Winding Up of Banks Pursuant to the Provisions of the NDIC Act 2006: The Legal Challenges and the Way Forward

Abstract

Banks carrying on business in Nigeria are primarily companies incorporated under the Companies and Allied Matters Act (“CAMA”), which are licenced to carry on banking business by the Central Bank of Nigeria (“CBN”) pursuant to the Banks and Other Financial Institutions Act (“BOFIA”) . Upon incorporation, a company becomes an artificial person with perpetual succession and until its liquidation and dissolution, the company exists as a legal entity. The pivotal roles of banks in the economic structure of nations and the systemic risk posed by bank failures necessitate the special regime for the insolvency of banks. The special insolvency regime for banks exists, primarily in the interest of the public- to maintain confidence in the banking system and the stability of the financial system. A key essence of the special insolvency regime for banks is to promote the efficient, expeditious, and orderly liquidation of failed banks.The Nigeria Deposit Insurance Corporation (“NDIC” or “the Corporation”) Act 2006 establishes the special legal regime for the winding up of failed banks. The scheme of the NDIC Act for the winding up of banks combines special provisions contained in the Act itself with CAMA by incorporating certain provisions of CAMA on the winding up of companies.The objective of this paper is to examine the salient provisions of the NDIC Act and CAMA with a view to explaining the new regime for the winding up of failed banks, foregrounding the challenges associated with it and positing ideas on how to make the process work better.