A critical examination of Nigeria's company directors' liability framework and enforcement in corporate insolvency

Company directors are liable for various criminal and civil violations committed in the state of insolvency to ensure accountability. At the same time, there are concerns about the impact of liability on directors’ actions towards pursuing rescue to save companies from collapse in insolvency. However, despite incidences of violations by directors, the enforcement of the insolvency liability provisions against such directors has been low in Nigeria. This thesis examines the efficacy of the insolvency liability framework under Nigeria’s company legislation - Companies and Allied Matters Act 2020 (CAMA 2020). It specifically examines the extent to which directors are liable for insolvency liability breaches, the challenges faced in enforcing the liability regimes and how a balance can be provided in Nigeria between liability and protection for company directors. In achieving these objectives, the research engaged primarily the use of doctrinal research methodology for data collection supported by twelve semi-structured interviews with selected respondents to get the practical situation and views on applying the liability regimes in Nigeria. The research equally used the UNCITRAL Legislative Guide on directors’ duty in insolvency as a benchmark while learning from the experiences of the UK and Australia. The findings show that the directors’ fiduciary duty provision under the CAMA 2020 does not incorporate creditors as stakeholders in addition to several legal and institutional challenges such as evidential hurdles, absence of incentive, and procedural bottlenecks, among others that have made initiating claims against directors discouraging and unattractive by insolvency office-holders. Likewise, due to their peculiar risks and difficulties, there is justification for protecting directors from insolvency liability in Nigeria. However, providing a balance is delicate due to the tension between liability and protection of directors. Thus, these findings indicate the non-achievement of the liability framework’s goals under CAMA 2020, which jeopardizes credits, threatens the economy and questions the accountability of directors in Nigeria. Therefore, the research recommends reforms to directors’ disqualification regime under CAMA 2020, use of litigation funding options, introduction of the business judgment rule, among other legislative and policy measures, to improve the insolvency liability framework, protect directors and change the behaviour of stakeholders