, he is liable to a penalty as prescribed by the Commission in the Regulations.
(4) If it appears from any such statement or otherwise that a liquidator has in his custody or under his control any money representing unclaimed or undistributed assets of the company which have remained unclaimed or undistributed for six months after the date of their receipt, the liquidator shall immediately pay the same to the companies liquidation account mentioned in section 591 of this Act and is entitled to a certificate of receipt in the prescribed form for the money so paid, which is an effectual discharge to him.
(5) For the purposes of ascertaining and getting in any money payable into the companies liquidation account under this section—
(a) the Commission may at any time order any such liquidator to submit to it an account verified by affidavit of the sums received and paid by him under or in pursuance of the liquidation, and may direct and enforce an audit of the account and if the liquidator fails to submit the account within such reasonable time as the Commission directs, he shall be liable to contempt of Court and may, on the application of the Commission to the Court made for the purpose, be punished accordingly ; and
(b) the Court may, if default is made in submitting the account referred to under this section—
(i) by warrant addressed to any police officer, cause the liquidator to be arrested, and all books, papers and money or goods, relating to the liquidation in his possession to be seized and him and them to be safely kept until such time as the Court may order,
(ii) at any time by order addressed to the Postmaster-General of the Nigerian Postal Service require that, for a period of not more than three months, letters addressed to the liquidator and sent through the post, be in course of post, redirected, sent or delivered to or at any place or places mentioned in the order,
(iii) summon the liquidator or his wife, or any person known or suspected to have in his possession any book or paper relating to the liquidation, and any money or goods belonging to the liquidator or representing any unclaimed or undistributed assets of the company, or summon any person whom the Court deems capable of giving information respecting any book, paper, money, goods or other asset, and require any person summoned under this paragraph to produce documents in his custody or under his control relating to the liquidator’s dealings with the property of the company,
(iv) where any person on examination before it admits that he is indebted to the company, by order made on the application of the official receiver or liquidator, direct payment to the official receiver or liquidator, as the case may be, of the amount admitted, or any part, either in full discharge of the whole amount in question or not at such time and in such manner as the Court deems fit, with or without costs of the examination,
(v) examine on oath, either by word of mouth or written interrogatories, any person so brought before it concerning the liquidator and his dealings with the property of the company, and
(vi) if any person on examination before the Court admits that he has in his possession any money properly payable into the company’s liquidation account under this section, order him to pay any such money into that account.
(6) A person claiming to be entitled to money paid into the company’s liquidation account under this section may apply to the Commission for payment, and the Commission, if the liquidator certifies the claim, may make an order for payment accordingly.
(7) An appeal shall lie to the Court by any person claiming to be dissatisfied with the decision of the Commission in respect of any claim made under this section.
Section 684. Resolutions passed at adjourned meetings of creditors
Where a resolution is passed at an adjourned meeting of creditors or contributories of a company, the resolution shall, for all purposes, be treated as having been passed on the date on which it was in fact passed, and is not deemed to have been passed on any earlier date.
Section 685. Power to make over assets to employees
(1) On the winding-up of a company, whether by the Court or voluntarily, the liquidator may, subject to subsections (2) –(4), make any payment which the company has, before the commencement of the winding-up, decided to make under section 745 of this Act.
(2) The power which a company may exercise by virtue of section 745 of this Act may be exercised by the liquidator after the winding-up has commenced if, after the company’s liabilities have been fully satisfied and provision has been made for the costs of the winding-up, the exercise of that power has been sanctioned by such resolution of the company as would be required of the company itself by section 745 (3) of this Act before that commencement, as if paragraph (b) of that subsection were omitted and any other requirement applicable to its exercise by the company had been met.
(3) Any payment which may be made by a company under this section may be made out of the company’s assets which are available to the members on the winding-up.
(4) On a winding-up by the Court, the exercise by the liquidator of his powers under this section shall be subject to the Court’s control and any creditor or contributory may apply to the Court with respect to any exercise or proposed exercise of the power.
(5) Subsections (1) and (2) shall have effect notwithstanding any other rule or law.
What this means
Short answer
In any winding up, secured creditors rank first, then the expenses of winding up and the preferential debts (taxes, pension and employee claims), then other unsecured creditors, then equity holders last (section 657). All debts, including contingent ones, can be proved (section 655).
Basics for every winding up
- The liquidator publishes notice of his appointment in the Gazette or two daily newspapers and delivers it to the Commission within 14 days (section 654).
- All debts and claims, present or future, certain or contingent, including claims that only sound in damages, can be proved, with a just estimate made of any uncertain value (section 655).
- In an insolvent company, the bankruptcy rules apply on secured and unsecured creditors, provable debts and valuation of future liabilities. A secured creditor can still realise his security (section 656).
Who gets paid first
Section 657 sets the order. Secured creditors rank in priority to all other claims, including preferential payments and winding-up expenses, and equity holders rank last (section 657(6)). In between, these are paid in priority to other debts, equally among themselves after the expenses of winding up, and in full unless assets fall short, in which case they abate equally (section 657(4)):
- local rates due within the previous 12 months, and pay-as-you-earn deductions and other assessed taxes, limited to one year’s assessment;
- deductions and contributions under the Pension Reform Act;
- contributions and obligations under the Employees’ Compensation Act;
- wages or salaries of clerks and servants, and wages of workmen and labourers, for services rendered to the company; and
- accrued holiday remuneration payable on termination before or by the winding up.
If the assets available to general creditors are insufficient, these preferential debts take priority over holders of debentures under a floating charge, to be paid out of the property covered by that charge (section 657(4)(b)). The relevant date is the date of the winding-up order, or otherwise the date the winding up began (section 657(7)).
Creditors who had already begun enforcing
- A creditor who levied execution or attached a debt cannot keep the benefit against the liquidator unless the execution or attachment was completed before the winding up began. Execution on goods is completed by seizure and sale, and attachment of a debt by receipt of the debt (section 666).
- If goods taken in execution have not been sold, the sheriff must on notice hand them to the liquidator, with the costs of execution as a first charge. Where a judgment over ₦100,000 is satisfied by sale, the sheriff holds the balance for 14 days and pays it to the liquidator if a winding-up petition or meeting notice is served in that time (section 667).
Floating charges and onerous property
- A floating charge created within three months before the winding up began is invalid unless the company was solvent immediately afterwards, except for cash paid to the company for the charge, with interest (section 662).
- With the court’s leave, a liquidator can disclaim unprofitable contracts and unsaleable property within 12 months of the winding up starting, or of learning of the property. A person injured by a disclaimer can prove as a creditor (sections 663 and 664).
- Suppliers of gas, electricity, water and communications services cannot insist that old debts be paid before continuing supply to the liquidator, though they can require the liquidator’s personal guarantee for new supplies (section 665).
Records, unclaimed money and employees
- Business documents of a company being wound up must state that it is being wound up (section 679).
- The company’s books can be destroyed five years after dissolution unless the Commission directs otherwise (section 682).
- If a winding up is not concluded within a year, the liquidator sends the Commission periodic statements. Unclaimed or undistributed money held for six months goes to the Companies Liquidation Account (section 683).
- The liquidator can make over assets to employees if the company had decided to make such provision under section 745 (section 685).
Questions and answers
Do secured creditors get paid first?
Yes. Section 657(6) says secured creditors rank in priority to all other claims, including preferential payments and the expenses of winding up. Equity holders rank last.
What are preferential debts in a winding up?
Rates due within 12 months, PAYE and other assessed taxes, pension and employees’ compensation obligations, wages and salaries, and accrued holiday pay (section 657(1)).
Do employees rank ahead of floating-charge holders?
If assets for general creditors are insufficient, preferential debts, including wages, take priority over floating-charge debenture holders (section 657(4)(b)).
Is a floating charge made just before a winding up valid?
A floating charge created within three months of the winding up is invalid unless the company was solvent immediately after, except for cash actually advanced (section 662).
What happens to unclaimed money held by a liquidator?
After six months it is paid into the Companies Liquidation Account (section 683(4)).
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