Berkeley Legal | AMCON’s Role in Reviving Ailing Companies

28 Feb AMCON’s Role in Reviving Ailing Companies

Posted at 18:23h in Resources, Snippets by Berkeley Legal IT

The Asset Management Company of Nigeria “AMCON” is a statutory body created by an Act of the National Assembly, (Section 1(1) of the AMCON Act 2010) for the purpose of resolving the Non-Performing Loan (NPL) assets of banks in Nigeria and related matters. It is a key stabilizing and revitalizing tool aimed at reviving the financial system.

It was established as a result of the constant growth of NPLs in a number of banks within the Nigerian system. The level of solvency contributed majorly to this. This article will discuss AMCON’s role in reviving failing companies in Nigeria.

Firstly, it is important to note the functions of AMCON that have defined the institution’s role in the Nigerian economy; and they include the following;

To acquire eligible bank assets from eligible financial institutions in accordance with the provisions of the Act.
To purchase or otherwise invest in eligible equities on such terms and conditions as the Corporation, with the approval of the Board of Central Bank of Nigeria may deem fit.
To hold, manage, realize and dispose of eligible bank assets (including the collection of interest, principal and capital due and the taking over of collateral securing such assets) in accordance with the provisions of the Act.
To pay coupons on, and redeem at maturity, bonds and debt securities issued by the Corporation as consideration for the acquisition of eligible bank assets in accordance with the provisions of the Act.
To perform such other functions, directly related to the management or the realization of eligible bank assets that the Corporation has acquired, including managing and disposing assets acquired with the proceeds derived by the Corporation from managing or disposing of eligible bank assets acquired by it.
To take all steps necessary or expedient to protect, enhance or realize the value of the eligible bank assets that the Corporation has acquired.
To perform such other activities and carry out such other functions which in the opinion of the Board are necessary, incidental or conducive to the attainment of the objects of the Corporation. (Section 5)

Essentially, AMCON’s objectives include assisting eligible financial institutions to efficiently dispose of eligible bank assets, managing and disposing of eligible bank assets acquired by it and the obtainment of the best achievable financial returns on eligible bank assets or other assets acquired by it.

Debt Recovery

In implementing its debt recovery functions, AMCON tries to reclaim what is legally owed by a debtor. One vital information to note is that AMCON would not be found in open dispute with a debtor except all options for amicable settlement of issues have been exhausted. These debtors must have passed through the three normal stages of the debt recovery, which include the following;

The debtor must have failed to settle their debts with their initial creditor (in most cases this is a bank), commonly referred to as a first-party agency.
A third party must have been introduced as a debt collector.
The original creditor must have written off the debt and sold same. this is where AMCON comes in.

The statutory body adopts an aggressive recovery strategy that has led to increased repayment from recalcitrant debtors. Section 48 of the AMCON Act empowers the body to either act as or appoint a receiver for a debtor company whose assets have been charged, mortgaged or pledged as security to AMCON. This receiver has been empowered by the Act to realize the assets of the debtor company, enforce the individual liability of its shareholders and directors and manage its affairs.

While Section 49 provides the right to custody and possession of a debtor’s property, Section 50 also permits the attachment and freezing of the debtor’s bank account(s).

Disposal of Assets

The debt recovery process sometimes includes asset disposals. AMCON by virtue of the Act, is empowered to dispose of managed assets for the purpose of fulfilling its functions and objectives. The classes of assets that may be sold by AMCON range from real estate to specialized assets. The real estate asset maybe residential or commercial property.

In addition to Section 5 stated above, AMCON may also dispose of eligible bank assets that have been acquired by it, including portfolios of such banks in the market at the best achievable price. It may also securitize or refinance portfolios of eligible bank assets, as well as hold, realize and dispose of the collateral securing eligible bank assets.

Take Over

The AMCON Act also enables the institution to take over ailing companies that have failed to meet their debt obligations. A leading Nigerian Airline Company was taken over by AMCON in the early 2000s. AMCON dissolved the company’s board of directors and appointed a manager to oversee the affairs of the company. The aim of the take over was to ensure continuity, credit recovery and economic use in a profitable manner.

In conclusion, AMCON continues to ensure the financial stabilization of the Nigerian system. It has saved a number of entities from systemic collapse through debt recovery, asset disposals, bridge banking and outright takeover. it is expected that it will restore the confidence of investors in the banking and financial institutions.

Berkeley legal is capable of advising on the above and other legal areas relating to this Article.

The information provided in this article is for general informational purposes only and does not constitute legal advice. If you require specific legal advice on any of the matters covered in this article please contact info@berkeleylegal.com.ng