When receivership becomes economic banditry – Dr. Muiz Banire

The issue of receivership I seek to interrogate in this intervention is one that, on the surface, may appear remote from the immediate concerns of the average Nigerian. At first glance, it may look like a subject reserved for bankers, lawyers, debtors, creditors, accountants, insolvency practitioners, and corporate executives. However, upon deeper reflection, it becomes clear that it is a matter that affects all of us. It affects employment. It affects investment. It affects productivity. It affects the survival of businesses. It affects the confidence of entrepreneurs. It affects the economy. It affects families whose breadwinners lose their jobs when companies are recklessly taken over and destroyed. Ultimately, therefore, it affects the common man who may never have borrowed a kobo from any bank.

This is the issue of lenders, particularly banks, appointing receivers or receiver/managers over the undertakings, assets, and businesses of companies. For the benefit of non-lawyers, a receiver is ordinarily a person appointed over the assets or undertaking of a company that is unable, or alleged to be unable, to meet its debt obligation. The receiver is appointed principally for the purpose of recovering the debt owed to the appointor, usually a bank or other financial institution. Where the receiver goes beyond merely preserving or realising assets and is empowered to take over the running of the business in the interim, he is described as a receiver/manager. In theory, the idea is not necessarily objectionable. A creditor who has advanced money to a company, particularly where security has been created over the company’s assets, is entitled to take lawful steps to recover its money where there is default. No responsible society can encourage borrowers to take loans and refuse to repay them. The problem, therefore, is not the existence of receivership as a legal remedy. The problem is the reckless, abusive, oppressive, and destructive manner in which the remedy is now being deployed in Nigeria. What was designed as a mechanism for preservation of assets and orderly recovery of debt is gradually becoming an instrument of corporate strangulation, economic intimidation, and, in some instances, commercial banditry. A receiver, properly so called, is not meant to be an undertaker of businesses. He is not meant to be a conqueror. He is not meant to be a warlord. He is not meant to be an instrument of vendetta. He is not meant to arrive at a business premises with the mentality of one invading enemy territory. His role is fiduciary. His duty is one of responsibility. His assignment is to preserve value, not to destroy it. He must act in good faith. He must account for what he does. He must avoid unnecessary injury to the business. He must remember that behind the company are employees, suppliers, contractors, families, investors, and communities that depend on the continued existence of that enterprise. Unfortunately, what we are witnessing today is a complete distortion of that purpose. In recent times, lawyers appear to have taken centre stage in receivership practice, possibly because of their presumed knowledge of the law and their ability to navigate the court system. This, by itself, may not have been objectionable if the role were limited to legal guidance, compliance, and proper protection of rights. However, the disturbing reality is that many lawyers now relish being appointed as receiver/managers with impunity, thereby plunging themselves directly into the management of businesses for which they have neither training nor competence.

This raises a serious ethical question for the legal profession. By the Rules of Professional Conduct for Legal Practitioners, a lawyer is not expected to engage in trade or business in a manner inconsistent with the honour, dignity, and independence of the profession. The legal profession is not a marketplace of commercial predation. It is not a platform for asset-grabbing. It is not a mask behind which lawyers may become emergency businessmen, factory managers, oil traders, hotel operators, property administrators, or corporate undertakers. Yet, in open contradiction of the spirit of the profession, many lawyers now take over businesses as receiver/managers and begin to run them in a manner that often leaves more damage than recovery. The tragedy is that because most of them are not trained as managers, they destroy the very businesses they are meant to preserve. A lawyer may understand pleadings, affidavits, injunctions, debentures, charges, and enforcement clauses, but that does not automatically make him competent to manage a manufacturing company, a hotel, an oil servicing firm, a real estate project, a construction company, or a complex commercial enterprise. Business management requires skill. It requires prudence. It requires industry knowledge. It requires financial discipline. It requires human management. It requires continuity planning. It requires restraint. Where these are lacking, receivership becomes a death sentence.It is therefore regrettable that the disciplinary bodies of the legal profession are yet to sufficiently address this growing embarrassment.

The Body of Benchers, the Legal Practitioners Disciplinary Committee, the Nigerian Bar Association, and other organs of professional regulation must begin to ask hard questions. When does a lawyer, acting as receiver/manager, cross the line into unethical business management? When does the role become incompatible with the dignity of the profession? When does the lawyer cease to be an officer of the court and become an instrument of economic oppression? These are not academic questions. They are urgent questions arising from the daily experiences of businesses being destroyed under the guise of receivership. It is becoming an indelible stain on the legal profession, particularly to the victims. A receiver or receiver/manager ought to be accountable for the mismanagement of any entity entrusted to him. The mere fact that he was appointed by a bank or armed with a court order cannot make him immune from responsibility. A court order is not a licence for irresponsibility. A debenture is not a warrant for recklessness. A loan default is not an invitation to destroy the borrower’s business. If assets are wasted, if accounts are mismanaged, if employees are thrown into avoidable hardship, if contracts are needlessly frustrated, if the company’s goodwill is destroyed, the receiver must answer. The appointing bank must also answer where it aided, encouraged, or benefited from the misconduct. Sadly, the reverse is currently the case. Many receivers act with brazen impunity. They walk into companies as if they had captured conquered territories. They seal premises. They freeze accounts. They chase away staff. They issue aggressive notices. They take over documents. They alienate customers. They disrupt production. They make reckless statements to third parties. They damage the reputation of the company. They sell assets in questionable circumstances. Thereafter, when the business collapses, everyone moves on as if nothing happened. The owner is left with the ruins. The employees are left with joblessness. The economy is left with another dead enterprise. The worst aspect of the present practice is the abuse of legal process to arm-twist and hijack the businesses of unsuspecting people. Due to the painfully slow pace of our judicial process, receivers and their appointors often rush to court to secure ex parte orders. These are orders obtained behind the affected party, without giving the company or its owners an opportunity to be heard. Armed with such orders, they descend on the business, seize possession, take over accounts, and paralyse operations. By the time the affected company is able to return to court to challenge the order, the damage may already have been done. This is where the injustice becomes most glaring.

The owner of the business is told to go to court. He goes to court, but the wheel of justice moves at its usual sluggish pace. Applications are filed. Counter-affidavits are filed. Further affidavits follow. Written addresses are exchanged. Adjournments intervene. Preliminary objections may arise. Judges are transferred. Courts go on vacation. Before the matter is meaningfully heard, the company may have lost its customers, workers, suppliers, reputation, contracts, cash flow, and goodwill. At that stage, even if the ex parte order is eventually discharged, what remains to be celebrated? A dead business cannot applaud a victorious judgment. This is why I have always maintained that justice is not merely about the final pronouncement of the court. Justice is also about the timing, effect, and practical consequence of the process. Where an interim order destroys the subject matter of a dispute before the dispute is heard, the court must be worried. Where an ex parte order becomes an instrument of coercion rather than preservation, the court must be concerned. Where a party uses the slow machinery of justice to extract unfair concessions, the process has been abused. In many cases, business owners are forced to accept oppressive terms not because the terms are fair, but because they are desperate to regain control of their business before it dies completely. That is not genuine settlement. That is commercial coercion. It is settlement under suffocation. It is negotiation with a knee on the neck of the enterprise. Law must not lend itself to such injustice. The practice is now assuming a dangerous dimension. Several businesses are being crippled.

Unemployment is worsening. Assets are wasting. Investments are being destroyed. Entrepreneurs are being discouraged. Banks that are supposed to support enterprise are now perceived, in some quarters, as predators waiting for an opportunity to devour distressed businesses. Many banks create situations of impossibility for debtors to be able to pay their loans. Where a bank agrees to give a loan of N5 billion to finance a business but advances 1.5 billion at the commencement of the business. It knows that the advanced sum cannot commence production and yet it starts calculating interests on the amount advanced while refusing to release further funds for the business to take off. Before you could say Jack Robinson, the business is swimming in debt at a rate more than 30% interest and the ugly-faced receiver comes in taking over the business he does not understand how it is operated. He immediately starts selling the assets of the company with lots of the money recovered not accounted for. This perception is dangerous, not only for borrowers but also for the financial system itself. A banking system that inspires fear rather than confidence cannot sustainably support economic growth. Let it be made clear that I am not defending irresponsible borrowing. I am not suggesting that debtors should borrow money and refuse to pay. A borrower who takes depositors’ funds through a bank must honour his obligation. Commercial discipline is essential to economic stability. Banks are not charities. They must recover loans in order to remain viable and protect depositors. However, there is a difference between responsible debt recovery and reckless business destruction. There is a difference between enforcing security and killing an enterprise. There is a difference between lawful recovery and economic banditry.

The larger point is that in a fragile economy like ours, business preservation must be treated as a matter of public interest. Nigeria is already a difficult place to do business. Power supply remains unstable. Infrastructure is weak. Interest rates are high. Foreign exchange instability has damaged many balance sheets. Inflation has reduced purchasing power. Multiple taxation continues to suffocate enterprise. Regulatory uncertainty is a constant headache. Insecurity affects logistics and investment decisions. Many businesses are already gasping for breath. To now allow banks and receivers to pounce on them in a manner that guarantees their death is to worsen an already grave national problem. A company in distress is not necessarily a company that must die. Many businesses suffer temporary liquidity problems. Some are victims of delayed government payments. Some are affected by currency devaluation. Some are victims of supply-chain disruptions. Some are struggling because their trade debtors have failed to pay them too. Some are victims of sudden policy shifts. Some require restructuring, patience, and professional turnaround management. If every distressed company is treated as a carcass to be consumed by receivers, then we shall end up destroying viable enterprises that could have survived with proper intervention. This is where comparative thinking becomes useful. In more developed commercial environments, insolvency and receivership mechanisms increasingly emphasise business rescue, corporate restructuring, and value preservation. The goal is not always to kill the company. The goal is often to save what can be saved, protect jobs where possible, maximise value for creditors, and avoid unnecessary economic waste. Nigeria must embrace this philosophy more deliberately. Debt recovery must not be viewed only from the narrow lens of the creditor. It must also be viewed from the broader lens of national economic interest.

Our courts have a major role to play. Judges must be extremely circumspect in granting ex parte orders that effectively hand over living businesses to receivers without first hearing the affected parties. I appreciate that there may be cases of real urgency where interim protection is necessary. Assets may be at risk of dissipation. Fraud may be alleged. Security may need to be preserved. However, urgency must not become a magic word that opens the gate to oppression. Where an ex parte order is unavoidable, it must be narrowly tailored, time-bound, and subject to prompt inter partes hearing. The court must insist on accountability. The receiver must file periodic reports. The affected company must be given an early opportunity to be heard. The order must preserve, not destroy. Courts must also become more willing to impose liability where banks and receivers abuse the process. I am aware that this has occurred in at least one case, and our courts must embrace such approach more boldly where the facts justify it. If a bank recklessly appoints a receiver, obtains oppressive orders, destroys a business, and it later turns out that the process was wrongful or excessive, damages must follow. If a receiver mismanages assets, liability must follow. If a lawyer acting as receiver conducts himself in a manner that violates professional ethics, disciplinary consequences must follow. Without consequences, impunity will continue. In this connection, I must salute the proactive manner in which the Chief Justice of Nigeria, Honourable Justice Kudirat Kekere-Ekun has been treating cases involving receivership. I observed that the court is now giving priority to and fast-tracking the cases. I must equally commend my Law Lords of the apex Court in the manner of they have displayed conscious and full appreciation of the issues raised above in their judgments so far. It is also important for regulators to pay closer attention. The Central Bank of Nigeria, the Corporate Affairs Commission, the Securities and Exchange Commission where applicable, the Nigerian Deposit Insurance Corporation, and other relevant institutions must begin to interrogate the wider implications of reckless receivership. This is not merely a private quarrel between a bank and a borrower. Where a major employer is destroyed, the labour market is affected. Where a manufacturing company collapses, suppliers are affected. Where a real estate project is abandoned, subscribers are affected. Where a hotel is shut down, workers and vendors are affected. Where an oil servicing firm is paralysed, industry chains are affected. The ripple effect is always wider than the original debt.

There must also be a more serious conversation around who qualifies to act as receiver or receiver/manager. It cannot continue to be an all-comers affair. A person appointed to manage a business must have demonstrable competence, independence, integrity, and capacity. Where the business is complex, the receiver must have access to appropriate professional expertise. There must be standards. There must be reporting obligations. There must be ethical boundaries. There must be consequences for misconduct. It is unacceptable for someone with no practical management experience to take over a multi-billion-naira enterprise simply because he has the backing of a bank or the benefit of a court order. The legal profession must particularly rescue itself from this growing stain. It is painful that a profession that should defend justice is now, in some cases, being associated with commercial intimidation. Lawyers must remember that they are ministers in the temple of justice. They must not become merchants of destruction. A lawyer who uses legal knowledge to oppress, intimidate, or destroy legitimate enterprise is worse than the layman who commits wrong in ignorance. Knowledge must impose restraint. Professional privilege must come with moral responsibility. As one of my respected Law Lords recently observed, many of those parading themselves as receivers or receiver/managers today behave no better than bandits. Strong as that description may sound, it captures the frustration of many who have watched businesses being invaded, assets being wasted, and livelihoods being destroyed under the guise of lawful enforcement. Banditry is not only when a man carries a gun in the forest. There is also economic banditry. There is institutional banditry. There is legal banditry. There is financial banditry. Where a receiver was appointed to recover alleged debt of a real estate developer company and it enters with bulldozers demolishing already built houses, can such be described as a receiver or destroyer? When the instrument of law is deployed to achieve unjust, oppressive, and destructive ends, society must not be deceived by the elegance of the documentation. In fact, it is becoming increasingly notorious that a particular bank has, in recent times, been on rampage in this regard. Its pattern of ruthlessness and recklessness in receivership matters has become so pronounced that courts and practitioners are beginning to take note of its conduct. This is dangerous.

A bank must not build a reputation as an undertaker of businesses. A bank must not be known more for corporate destruction than financial intermediation. A bank must not use the power of credit to suffocate the same productive sector it claims to support. The leadership of the country must also be concerned. We cannot continue to lament unemployment while allowing viable businesses to be destroyed by reckless financial enforcement. We cannot continue to preach investment while permitting legal processes to be weaponised against investors. We cannot continue to complain about low productivity while allowing the machinery of receivership to waste productive assets. We cannot continue to speak of economic recovery while ignoring practices that silently kill businesses. The judiciary, the legal profession, financial regulators, banks, business associations, insolvency practitioners, and policymakers must come together to reform this area. Receivership must be redefined in practice as a mechanism of preservation, accountability, and responsible recovery. Ex parte orders must be treated with great caution. Receiver/managers must be subject to stricter supervision. Banks must be made liable for reckless appointments. Lawyers who abuse the process must face professional discipline. Debtors must also be encouraged to act responsibly and transparently. The entire system must be recalibrated in the interest of justice and economic survival. There is also need for legislative attention. Our insolvency framework must continue to evolve towards business rescue and restructuring rather than mere asset seizure. The law must encourage arrangements that preserve value, protect jobs, and maximise recovery without unnecessarily destroying enterprises. Where a business can be turned around, the law must favour turnaround. Where assets must be realised, the process must be transparent. Where management must be displaced, the replacement must be competent. Where a receiver acts, he must account. Where he fails, he must be sanctioned. The moral of this intervention is simple. Debt recovery is legitimate, but destruction is not. Creditors have rights, but those rights must be exercised responsibly. Debtors have obligations, but default does not strip them of all protection under the law. Courts have powers, but those powers must be exercised with sensitivity to commercial realities. Lawyers have skills, but those skills must not be converted into tools of oppression. Banks have financial strength, but that strength must not become a weapon of intimidation.

As the Yoruba would say, ti a ba ran ni ni ise eru, a fi ti omo je, even when one is sent on the errand of a slave, one must execute it with the dignity of a freeborn. A receiver may be appointed by a bank, but he must act with responsibility. He may be empowered by documents, but he must be guided by conscience. He may be armed with a court order, but he must remember that justice is larger than paper. He may enter a distressed business, but he must not leave behind ashes. The time has come to call reckless banks to order. The time has come to hold receivers and receiver/managers accountable. The time has come for the legal profession to cleanse itself of this embarrassment. The time has come for the courts to scrutinise ex parte receivership orders more carefully. The time has come for regulators to appreciate the economic consequences of reckless receivership. Above all, the time has come to ensure that a legal remedy designed to preserve value does not continue to operate as a weapon of economic banditry. A nation that kills its businesses kills its jobs. A nation that kills its jobs kills hope. A nation that kills hope invites instability. Receivership must not be allowed to become another silent undertaker in Nigeria’s already fragile economy.