Navigating the Bankruptcy Act in Nigeria
Abdul Muhammed Law Practice sheds light on what constitutes acts of bankruptcy and provides guidance on how businesses can avoid having a bankruptcy notice filed against them under the Bankruptcy Act.
Introduction
In the ever-changing landscape of business, it’s essential for Nigerian entrepreneurs and business owners to be aware of the concept of bankruptcy and its implications.
Acts of bankruptcy
Acts of bankruptcy are certain actions or situations that indicate a debtor’s inability to meet their financial obligations.
These actions serve as triggers for creditors to initiate bankruptcy proceedings against the debtor.
Key acts of bankruptcy to be aware of
Inability to pay debts
If a debtor owes a sum exceeding ₦200 (or any other sum as specified by the Act) and neglects to pay within three weeks, this can be considered an act of bankruptcy.
Execution or other process
If a creditor obtains a judgment against the debtor, and the debtor fails to comply with the terms of the judgment for 14 days after service of the judgment order this can serve as grounds for bankruptcy proceedings.
No-asset petition
When a debtor voluntarily files a petition for their own bankruptcy, indicating they have insufficient assets to meet their debts – this is an act of bankruptcy.
Fraudulent conveyance
Transferring assets or property with the intent to defraud creditors can be seen as an act of bankruptcy.
How to prevent bankruptcy notices under the Bankruptcy Act?
Timely communication
If your business is facing financial difficulties, communicate openly with creditors to negotiate repayment plans. Early dialogue can often prevent aggressive measures.
Prudent financial management
Implement sound financial practices such as budgeting, regular financial statements, and maintaining a cash reserve to handle unexpected downturns.
Professional advice
If your business is struggling financially, seek guidance from financial advisors, accountants, or legal experts to explore all available options.
Negotiation and settlement
Work with creditors to restructure debts or settle outstanding amounts through negotiations. This approach can help avoid formal legal proceedings.
Avoid fraudulent activities
Steer clear of any activities that could be perceived as attempting to conceal assets or defraud creditors. Transparency is crucial.
Asset protection
Maintain proper records of all financial transactions and asset transfers. Any transfers should be legitimate and not raise suspicions of fraudulent conveyance.
Conclusion
Navigating the complex landscape of bankruptcy requires a proactive and transparent approach.
Nigerian businesses should strive to maintain financial health through diligent financial management, open communication with creditors, and seeking professional advice when needed.
By understanding acts of bankruptcy and their implications, businesses can take steps to prevent bankruptcy notices and secure their financial future.
Remember, this article is meant for informational purposes only and does not constitute legal advice.
For specific legal guidance tailored to your business situation, consult with a qualified and experienced lawyer.
READ: Deep dive analysis of the landscape of bank loans in Nigeria
