Nigeria: An Analysis Of Nigerian Law On Procedure For Recovery Of Debt From An Insolvent Company And Fraudulent Directors

Many contracts today are negotiated, agreed upon and executed through the internet. The increase of international trade and investment has led to a rise in business relationships between foreign businesses and their Nigerian counterpart. The element of trust and confidence that parties across borders will be bound by the terms of their agreement is important to the implementation of the contract.

Therefore, where a Nigerian party enters into an internet transaction with a foreign party for the purpose of reaping benefits for himself and disregarding his obligations under the contract, the foreign party not only loses confidence in the Nigerian party, but in some instance, also losses the principal sum and anticipated profit under the contract.

This experience may prevent the foreign party from entering into contracts with genuine businesses in Nigeria. This is indeed a loss for both the foreign party and the Nigerian market and economy. Hence, it is important to know the provisions of Nigerian Law on Recovery of Debts from an Insolvent Company and Fraudulent Directors.

Provision of the Federal High Court Rules on Recover of a Liquidated Sum

Order 12 of the Federal High Court Rules provides that a claimant may apply summarily to Court for issuance of a writ of summons to recover a liquidated sum and the application will be accompanied with an affidavit stating the grounds upon which the claim is based and that the defendant has no defence on the merit to the claim. The Court would enter the claim in the "undefended list" if it is satisfied that the defendant has no defence to the claim.

Order 30 of the Federal High Court Rules provides that where the claimant feels that the defendant have the intention to obstruct or delay the execution of any order that may be passed against him by disposing or removing his property from the jurisdiction of the Court, the claimant may apply to the Court at the time of instituting the suit to make the defendant to deposit sufficient security to fulfill the order or for his moveable or immovable property within jurisdiction to be attached until the order of Court is delivered.

Provisions of Companies and Allied Matters Act on Liability of Companies and their Directors

Section 290 of the Companies and Allied Matters Act provides that where a company receives property by way of advance payment for execution of a contract or project and the company with intent to defraud, fails to apply the property for the purpose for which it was received, every director and officer of the company who is in default shall be personally liable to the party from which the property was received and a refund of the property so received and not used for the purpose for which it was received. This does not affect the liability of the company itself.

Provision of Companies and Allied Matters Act on Winding Up of Companies

Section 408 (d) of the Companies and Allied Matters Act provides that a creditor may commence winding up proceedings against a company if it is unable to pay its debts. Section 409 of the Companies and Allied Matters Act provides that a company shall be deemed to be unable to pay its debts if it is indebted to a creditor in a sum exceeding N2, 000 (about $ 8) and same remain unpaid after 3 weeks of service of a statutory letter of demand delivered at the registered place of business of the company.

Provision of Nigerian Law on Obtaining By False Pretense and Economic Crime

Section 419 of the Criminal Code Act provides that a person who by false pretense and with intent to defraud obtains from another person anything capable of being stolen and induces the person to deliver anything capable of being stolen is guilty of a felony and is liable to imprisonment for 3 years and 7 years if the thing is of a value of N1, 000 (about $ 4) and above. It is immaterial that the thing obtained or its delivery was induced through the medium of a contract induced by false pretense.

Section 40 of the EFCC Act defines economic crime as an illicit activity committed with the objectives of earning wealth illegally either individually or in a group or organized manner thereby violating existing legislation and includes any form of fraud and corrupt practices.

Procedure for Recovery of Debt from an Insolvent Company and Fraudulent Directors

The Company and its Directors will be served with a letter of demand demanding full payment of the debt within 7 days of receipt of the letter failing which an action will be commenced against the Company and its Directors to recover the debt, including damages for breach of contract and winding up proceedings against the company for inability to pay its debts.

If the debtor does not pay the debt within 7 days as provided in the letter of demand, a summary judgment proceeding is commenced against the debtor and its Company to recover the debt and an application for security or attachment of the moveable and immoveable property of the debtor pending the determination of the proceeding is brought before the Court.

A statutory letter of demand for winding up of the Company for inability to pay its debts may also be served on the Company and upon expiration of the statutory period of 3 weeks, a winding up proceedings commenced against the Company to liquidate and sell its assets.

If the Company or its Directors obtained services or products from a foreign party with intent to defraud or induced the contract by false pretense, this constitutes an economic crime for which the foreign party may petition the Economic and Financial Commission ("EFCC") and cause criminal investigation to be conducted against the Company and its Directors for their assets to be frozen towards payment of the debt and criminal prosecution.

Though there is a need to quickly pass the bills on internet transactions pending before the National Assembly in order to adequately protect the interest of foreign parties, the current laws on contract and crime may be applied to protect the interest of foreign parties who enters into internet transaction with an insolvent Company or fraudulent Directors of a Company.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions