The recent nationalisation of some rescued banks by the Asset Management Corporation of Nigeria (AMCON), the Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC, has continued to generate reactions from various stakeholders. While some queried the process employed by the financial regulators, alleging it lacked transparency, othersexpressed anxiety over the absence of laws to protect their investments, whichthe Governor of CBN, Mallam Lamido Sanusi, said had been lost to exercise. But a Lagos-based insolvency practitioner, who is also a Senior Advocate of Nigeria, Chief Anthony Idigbe, in this Interview with BERTRAM NWANNEKANMA, believes that the issue can be addressed throughthe enactment of consumer credit law. Idigbe, whois the President of Business Recovery and Insolvency Practitioners Association of Nigeria (BRIPAN), a body of insolvency practitioners, is also a renowned commercial lawyer. He speaks on these challenges and some other related issues in the sector. Excerpts.AS an insolvency practitioner, what do you think is responsible for toxic loans in the nation's financial sector'Basically, it is the pressure on banks to raise capital. This factor was then complicated by the global meltdown, which between 2008 and 2010, led to collapse of the capital market. Again, the manner of regulatory intervention, when the crisis became evident, contributed in no small measure to deepening the crisis. We could have learntfrom the manner of regulatory intervention in other countries, since the crisis was global. Unfortunately, that was not to be the case.Are you comfortable with the method employed by the CBN in the recapitalisation of the affected banks'The Central Bank of Nigeria has a burden of reassuring Nigerians that there is no witch-hunting or arbitrariness in its implementation of its policies.What relationship, do you think, exists between insolvency practitioner and Asset Management Corporation of Nigeria (AMCON), as established by the CBN'Asset Management Corporation of Nigeria (AMCON) was established essentially to rescue businesses by the Federal Government in the wake of the impact of the globalmeltdown in Nigeria, particularly the contradiction in 2009, of the Nigerian capital market and distress of financial sector. The AMCON law was passed in June 2010, creating an Asset Management Corporation with the general objectives of resolving the liquidity problems in the financial sector and resuscitating the vital credit role of deposit in banks and financial institutions through the severance/management of toxic assets in their balance sheet. This was a follow-up and more calculated effort from the initial CBN bail-out injection of about N420 billion in reserved Nigerian banks. It is a clear and special departure from the traditional undertaker role of the NDIC, extensively articulated under various laws such as the Companies and Allied Matters Act and special banking laws such as the Nigeria Deposit Insurance Corporation (NDIC) Act and the Banks and Other Financial Institutions Act (BOFIA).AMCON was established to acquire non-performing loans, recapitalise banks to zero equity and recover the loans as much as possible with minimum costs.Actually, AMCON has, in implementing its mandate of debt recovery, created a register of turnaround/recovery experts to deal with the borrowers, particularly, as it does not possess the capacity to deal with over 10,000 borrower cases. It is believed, rightfully so, speaking from the perspective of an experienced insolvency practitioner, that a lot of borrowers have a cash flow problem and the bankers have not been able to meet up with these cash flow requirements in the loans given to such businesses, which may otherwise be good and viable businesses. That means that efficient recovery may lie in assisting the business to restructure and survive rather than collapse.It follows that the relationship between insolvency practitioners and AMCON, in such a situation, should ideally be symbiotic. An insolvency practitioner, in such a situation, is bound to relate with AMCON, either from the perspective of advising debtor customers or acting as an agent or turnaround consultant for AMCON in line with its balanced recovery strategy. Whether customers or AMCON would, in fact, actually use these experts, is yet to be seen but it seems that until expert regulation or guideline is put in place, requiring such turnaround or rescue plan from a certified expert, nothing much may, indeed, be achieved.Do you think that AMCON's activities will have adverse effect on insolvency practice in Nigeria'AMCON is certainly vested with huge legal powers and enforcement remedies under its enabling statute to deal with Non-Performing Loans (NPLCs) and to pursue recalcitrant customers. It intends to use those powers only as a weapon of last resort. The use of these powers and the priority given by law to AMCON, raises serious constitutional issues of due process, which I foresee, may be tested by litigations in the nearest future, but definitely at the customer's cost. So, in a way, it does not make business sense for a seriously indebted customer to further deepen his or her woes through further litigations on powers of AMCON, particularly where the Corporation appears willing to look for proactive ways to resolve issues at the barest minimum possible cost.For instance, AMCON may enforce any creditor's rights accruing to any bank it purchases NPLs from and to which it is subrogated in rights, but at the same time, is not to be liable to debtors or other parties, to contract for any breach of contract by the bank.Again, in the context of litigation, the Act provides for the Chief Judge to designate judges for AMCON cases, meaning that there are several landmines for a recalcitrant debtor in accessing justice and perhaps being heard fairly. Be that as it may, the avowed objective of pro-activeness of the Corporation in its responses to insolvency issues seems to suggest that AMCON, in collaboration with relevant professionals, would seek to exhaust rescue strategies first and use litigation as a resolution method of last resort. Any other strategy would generate an extensive and perhaps expensive litigation.In what areas are you expecting collaboration and conflicts'As I have mentioned earlier, AMCON has already solicited for business rescue consultant and turn-around consultants to forward their expression of interests in assisting them to handle more than 10,000 cases of toxic loans that they would have to deal with. We expect a prompt feedback from the agency though from feedback from our members, they are still rather slow in engaging actively with the various customers and turn around experts.I also expect that there will be more opportunities for AMCON and our expert members to partner in achieving restructuring of several viable businesses and enterprises.There is bound to be frictions depending on whom the insolvency professional is representing but as professionals, there should be a common goal of finding the best way for the parties to reach a practicable consensus that would be mutually beneficial. There is no doubt that a borrower has a duty to repay its loan. There is also no doubt that many a times, the problem for some customers stem from the fact that there was a failure by the bank to properly assess the credit structure of the loan to tailor repayment to cash flow.How do you think the government should handle the toxic loan saga, especially in respect of the rescued banks'I think the government should be resolute. The problem with government is usually the fear of arbitrariness in implementation of policy. The fear remains. Government by its action must continue to assure Nigerians that its interventions are not politically motivated and that everyone in Nigeria is subject to the same rule of law. Unfortunately, the 2009 intervention in allegedly rescued bank falls flat on account of this concern. It is, however, not too late for reassuring remedial measures.In your view, do you think many Nigerians, especially lawyers, appreciate the practice'There is no doubt that we have started witnessing a tangible paradigm shift in the psyche of lawyers. This was not so about five years ago. The government and regulators also seem to appreciate the crucial role that an efficient insolvency framework plays since the advent of the global meltdown. The government has since moved from a simplistic approach to insolvency matters, to the need to adopt a preventive and proactive approach in order to deal with the macro-economic problems that may arise from insolvency. The elaborate scheme to save the banks alleged to be insolvent between 2009 and now is evidence of this shift in mindset. We only hope that government would otherwise utilise the wealth of experience of BRIPAN members to implement its salvaging strategy agenda.There are other sectors such as the capital market where the regulator is making effort to deal with insolvency matters by looking at turn-around options first.I believe that the association and its membershave developed the relevant body of knowledge and have the requisite experience to assist in this effort.What are the major drawbacks of insolvency practice in the country'There is, no doubt, that the major challenge Nigeria has, at present, is the archaic nature of the existing corporate general insolvency framework and its bias for collective procedures (winding-up/liquidation) and or secured creditor's private procedure (receivership). There is no articulation under our law for business rescue procedures, moratorium period given to the failing companies to allow for a turn-around under the management of a qualified and experienced insolvency practitioners. Banks and financial institutions do not always help matters understandably for selfish reasons which are not necessarily in their best interests when properly analysed, as they are usually averse to turn-around options which may at the end of the day give them more value if allowed to be developed by the insolvency practitioner.The personal bankruptcy framework is quite in appropriate, as it requires that a creditor must have first obtained a judgment in his favour or that there is a clause in the credit agreement allowing the creditor to initiate bankruptcy procedure. Further, the entire processes are not debtor-friendly and there are no incentives for a debtor to drive the process.There is a great need to continuously educate the stakeholders, the lawyers themselves. Although, electronic commerce and consumer-credit business have hugely developed in Nigeria, there is no statutory framework to either deal with consumer insolvency or even criminalise fraudulent conduct. We urgently need a consumer credit law in Nigeria. It is unbelievable that such a law is not in place yet. By June 2012, cash transaction would have been legally almost eliminated going by CBN's recent directive.Why do modern insolvency practitioners focus on turnaround management of ailing businesses and turn to liquidation only as a last resort'Why do doctors focus on prevention rather than cure in improving health of life and limb' Why does government focus on increasing productivity, creating jobs and improving the economy' And why is one more difficult to achieve than the other' The answer is obvious: it is easier to destroy than to build. We are in a system and there are various components. But the problem is that in such a productive system, businesses are interconnected: the output of one is the input of another, and so on. And where there is a disruption in the chain, there is an imbalance and a chain reaction.Business enterprises are vehicles for generation and distribution of wealth to several stakeholders. People invest in the enterprise and bring equity or debt capital and expect to be paid a return on their investment by way of dividend or interest. Employees' productive forces are used by the enterprise to manufacture products or give services in return for salaries. The running of businesses also yields profit to the state as the company pays taxes on its profit, which the state uses to build and maintain necessary basic infrastructure and wellbeing of its people.You see from the above that it is essential to ensure that businesses thrive rather than die. It is the company, which will generate the necessary cash to offset these various obligations and give value to different sets of people. Seeing insolvency practice strictly from perspective of coming to 'clean up' the company for the profit of a selected few ' as people tend to view it ' is rather myopic. Insolvency by nature presupposes a delicate balancing act of various interests of stakeholders in a company. Sometimes it may be necessary to put the company to death but most times, a good insolvency practitioner, especially if he is called in at an early stage, is meant to advise or help a company to take proactive steps and 'turn around' form a path leading to its death. My experience is that lack of understanding of the key role of the insolvency practitioner in Nigeria has meant that instead of stakeholders, like shareholders and directors cooperating with the office holder in insolvency, they usually fight till the death.Turnaround management and business recovery is, therefore, the first port of call of insolvency practice just as a doctor who detects symptoms of sickness may proactively treat those situations and arrest spread of disease in the system.Can we say that BRIPAN was formed to address these problems'Well, they say the greatest achievements by men are as a result of a burning passion. BRIPAN is no different in this regard. It was the keen interest of a handful of then young lawyers in this area that really got us where we are now. Our pioneers/founders had the clear objective of being the voice of business recovery and insolvency practice in Nigeria and they created the platform of BRIPAN to build a body of knowledge in this field, improving standards of performance of turn-around consultants, collective and non-collective insolvency office holders, promoting and maintaining high standards of practice and professional conduct in this distinct multidisciplinary field and as well intervening in improving the existing legal framework in Nigeria for the practice of insolvency and business recovery.Can you elucidate on the operational profile of BRIPAN, on an historical perspective when it metamorphosed from IPAN'This association has been in existence since the 90s and has sought to lay crucial emphasis on business recovery since year 2000, when it changed its name from IPAN to BRIPAN and has since consistently sought to reform our inadequate legal framework for the practice of insolvency.We are saying that there is a need to reform our statutory framework to give professionals the necessary flexibility to provide efficient solutions to very thorny issues of collapse of businesses and its snowball effect on other sectors.We are also saying that in a world that has become a global village, and businesses are intricately interconnected; there is a crucial need to raise the standards to best international practice in order to assist our beloved country to be properly equipped to face the challenges of the 21st Century. Our professionals need to be equipped and trained. The regulators need to be informed and sensitive, the judiciary needs to appreciate the sensitive commercial and human dimension nature of insolvency practice, the lenders and borrowers also.BRIPAN's objective is to assist in creating a conducive environment in Nigeria for restructuring of businesses in the most efficient manner possible and the best interest of all, including the failing business.As the current president of BRIPAN, in what areas do you think insolvency practice can be improved upon'Our focus is to expand the membership base of the association to attract not only professionals drawn from certain naturally affiliated associations such as NBA, ICAN, CIBN but also other important stakeholders such as lenders and borrowers. We are engaging government officials and regulatory agencies including establishing strategic partnership with sectoral regulators), tax institutions and members of the judiciary to entrench a proper understanding of all the connected issues.We are interested in professionalisation of business rescue/insolvency practice by consulting with various sectorial government regulators with a view to creating framework for control of practice of insolvency through subsidiary regulation in these special fields with BRIPAN playing a pivotal role.We will review our code of ethics designed to assist members not only in the efficient and effective discharge of their duties, but as well as to provide a check on their professional conduct (i.e. give a recourse to their clients) and assist in the resolution of member/client disputes.We will also ensure the protection of the profession and of the clients from quacks/breach of trust, as well as put in place a group professional indemnity insurance cover for all our members engaged in insolvency practice. We intend to charter the Association and ensurean overhaul and modernisation of our very inadequate insolvency laws. This, we will do by both partnering with government agencies (towards helping to assess the burning issues in their sectors, so that we can have a properly domesticated insolvency framework) and international bodies to ensure any outcome reflect international best practices. We hope to host an international conference and workshop early next year as part of our strategic activities.What should really be the strategic focus in the practice improvement agenda'The core focus remains education, training and public awareness, as well as legislative reform. In addition, in terms of training, one of the areas that we should focus on is deepening the expertise of our senior practitioners in terms of deepening their knowledge of business rescue and turnaround plans for businesses experiencing difficulties. Accordingly, BRIPAN has been developing a fellowship programme targeted at training intending fellows of the association to develop suitable turnaround and repayment plans for companies.
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