An Examination of the Scope of the Liabilities and Indemnity of the Receiver/Manager under Nigerian Law

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ABSTRACT

An Examination of the Scope of the Liabilities and Indemnity of the Receiver/Manager under Nigerian Law

Chimemeka Egonu*

A receiver/manager appointed in Nigeria either under the powers contained in a debenture deed or by the court must discharge his duties to preserve the assets of the company or realize the security of the debenture. While exercising his powers and discharging his duties, the receiver/manager may take several decisions and actions for the benefit of those on whose behalf he was appointed thereby making him vulnerable to liability. This paper discusses the statutory creation of an agency relationship between the receiver/manager and the company. It examines the scope of the personal liability of the receiver/manager, how the agency relationship helps the receiver avoid personal liability and the extent to which he can claim an indemnity under Nigerian laws. This paper concludes with the notion that the liability of the receiver possibly serves as a check on an arbitrary use of his numerous powers.

Keywords: Receiver/Manager, Indemnity, Liability, Court, Nigeria.

INTRODUCTION
The principal law on receivership in Nigeria is the Companies and Allied Matters Act₁ (CAMA). CAMA gives no elaborate definition of a receiver. It only states that ‘a receiver includes a manager’.₂ In Adetona v Zenith Int’l Bank Limited ₃ the court defined a receiver as ‘a person appointed by a Court for the purpose of preserving the property of a debtor pending an action against him, or applying the property in satisfaction of a creditor’s claim, whenever there is danger that, in the absence of such an appointment, the property will be lost, removed, or injured’. A receiver’s duty is only to realize the debenture holder’s security. Thus, it is not his duty to manage the affairs of the company for its benefit. On the other hand, if it is necessary for the receiver to carry on the business of the company, the court usually appoints the receiver as both receiver and manager. A manager is not generally appointed except to carry on the business for the purpose of selling it as a going concern.₄

* LL.B, BL. Associate, Oluwakemi Balogun LP, Lagos Nigeria. The author is a Member of INSOL International and advises on corporate transactions, banking and finance, receiverships, liquidation, insolvency and business rescue.

1. Cap C20 Laws of the Federation of Nigeria, 2004.
2. CAMA, s 567.
3. [2007] LPELR-8896 (CA).
4. Pharmatek Ind Projects Ltd v Trade Bank (Nig) Plc [2009] All FWLR (Part 495) 1678, 1722[E] – [F].

THE GRAVITAS REVIEW OF BUSINESS & PROPERTY LAW VOL.10 NO.4