The Companies and Allied Matters Act (CAMA) 2020 is the regulatory guide for Corporate practice in Nigeria. It has some provisions governing Corporate Insolvency practice in Nigeria which revolves around the methods and processes used to manage companies in a state of Insolvency or debt.

One of the new methods of Insolvency practice introduced by the CAMA 2020 is the Company Voluntary Arrangement.

What is a Company Voluntary Arrangement (CVA)?

A Company Voluntary Arrangement is a binding agreement for debt repayment, between a company and its unsecured creditors. It provides an opportunity for the company to negotiate achievable repayment terms with its creditors, and avoid insolvent liquidation.[i] It is however important to note that the CAMA 2020 precludes CVAs from interfering with the rights of secured creditors without their concurrence.[ii]

What is the Procedure for approving CVAs?

Company directors are required to prepare a proposal, embodying the debt restructuring plan. The proposal will name an insolvency practitioner, to act as a nominee. The nominee is required to submit a report to Court opining on its viability, and whether meetings of creditors and members should be convened to consider the proposal.[iii] Except the Court orders otherwise, the nominee would convene the meetings. Where the company is in administration or liquidation, the administrator or liquidator will summon the meetings.[iv]

A proposal consists of information such as the company’s assets, liabilities, nominees’ fees/expenses, the supervisor, guarantees, timing, conduct of business during the CVA, further credit facilities, etc. Generally, the repayment plan should be realistic.

It is an offense for a company official to make a false representation or act fraudulently, in order to obtain approval of an arrangement.[v] The meeting may approve the proposal, with or without modifications.

However, the following proposals and/or modifications are impermissible;

  • a modification that results in the cessation of the CVA,
    • a proposal/modification which affects the rights of a secured creditor without their consent, and
    • a proposal that alters the payment priority of preferential creditors without their consent.[vi]

Where the creditors’ meeting and the members’ meeting make similar decisions, the decisions will become effective. Where there are different decisions from the meetings, a member may apply to Court within 28 days of the decision, for the decision taken at the members’ meeting to have an effect. The Court may grant such application or make any other order as it deems fit.[vii] Upon approval, the CVA would be implemented under the supervision of an insolvency practitioner (a supervisor).

What is the effect of a CVA on Creditors?

If the meeting of creditors and the meeting of members approve the proposal, it will become binding on all unsecured creditors. It will bind every creditor entitled to vote at the meeting as if he was a party to the arrangement. This will be the case, irrespective of whether or not the creditor;

  • voted at the meeting,
  • was present at the meeting, or
  • received notice of the meeting.

Options available to aggrieved Parties

CVAs may be challenged by a creditor, member, nominee, or by an administrator or liquidator, where the company is in administration or liquidation respectively. It may be challenged on the ground that it unfairly prejudices the interest of a creditor, member, or contributory.[viii]

A CVA may also be challenged on the ground that there has been material irregularity at or in relation to the creditors’ or members’ meetings. Where the challenge is successful, the Court may revoke or suspend any decision approving the CVA or taken at the meetings. Alternatively, the Court may order the convening of further meetings to consider revised proposals or reconsider the original proposal.

A person who is dissatisfied with a Supervisor’s act, omission, or decision in implementing the terms of a CVA, may apply to the court for redress. The court may confirm, reverse or modify the Supervisor’s act or decision, or make any order it deems fit.[ix]

Consequences of default in implementing the terms of a CVA?

The terms of a CVA may be implemented like any other commercial agreement. They often specify events and consequences of default. Where a company defaults, creditors may cease to be bound by the CVA and would be able to take unilateral actions against the company.

Furthermore, the CVA may empower the supervisor to petition for the company’s liquidation. Section 442(4) of CAMA 2020 provides that the supervisor is “included among the persons who may apply to the Court for the winding up of the company or for an administration order”.

Advantages of CVAs[x]

  • Companies remain under the control of directors/internal management, and there is no disruption of business operations. This reduces the risk of cash flow insolvency.
  • CVAs are private, and there is no requirement for customers or the public to be notified of the process.
  • CVAs are flexible and allow debtors to propose diverse arrangements to creditors depending on the debtor’s financial position.
  • CVAs are neither complicated nor expensive when compared to other formal insolvency procedures.
  • CVAs do not interfere with, or suspend the rights of secured creditors, except with their consent.
  • Unsecured creditors stand a good chance of being paid their debts, compared to liquidation and administration.
  • CVAs are binding on both consenting and non-consenting unsecured creditors.

Disadvantages of CVAs[xi]

  • Secured and preferential creditors are not bound by CVAs and may call in administrators.
  • The absence of a moratorium exposes CVAs to the risk of being torpedoed by creditors.
  • Unsecured creditors are bound by the terms notwithstanding that they opposed the same or had not received notice of the meeting.
  • Directors are allowed to remain in office, and there is no investigation of conduct that may have contributed to the company’s distress.


The introduction of the CVA improves the legal framework for insolvency in Nigeria and provides options to failing companies to avoid being liquidated in the face of a chance at Companies profitability. Although this is a new mechanism to our jurisdiction, there is a positive outlook toward it because of its effect in advanced jurisdictions.

[i] accessed on 14/03/2023

[ii] Section 437(3) of the Companies and Allied Matters Act, 2020

[iii] Section 435(2) of the Companies and Allied Matters Act, 2020

[iv] Section 436(1)(b) of the Companies and Allied Matters Act, 2020

[v] Section 441 of the Companies and Allied Matters Act, 2020

[vi] Section 437 of the Companies and Allied Matters Act, 2020

[vii] Section 438(5) of the Companies and Allied Matters Act, 2020

[viii] Section 440(1)(a) of the Companies and Allied Matters Act, 2020

[ix] Section 442(3) of the Companies and Allied Matters Act, 2020

[x] accessed on 14/03/2023

[xi] accessed on 14/03/2023

Written bOlalekan O. Elizabeth for The Trusted Advisors

Email us: [email protected]

Telephone Number: +234 810 159 9159

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