AN APPRAISAL OF THE ROLE OF MORATORIUM MECHANISM IN BUSINESS RESCUE IN NIGERIA

Abstract

One of the Key changes introduced by CAMA 2020 is the introduction of a business rescue, which aims to provide an alternative to liquidation for distressed companies. Business rescue is designed to allow companies to restructure their affairs and avoid liquidation, preserving value for all stakeholders including shareholders, creditors, and employees. It is a significant departure from the traditional insolvency law framework in Nigeria, which had a strong emphasis on liquidation. A central feature of the business rescue is the moratorium mechanism, which temporarily suspends creditor claims and legal proceedings against the company. The moratorium is intended to provide companies with the necessary breathing space to restructure their affairs and avoid the costs and uncertainties associated with liquidation. Despite its importance, the moratorium mechanism has been subject to much debate among legal scholars, practitioners, and policymakers, due to its potential impact on the rights and interests of stakeholders. This paper, using a doctrinal research methodology, examines the role of the moratorium mechanism in business rescue under CAMA 2020, with a focus on its effectiveness in achieving the objectives of business rescue. The paper found that while the moratorium is an essential tool in business rescue, its effectiveness depends on several factors, such as the financial health of the company and willingness of creditors to cooperate. The paper also identified areas of improvement, including the need for clearer guidance on the scope and application of the moratorium. Based on these findings, the paper makes recommendations to enhance the effectiveness of the moratorium and the overall business rescue process in Nigeria.