A Doctrinal Assessment of the Insolvency Frameworks of African Countries in Coping with the Pandemic-Triggered Economic Crisis

• Author: Iheme, C.I.
• DOI: https://doi.org/10.47348/SLR/2021/i2a7
• Published date: 29 September 2021
• Date: 29 September 2021
• Citation: (2021) 32 Stell LR 306
• Pages: 306-329

https://doi.org /10.47348/ SLR/2 021/i2a7

306

A DOCTRINAL ASSESSMENT OF THE

INSOLVENCY FRAMEWORKS OF AFRICAN

COUNTRIES IN COPING WITH THE PANDEMIC-

TRIGGERED ECONOMIC CRISIS

Williams C Iheme*

LLB LLM SJD

Associate Professor of Law, Jindal Global Law School; Visiting Professor, Strathmore

Law School

Sanford U Mba**

LLB LLM SJD

Senior Associate in the law firm Dentons ACAS-Law

Abstract

The COVID-19 pandemic has no doubt impa cted all countries of the world.

In its wake, it has left a tra il of mortality and an economic c risis of immense

proportions. As the vir us continues to mutate and containment mea sures are

introduced, the ec onomic challenges posed by the pand emic continue to be

felt by households and bu sinesses. By arguing that t imes of economic crises

provide an auspicious o ccasion for countries to re work their insolvency

frameworks an d their debt restructuring regime s, this article interrogates the

existing debt rest ructuring regime s in both Kenya and Nigeria, as provided

for in the Kenyan Insolvency Act 2015 and the Nigerian Companies and Allied

Matters Act 2020, and considers the role of their sta tutes and institut ions

created to facilitate debt restr ucturing. The arti cle further highlights key

defects and proposes imp ortant and critical changes to the se legal frameworks

to ensure that they are sufciently responsive to the pandemic-triggered crisis.

Keyword s: COVID-19 pandemic; insolvency; administration; rece ivership;

debt restructu ring; crystallisation of oating charge

1 Introduction

Late in 2019, t he  rst case of the COVID-19 virus (“the vir us”) was

reported.1 Little did the world know that the virus – which was subsequently

*Email: wciheme @jgu edu in; wil liamsiheme@g mail com

∗∗ Email: s anford mba@dent ons com; sanfor dmba@gmail com The vie ws expressed h ere are solely mine

and do not repre sent those of Dentons ACAS- Law

We are grateful to the anonymous reviewers for their comme nts on an earlier draft of this article However,

any errors i n the article are sol ely our own

1 See World Healt h Organisat ion “Coronavir us disease 2019 (COVID-19) Situation Report – 94” (23-04-

2020) WHO i nt/docs/default-source/coronaviruse/situation-repor ts/20200423-sitrep-

94-COVID-19 pdf > (accessed 20-03-2021)

(2021) 32 Stell LR 306

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https://doi.org /10.47348/ SLR/2 021/i2a7

declared a pandemic i n March 20202 – would impact the world i n so many

ways, including the cost to human life and its effect on the global economy. As

of March 2021, it is estimated that over two million lives have so far been lost.3

While the global ec onomic impact is still being assesse d, the world economy

has undoubtedly come unde r severe strain a s a result of the pandemic.4

Presumably, by sheer serendipity, while many A frican countries were

spared the very high mortality rates of the vir us, their economies were not

spared the devastat ion which plunged Africa into what has been des cribed as

its worst re cession in more than 50 years.5 Africa n economies dependent on

commodity export6 and tourism7 have been particularly hit hard. As a result

of lockdowns imposed by govern ments to contain the spread of the virus

and its var iants, economic activities continue to suffer. The m icro-economic

implications are a d rop in hou sehold i ncome and ma ny bu sinesses strugg le

to st ay aoat. I ndeed, many individuals and businesses a re on the brink of

insolven cy.

As A frican c ountries initiate policies t o ameliorate the devast ating

economic impact resulting from the pandemic, the legal frameworks that

facilitate individual a nd corporate insolvencies and the restructu ring of debts

need to be i nvestigated for their efciency. This accords with inter national

experience where policymaker s traditionally have taken adva ntage of periods

of economic downtur n to rework their insolvency law regimes by addressi ng

shortcomings in these laws as an integral part of addressing na ncial distress,

especially at the level of businesses.8

In this article, we examine the su itability of the insolvency frameworks of

African countries, par ticularly those of Kenya and Nigeria. T hese countries

have been chosen because both share a common British colonial heritage. Also,

both cou ntries have unde rtaken reforms which – the authors believe – have

2 C Sohrabi, Z Alsaf i, N O’Neill, M Khan, A Ker wan, A Al-Jabir, C Losif idis & Riaz Agha “World Health

Organiza tion declares global emerg ency: A review of the 2019 novel coronavirus (COVID-19)” (2020) 76

Int J Surg 71 nih gov/32112977/> (accessed 20-03-2021)

3 See Statista “Numbe r of cumulat ive ca ses of coron avirus (COVID-19) worldwide from January 22,

2020 to March 16, 2021, by day” (29 -03-2021) Statista

cumulative -coronaviru s-COVID19-cases -number-worldwide-by- day/> (accessed 20- 03-2021)

4 See eg N Arnold & V Nguyen “Five Charts on the Euro Area’s Post-COVID-19 Recovery and Growth”

(22-12-2020) Internation al Monetary Fun d

na122220five-charts-on-the-euro-areas-postcovid19-recovery-and-growth> (accessed 20-03-2021);

M Nichola “The socio-economic implicat ions of the coronavirus pandemic (COVID-19): A review” (2020)

78 Int’l J S urg 185 62753/> (accessed 20-03-2021);

CY R hee “IM F: How Asia can navigate the long-term economic impact of COVID-19” (22-03-2021)

World Economic Forum org /agenda/2021/03/asia-COVID-coronavirus-pandemic-

economics-r ecovery-imf/> (ac cessed 20-03-2021)

5 African D evelopment Bank “Afric a’s Growth Performance and Outlook amid t he COVID-19 Pandemic”

(09- 03-2 021) African Development Bank

aeo_2021_-_chap1_-_en pdf> (accessed 20-03-2021)

6 See R Olurounbi “Coronav irus to knock $4bn from Africa’s com modity r evenues” (06 -03-2020) T he

Africa Report

commodit y-revenues/> (accesse d 20-03-2021)

7 J Page “T hreats to job creatio n: Tourism and COVID-19” (18-02-2021) Brookings

brookings edu/blog/africa-in-focus/2021/02/18/threats-to-job-creation-tourism-and-COVID-19/>

(accessed 20- 03-2021)

8 See E Cirmizi , L Klapper & M Uttamchand ani “The Challenge s of Bankruptcy Refor m” (2012) 27 World

Bank Research Observer 185

A DOCTRINAL ASSESSMENT OF THE INSOLVENCY

FRAMEWORKS OF AFRICAN COUNTRIES 307

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