Collective Proceedings for Wiping Off Debts and Its Implications on Bankruptcy Proceedings: An Appraisal of the OHADA Uniform Act on Simplified Recovery Proceedings
Keywords:
Collective Proceedings-Wiping Off Debts-Implications-Bankruptcy Proceedings -Appraisal -OHADA Uniform Act on Simplified RecoveryAbstract
The Uniform Act on Collective Proceedings for Wiping off Debts entered into force on the 1st of January 1999 and governs all such proceedings commenced after that date. The urgent need for a modern system to deal with insolvency and related situations was felt on the member states whose legislation on the subject was obsolete. This Uniform Act is designed to remedy the problem by laying down procedures that are suitable for a modern business environment and providing collecting proceedings for the clearing of debts. Even though with the Act put in place the act of collecting funds has been difficult and complicated especially when the companies in question goes into bankruptcy or winding up. The judgment creditors find it difficult in recovery their debts from the judgment debtors, and this has to a larger extent affected the implementation of the judgment. The objective if this paper is in demonstrating the effects or implications that the failure in recovery the judgment debts can have on the creditors as a result of Bankruptcy of the companies. In other in solving this, it is assumed that the bankruptcy of the judgment debtors can affects the recovery proceedings by the judgment creditors.
References
1. Clear care must be taken before bankruptcy proceedings are instituted. Dialo (B) IN “les cessation de paiement de debiteur en OHADA”. A premature commencement of bankruptcy proceedings may compromise the future of a company by the sudden publicity of its bankruptcy in a situation where the financial difficulty is only temporal. A late institution of the proceeding will frustrate all hopes of redressing the situation as well as compromising the chances of paying the creditors
2. David Bernard. op cit, p 251. David Bernard further initiates that the prim ary purpose of the proceeding is to ensure that every creditor shall receive a fair share of whatever is available for distribution; that it might be thought that such proceedings would be a matter of last resort; that since the consequences of bankruptcy proceedings is to stop a debtor from carrying on his business, until recently under the common law, the procedure was often initiated as a very effective means of forcing a recalcitrant debtor to settle his creditor.
3. Black’s law dictionary. op cit.p.156
4. Preventive settlement, legal redress and liquidation.
5. Bankruptcy proceedings in most cases are initiated against companies. These companies are considered as legal entities of general interest that need to be given a degree of protection from creditors, bas ed on the principle that general interest overrides individual interest.
6. Issa Sayegh (j) presentation des dispositions sur les procédures collective d’apurement du passif ». Contends that in most francophone African countries, the applicable legislation i n bankruptcy proceedings was the code de commerce of 1807, as amended by the law of 14 March 1889 and the decree of 1933. He cites the example of Senegal, Central African Republic, Gabon, Cameroon, Benin and Madagascar. http.www.ohada.com.ohada ta.D-10-64.
7. David Bernard op.cit. p.251
8. Article 2 on the Uniform Act on Debts.
9. Collection is different from seizing of property by an individual creditor with the intention of selling the same to satisfy the judgment debt. In bankruptcy proceedings, JCMSL (2019) 12–22 © Law Journals 2019. All Rights Reserved Page 20 the seizing of property is initiated by a receiver, appointed by the court on behalf of all the creditors and not by the individual creditors
10. This property is usually property owned by the debtor at the time of filing the bankruptcy petition.
11. Upon liquidation the debtor hopes to obtain a discharge which releases the debtor from any further personal for pre - bankruptcy debts.
12. The companies’ ordinance was first enacted in Nigeria in 1912 and drew inspiration from the English company Act of 1908. This ordinance which was amended in 1917 was further amended in 1929, 1941 and 1954. It therefore became cap 32 of the 1948 and cap 38 of the 1958 laws of the federation of Nigeria. The 1954 ordinance was supplemented by the 1968 companies’ decrees
13. Companies Decree No 51 of 1968, section 210
14. Article 33(30) of the Uniform Act on Debts. A composition is defined in Black’s law dictionary op cit. as an agreement between the debtor and two or more creditors for the adjustment or discharge of an obligation for some lesser amount.
15. Meuk B.Y. in quelques précisions sur la notion de cessation des paiements dans OHADA., contends that it is an accounting notion retained by the legislator and applied by the courts as was the case in requite de la B.C.T.I. TGI de Ouagadougou no.192 of 24 February 1999
16. This legal phrase used to describe the bankruptcy proceedings is u nknown at common law. However, a look at rehabilitation under bankruptcy provides a meeting point. Rehabilitation is defined as the process of reorganizing the debtor’s financial situation so that the debtor may continue to exist as s financial entity, wit h creditors satisfying their claims from the debtors’ future earnings. Rehabilitation is therefore a preventive measure. It prevents the winding up of the company.
17. The Uniform Act on Collective Proceedings for wiping off Debts. Article 2(1)
18. Enterprise Camerounaise du Genie Civil (ECAGEC) v All Creditors of ECAGEC.HCB/07SRM/06-07
19. We call this corporate bankruptcy
20. Natural persons Include person who are managers of corporate bodies subject to collective proceedings and who are permanent representatives o f corporate bodies.
21. Article 194(1) of the Uniform Act on Debts this type of bankruptcy is known as personal bankruptcy. personal bankruptcy is usually established during collective proceedings and must be pronounced by the court. personal bankruptcy is usually pronounced against person who have: abstracted the accounts of their companies, embezzled or hidden the part of its assets or reorganized fraudulently debts which did not exist, carried out commercial activity in their personal interest either through, or intermediary or under cover of a corporate body concealing their dealings, disposed of the property of a corporate body as their own by fraudulent misrepresentation, obtained for themselves or their companies a co mposite agreement which is later annulled, committed acts in bad faith or inexcusable misfeasance or serious offences against trade rules and practice.
22. David Bernard op.cit. p.251
23. David Bernard loc cit p.251
24. Article 28 of the Uniform Act on Debts.
25. Ibid, article 28 the creditor seises the court by way of summons which shall specify the nature an amount of his claim and mention the proof of debt. This method of seising the court is different from the mode granted the debtor who seised the court by petition stating his economic and financial situation and the measures required from the court. JCMSL (2019) 12–22 © Law Journals 2019. All Rights Reserved Page 21
26. Article 29(1)
27. Ibid article 29(1)
28. Aremo LL v Adekanye (2004)19 NSCQR.27
29. Ordinance No 72/4 of 26th August 1972 on Judicial Organization. After the coming into force of the Uniform Act, Law No 2006/15 of 29 December 2006 on judicial organization raised the jurisdiction of the court of first instance to claims up to 10 million while that of the high court was raised to above 10 million.
30. In the matter of petition for bankruptcy proceedings pursuant to the OHADA Uniform Act on Collective Proceedings For Wiping Off Debts, the and the bankruptcy protection of Star Credit Company plc( Micro Finance Establishment cat ii) The mat ter was filed in the High Court of Bamenda then was abandoned and a similar action filed in the Court of First Instance Bamenda. The court of First Instance went ahead to make a decision
31. In case of Enterprise Camerounaise de Genie Civil ECAGEC v All Credi tors of ECAGEC (2007) BHC/007SRM/06 (unreported) the bankruptcy order was granted in the Bamenda High Court.
32. See article 18 (b) (new) of the 2011 Law on Judicial Organization Amending and Supplementing Certain Provisions of the 2006 Law On Judicial Organization.
33. Ayemo ii v. Adeyemo (2004) 19 NSCQR.271
34. Article 4(1) Uniform Act on Collective Proceedings for Wiping off Debts.
35. Loc. cit article 4
36. Air via ltd v. Oriental Airlines ltd. (2004) 18 NSCQR 292
37. Air via ltd v. Oriental Airlines ltd, supra
38. Air via ltd v. Oriental Airlines ltd supra
39. (1883)23ch.230
40. (1963) N.S.C.C.(VOL3) 21
41. In this case the court held that since the respondents petition was based on a breached of contract by the appellant, the respondent has the duty to first the breach and the d amages flowing there from. The court concluded by stating that the relief sought in the winding up petition is not one for the recovery of debt or that of breach of contract, but one for winding up on account of insolvency and inability to pay the debt
42. Adekola(m) Companies and Allied matters Act; The Law and the Implementation 1st Edition, P.121
43. U.B.N. Limited v Tropic Foods (1992) N.W.L.R. (pt.228)231
44. This Act does not define cessation of payment, but by this we understand the stoppage of payment for the s taff and the company’s debts
45. Article 28 of the Uniform Act.
46. Ibid Article 25
47. General and Aviation Services ltd v. Thadal (2004) 18 N.C.Q.R.225. This affidavit states the economic and financial situation of the petitioner. The level of indebtedness and the fact that the debt cannot be paid. The petition shall state the prayer requested which can be rehabilitation or liquidation and that all lawsuits against the petitioner should be suspended. The petition is filed alongside with accompanying affidavit. The affidavit must contain only statements of facts and the circumstances derive from personal knowledge which the deponent believes to be true. The a ffidavit must also state facts to justify the order of bankruptcy proceedings.
48. Article 5, Uniform Act on Collective Proceedings for Wiping off Debts.
49. Ibid article 6, these documents include the extract of registration in the trade and personal credit regi ster, a summary financial statement comprising notably, the balance sheets, income statement and statement of source and expenditure of funds, a cash position, statistical statement of claims and debts, mentioning the names and residence of the debtors and creditors, a detailed statement (assets and liabilities )of collateral securities and secured debts given and received by the managers and their company, an inventory of the debtor’s property, showing the movable property subject to claim by their owners and that affected by an ownership receive clause, the number of workers and the wages and wage cost, the turn over an JCMSL (2019) 12–22 © Law Journals 2019. All Rights Reserved Page 22 profits for the last three years, the name and staff representatives, where it is a corporate body, it should state the list of person joi ntly and severally liable for its debts with their names and residences, as well as the names and addresses of its managers.
50. Article 6 and 26 of the Uniform Act.
51. Ibid article 6 and 26
52. Article 7 of the Uniform Act on Collective Proceedings for Wiping off D ebts states that, he must state the modalities for continuing the operations of the company such as request for deadlines and debts cancellations, special transfer of property specifying the property to be transferred, transfer or management under leas of a branch of activity forming a business transfer or management under lease of the entire company, without such modalities being restrictive an exclusive of each other; persons who have to execute the composition agreement and all the commitments entered in to by them and needed to redress the company, modalities for maintaining and financing the company, and setting debts contracted during prior the decision suspending all law suits and appointing an expert to prepare a report on the economic and financial situation of the company, where necessary ,the guarantees given to guarantee the execution; such commitments and guarantees may consist of subscribing to an increase of capital of the company by the former or new partners; the opening of credits by financial or banking establishments, the continuation of the execution of the contracts concluded before the petition and the provision of securities; layoffs for economic reasons which shall be carried out under the conditions laid down by the labour provisions, the replacement of managers
53. Uniform Act article 6 and 26
54. In the case of SNC Le Couloumney c/ Sautarel es -qual.2ch civ,25 juin 2008 BRDA 3/09. No. 7. The court held that the plan of judicial redress should permit the continuation of the economic activity in a durable matter and if possible, its development.
55. Ibid accessed on the 2/04/2018
56. This is a detailed program of action formulated by the debtor or its creditors to govern the debtor’s rehabilitation, continued operation or liquidation for payment of debts.
57. Air via ltd v oriental airlines ltd (supra)
58. Article200 of the Uniform Act on Debts.
59. Re Redman Builders ltd (1964) 1 ALL ER.at 855
60. Execution is complete when property when property seized has been sold by the bailiff, when land charged by the order of court and when the garnishee has paid over the debt to the creditors.
61. Chi Francis Ndéh (supra)
62. This does not however mean that once on order for bankruptcy has been made; there can be no seizure of property. It co uld still be seized and sold. At this level it is at the disposal of the official receiver appointed by the court. This is usually where the court has ordered the liquidation of the debtor’s asset. any seizure carried out the convenience of the individual creditor is null and void
63. Article 146 Uniform Act on Collective Proceedings for Wiping off debts.
64. Ibid article 131
65. Ibid article 133(1)
66. Ibid article 133 Cite this Article Shashan Laisin Adela, Nana Charles Nguindip. Collective Proceedings for Wiping Off Debts and Its Implications on Bankruptcy Proceedings: An Appraisal of the OHADA Uniform Act on Simplified Recovery Proceedings. Journal of Journal of Capital Market and Securities Law. 2019; 2(2): 12–22p.
