lease

How Poor Lease Documentation Cost a Landlord Millions – And How You Can Avoid the Same Mistake

When Mr. Ade rented out his three-bedroom apartment in Lekki to Lekan Olunade. He trusted his tenant’s word over a formal lease agreement. A simple handshake sealed the deal—no formal Tenancy agreement, no written terms, just a verbal understanding.

Fast forward two years, and he found himself locked in a legal battle. The tenant refused to vacate, claimed he had “rights” to the property, and because there was no solid lease document, Mr. Ade had no legal ground to stand on. The case dragged on for months, costing him lost rent and legal fees running into millions.

Don’t be like Mr. Ade. Properly documenting a property lease isn’t just paperwork—it’s your financial security. Here’s how to do it right.

Get Everything in Writing – No Assumptions

A lease agreement isn’t just a formality—it’s a contract that defines your rights and protects your property. Ensure it covers:
✅ Who the parties are (full legal names)
✅ Property details (address, condition, and permitted use)
✅ Rent structure (amount, due date, payment terms)
✅ Security deposit (amount, conditions for deductions and refunds)
✅ Exit strategy (lease renewal, termination, eviction process)

Verify Before You Sign the Lease

A bad tenant can cost you more than an empty property. Always:
✔️ Request valid ID and proof of income
✔️ Check rental history and references
✔️ Conduct a background check

Document the Property’s Condition before the Transaction

Before handing over the keys, take clear photos and have both parties sign a checklist of the property’s state—this protects you from disputes over damages.

Sign, Seal, and Store the Tenancy agreement properly

Have both parties sign and keep copies of the lease. If required by law, get it notarized or registered. Also, store all payment receipts and communication records—these could save you in court.

Make It Legal, Make It Foolproof

A handshake won’t hold up in court, but a well-drafted lease agreement will. Protect your property, your finances, and your peace of mind—document your lease the right way.

Want a rock-solid lease agreement? Talk to us today.

Nigerian inheritance laws

Decoding Inheritance Laws: A Comprehensive Guide for Nigerians

Understanding Nigerian inheritance laws plays a crucial role in estate planning, ensuring assets are distributed according to the deceased’s wishes. However, navigating these laws can be complex due to their intricacies and nuances. To help you understand these laws better, we’ve compiled a comprehensive guide that covers key provisions, legal nuances, and essential considerations for effective estate planning in Nigeria.

Creating a will in Nigeria requires a clear understanding of local laws and customs. These laws dictate how assets are distributed upon death, the rights of beneficiaries, and the responsibilities of executors. Therefore, familiarizing yourself with Nigerian inheritance laws is crucial to ensure your assets are distributed as intended and your loved ones are provided for.

One critical aspect of Nigerian inheritance laws is intestate succession. If a person dies without a valid will, their estate is distributed according to laws of intestacy, which may not align with their wishes. Thus, creating a will that clearly outlines asset distribution is essential.

Nigerian inheritance laws also address issues like will validity, spousal and child rights, and executor and administrator roles. Understanding these laws helps ensure your will is legally valid, and your wishes are carried out effectively.

When creating a will in Nigeria, seeking guidance from a qualified legal professional familiar with local laws is essential. They can help you understand relevant laws, draft a legally valid will, and ensure your wishes are executed effectively. With proper legal guidance, you can create an estate plan that protects your assets and provides for your loved ones.

In conclusion, understanding Nigerian inheritance laws is crucial for effective estate planning. By familiarizing yourself with these laws and seeking legal guidance, you can create a will that reflects your wishes and ensures your loved ones are adequately provide

estate

Understanding Poison Pills in Wills: Safeguarding Your Estate in Nigeria

In Nigeria, crafting a comprehensive will to protect your assets and ensure their smooth transfer to your loved ones is essential. However, amidst the intricacies of estate planning, there’s a lesser-known yet powerful tool called “poison pills.” These legal provisions serve as safeguards against potential threats to your estate, providing invaluable protection for your beneficiaries. Let’s delve into the concept of poison pills in wills and why they are crucial for safeguarding your legacy in Nigeria.

What are Poison Pills in Wills?

Poison pills, also known as “estate poisons” or “disinheritance clauses,” are provisions strategically inserted into wills to deter undesirable actions or individuals from interfering with the testator’s intentions. These clauses typically come into effect when specific triggering events occur, acting as a defense mechanism to protect the integrity of the estate plan.

Safeguarding Your Estate

In Nigeria’s dynamic legal landscape, where disputes over inheritance are not uncommon, poison pills serve as preemptive measures to safeguard your estate against potential threats. By incorporating these clauses into your will, you can mitigate the risk of challenges, disputes, or attempts to circumvent your wishes by disgruntled parties.

Types of Poison Pills

  1. In terrorem Clauses: Commonly referred to as “no-contest” clauses, in terrorem provisions disincentivize beneficiaries from challenging the terms of the will. If a beneficiary contests the will and fails, they may forfeit their inheritance or receive a nominal bequest.
  2. Conditional Gifts: Poison pills can be structured as conditional gifts, wherein beneficiaries must meet certain criteria or conditions to receive their inheritance. Failure to fulfill these conditions may result in the gift being redirected or revoked.
  3. Appointment of Executors and Trustees: Testators can include poison pills by appointing specific individuals as executors or trustees, with provisions specifying their removal or replacement under certain circumstances, such as conflicts of interest or incapacity.

Importance in Nigerian Estate Planning

In Nigeria, where cultural, familial, and legal complexities often intersect in matters of inheritance, poison pills play a crucial role in preserving the testator’s wishes and protecting beneficiaries’ interests. By strategically implementing these clauses, individuals can exert greater control over the distribution of their assets, minimize the risk of disputes, and maintain the integrity of their estate plans.

Consultation with Legal Experts

Given the nuances of estate planning and the intricacies of Nigerian law, seeking guidance from experienced legal professionals is paramount. At Milton and Cross Solicitors, our seasoned estate planning lawyers specialize in crafting personalized wills tailored to our clients’ unique circumstances and objectives. By leveraging our expertise and incorporating poison pills where necessary, we empower our clients to safeguard their legacies and protect their loved ones’ futures.

Conclusion

In the realm of estate planning in Nigeria, poison pills serve as potent tools for fortifying wills against potential threats and challenges. By strategically incorporating these clauses, individuals can uphold their intentions, mitigate disputes, and ensure the seamless transfer of assets to their chosen beneficiaries. At Milton and Cross Solicitors, we are committed to guiding our clients through the intricacies of estate planning, empowering them to secure their legacies and protect their loved ones’ futures.

Contact us today to learn more about how poison pills can safeguard your estate in Nigeria and schedule a consultation with our experienced legal team.

patent

Defending Innovation: Navigating the Landscape of Patent Trolls

In the dynamic realm of intellectual property, innovation thrives as the lifeblood of progress. Yet, the innovation landscape is not without its challenges. Enter the enigmatic figures known as patent trolls, wielding patents not as tools of creation, but as weapons of litigation. Today, we delve into the intriguing world of patent trolls and explore the proactive measures a savvy business can take to safeguard its intellectual treasures.

Unmasking the Patent Troll: A Legal Menace

A patent troll, or non-practising entity, is an entity that acquires patents with the sole purpose of enforcing them against alleged infringers. These trolls often lurk in the shadows, targeting businesses of all sizes to extract settlements through legal intimidation.

The Web of Trolling: How They Operate

Patent trolls cast wide nets, identifying potential targets through a range of tactics. From issuing demand letters that propose settlements to filing lawsuits against multiple entities, their modus operandi revolves around exploiting the fear of expensive legal battles.

Defending Against the Troll’s Grip: Legal Strategies

When faced with the ominous presence of a troll, legal defense becomes paramount. Our seasoned legal team specializes in navigating the intricate web of intellectual property law to mount a robust defence. Through Inter Partes Review (IPR) proceedings and strategic litigation, we empower businesses to challenge the validity of patents and stand firm against dubious infringement claims.

Shaping a Future of Innovation: Advocating for Reform

Beyond the courtroom, our commitment extends to advocating for patent reform at the legislative level. By pushing for laws that fortify patent validity requirements and increase transparency, we aim to create an environment that discourages patent trolls and nurtures a culture of genuine innovation.

Join the Fight: Protecting Your Innovation

In the face of patent trolls, knowledge is power, and proactive defense is the key to preserving your innovation. Trust our dedicated legal experts to be your allies in this battle. Together, let’s shape a future where innovation thrives, unburdened by the shadows of patent trolls.

Innovate fearlessly. Defend strategically. Choose Milton & Cross Solicitors for your intellectual property needs. Contact us today to embark on a journey of legal empowerment in the ever-evolving landscape of patents.

When Does a Spectator of a Conspiracy Become an Accomplice: Insights from Legal Precedent

conspiracy

In the complex realm of criminal law, the question of accomplice liability in conspiracy cases often raises intriguing debates. The case of Jimoh Ishola, famously known as Ejigbadero, v The State (1978), sheds light on the pivotal juncture where a mere spectator of a conspiracy might transition into an accomplice to the resultant offence.

Understanding the Issues around Conspiracy:

Central to this debate is the blurred line between mere knowledge or presence in a conspiracy and active participation. When does a person contribute to the commission of an offence? A spectator’s liability hinges on the threshold of involvement in the planning or execution of the unlawful act.

Rules of Law:

The ruling in Jimoh Ishola v. The State offers insights into the transition from a passive observer to an active participant. It underscores that knowledge of a conspiracy alone isn’t sufficient to establish culpability. The crucial element lies in whether the spectator willingly and knowingly participated in the conspiracy’s execution or provided substantial assistance that led to the offence.

A person is a criminal offender if they fall within the following category of offenders:

  1. Every person who actually does the act or makes the omission which constitutes the offence;
  2. Every person who does or omits to do any act to enable or aid another person to commit the offence;
  3. Every person who aids another person in committing the offence;
  4. Every person who counsels or procures any other person to commit the offence is guilty of the offence.

Everyone, therefore, who falls within any of the categories (a) – (d) is a participant in the actual offence, that is, an accomplice. The party who falls within (a) is the perpetrator of the offence; the one who falls within (b) prepares the way for, or facilitates the crime; the one who falls within (c) assists in the preparation of the crime and, the one who falls within (d) foments or incites its commission.

Potential Defenses to a Conspiracy charge:

Establishing innocence amidst allegations of conspiracy-turned-accomplice often rests on several key defenses:

  1. Lack of Intent: Demonstrating a lack of intent to participate actively in the conspiracy or the commission of the offence.
  2. Non-Contribution: Proving the absence of any active involvement, contribution, or encouragement towards the unlawful act resulting from the conspiracy.
  3. Withdrawal: Substantiating withdrawal from the conspiracy by actively disassociating oneself from the planning or execution before the offence occurred.

Conclusion:

The case of Jimoh Ishola (Ejigbadero) v. The State serves as a cornerstone in understanding the transition from being a mere spectator of a conspiracy to become an accomplice in the resultant offense. It reinforces the necessity to establish active participation or contribution beyond mere awareness to attribute liability.

In the intricate web of criminal law, this precedent underscores the need for a nuanced evaluation of individual involvement in conspiracies. It prompts a careful consideration of intent, actions, and the threshold of participation required to deem a spectator an accomplice to the offence arising from a conspiracy.

Ultimately, this legal precedent highlights the importance of a comprehensive understanding of accomplice liability, emphasizing the critical distinction between passive awareness and active involvement in criminal conspiracies.

legal risks

How to Identify and Assess Legal Risks in Real Time: A Guide for Businesses

Running a business involves navigating a complex landscape of opportunities and challenges, with legal risks lurking around every corner. Identifying and assessing these risks in real-time is crucial for maintaining a smooth operation and avoiding potential legal pitfalls. In this article, we’ll walk you through a simple guide on how to identify and assess legal risks in real-time, helping you safeguard your business’s interests and reputation.

1. Stay Informed:
The first step in managing legal risks is to stay informed about the ever-evolving laws and regulations in your industry. Regularly review industry publications, legal news, and updates to ensure you’re up-to-date on any changes that might impact your business. This proactive approach will help you spot potential risks before they become pressing issues.

2. Understand Your Business Activities:
Take a close look at your business operations and activities. Understand how each process works and identify potential areas where legal issues could arise. For instance, if you handle customer data, ensure you’re compliant with data protection laws. By comprehending the nuances of your business, you’ll be better equipped to spot risks that might otherwise go unnoticed.

3. Conduct Risk Assessments:
Regular risk assessments are essential. These assessments involve systematically evaluating different aspects of your business to identify potential legal risks. Create a checklist of common legal issues relevant to your industry and business type. Then, evaluate each aspect to determine its risk level. This could include contracts, intellectual property, employment practices, and more.

4. Seek Legal Expertise:
While you might be knowledgeable about your business, legal matters often require specialized expertise. Establish a relationship with a legal professional or law firm that understands your industry. Having legal experts on hand ensures you can get quick advice when you’re unsure about a potential risk or decision.

5. Monitor Contracts:
Contracts are the backbone of many business relationships. Regularly review contracts with clients, suppliers, partners, and employees. Ensure that all terms and conditions are clearly outlined and understood by all parties. This minimizes the risk of disputes and legal complications down the line.

6. Train Your Team:
Your employees are on the front lines of your business operations. Provide them with training on legal matters relevant to their roles. This could include data privacy, workplace safety, and customer interactions. Well-informed employees are more likely to recognize and address potential legal risks before they escalate.

7. Implement Technology:
In today’s digital age, technology can be a powerful ally in identifying and managing legal risks. Invest in tools that automate compliance tracking, data management, and risk assessment processes. These technologies can help you quickly spot anomalies and areas of concern.

8. Regular Audits:
Perform regular internal audits to evaluate your business’s compliance with relevant laws and regulations. This systematic review can highlight areas that need improvement and help you take corrective actions before legal issues arise.

9. Have a Crisis Plan:
Despite your best efforts, unforeseen legal issues may still arise. Having a crisis management plan in place can help you respond swiftly and effectively. This plan should outline steps to take in the event of legal disputes, regulatory violations, or other emergencies.

10. Learn from Others:
Keep an eye on legal cases and disputes in your industry. Learning from others’ mistakes can be incredibly valuable. Understand what went wrong and why, and adapt your own practices to avoid similar pitfalls.

Conclusion

In conclusion, identifying and assessing legal risks in real time is a vital skill for any business owner. By staying informed, understanding your operations, seeking legal expertise, and implementing proactive measures, you can minimize the potential legal challenges that may arise. Remember, prevention is key – addressing legal risks before they escalate can save your business time, money, and its hard-earned reputation.

economic duress

How does Economic Duress affect a contract?

Economic duress is a legal concept that arises in the context of contract law. It refers to a situation where one party to a contract is forced to enter into or modify the terms of a contract due to economic pressure or coercion exerted by the other party. The party claiming economic duress typically has no reasonable alternative but to agree to the terms imposed on them.

In order to prove economic duress, the victim must establish that the other person acted improperly or illegally. Because duress rests on pressure rather than an absence of consent, the nature of the pressure is crucial in determining whether duress has occurred. As some sorts of pressure are legitimate, you must show that the pressure was unlawful.

The victim should also establish that improper or illegal conduct caused them to be afraid of economic hardship and the fear of hardship prevented him or her from engaging in a commercial agreement with free will.

ELEMENTS OF ECONOMIC DURESS

To win a case, you must generally establish the following elements:

  1. Unlawful or wrongful conduct: The party alleging economic duress must show that the other party engaged in some form of wrongful behaviour or acted unlawfully. This can include threats, blackmail, fraud, or other coercive tactics. See S.P.D.C.N. Ltd. v. Nwawka (2003) 6 NWLR (Pt. 815) 184, C.C.C. ThriftCredit Society v. Ekpo (2001) 17 NWLR (Pt. 743) 649.
  2. Lack of reasonable alternatives: The party under duress must demonstrate that they had no meaningful choice but to agree to the contract or modify its terms. They must show that they were facing financial hardship or other circumstances that left them with no viable alternatives.
  3. Causation: There must be a direct link between the wrongful conduct of the other party and the coerced agreement. The party alleging economic duress must show that the wrongful behaviour directly led to their acceptance of the contract or modification.

If economic duress is successfully proven, the affected party may seek remedies such as rescission (cancelling the contract), damages, or the enforcement of the contract under revised terms. However, it’s important to note that the specific legal standards and remedies for economic duress can vary depending on the jurisdiction and the particular facts of the case. It is advisable to consult with a legal professional for guidance tailored to your specific situation.

HOW TO INVEST IN CO-WORKING SPACES

Investing in co-working spaces can be a lucrative opportunity given the growing demand for flexible office solutions. Co-working spaces present an exciting opportunity, but it’s important to approach it with the same level of diligence and caution as any other investment. Here are some considerations to keep in mind before making a decision:

Differences between Great and Terrible Co-Working Spaces

co-working

Great Co-Working Spaces:

  1. Productive Environment: Great co-working spaces provide a productive atmosphere that promotes focus and concentration. They have designated work areas, comfortable seating, and a quiet ambience, enabling members to work efficiently.
  2. Amenities and Facilities: These spaces offer various amenities and facilities to enhance the working experience. They may include high-speed internet, conference rooms, private offices, printing and scanning services, on-site cafes or refreshment areas, and even fitness facilities.
  3. Community and Networking Opportunities: Great spaces foster a sense of community among their members. They organize networking events, workshops, and social activities, providing opportunities for collaboration, knowledge-sharing, and professional growth.
  4. Flexibility and Customization: They offer flexible membership options, allowing individuals or teams to choose the duration and type of space they need. Great co-working spaces may have open desks, dedicated desks, private offices, or meeting rooms, accommodating various work preferences.
  5. Supportive Staff: The staff in great co-working spaces are friendly, professional, and readily available to assist members with any queries or concerns. They maintain the space, ensure a smooth operational flow, and often organize community events to encourage interaction.

Terrible Co-Working Spaces:

  1. Poor Infrastructure: Terrible co-working spaces may have outdated or unreliable infrastructure, such as slow internet connections, malfunctioning equipment, or uncomfortable furniture. These factors can hamper productivity and create frustration among members.
  2. Lack of Privacy and Distractions: Inadequate space planning and layout can result in a lack of privacy and excessive noise, making it difficult for individuals to concentrate. This can be a major drawback for those who require a quiet and focused work environment.
  3. Limited Amenities and Services: Terrible co-working spaces may lack essential amenities or charge extra fees for basic services. This could include limited access to meeting rooms, inadequate kitchen facilities, or unreliable support staff.
  4. Lack of Community Engagement: In contrast to great co-working spaces, terrible ones may lack a sense of community and fail to foster networking opportunities. The absence of organized events, workshops, or collaborative initiatives can make the space feel isolated and less engaging.
  5. Inflexible Contracts: Terrible co-working spaces often have rigid and inflexible membership contracts, leaving individuals or teams locked into long-term commitments even if their needs change. This lack of flexibility can be inconvenient and restrict a member’s ability to adapt their workspace as required.

Overall, great co-working spaces prioritize a conducive work environment, a sense of community, and flexibility, while terrible co-working spaces may fall short in these areas, leading to a less satisfying and productive experience for their members.

Before you invest

  1. Research the Market: Start by researching the co-working industry and understanding the current trends, market demand, and competition. Look into market reports, industry publications, and news articles to gather insights.
  2. Define your Investment Strategy: Determine your investment goals, whether you want to invest directly in a co-working space or through a real estate investment trust (REIT). Consider factors such as location, target market, amenities, and pricing models.
  3. Evaluate Potential Locations: Identify potential locations for your co-working investment. Look for areas with high demand, proximity to transportation hubs, business districts, or areas with a thriving startup and freelance community. Consider factors like population density, accessibility, and local business climate.
  4. Conduct Due Diligence: Perform thorough due diligence on the co-working space you are considering investing in. Assess factors like the financial health of the company, occupancy rates, lease terms, management team, and growth projections. Engage professional advisors, such as lawyers and accountants, to assist with the evaluation.
  5. Understand the Business Model: Gain a comprehensive understanding of the co-working space’s business model. Evaluate the pricing structure, membership plans, and value-added services offered. Assess how the company differentiates itself from competitors and how it plans to sustain profitability.
  6. Analyze Financials: Review the financial statements, including revenue, expenses, and profitability of the co-working space. Assess the stability of the revenue streams, the ability to cover operating costs and the potential for future growth. Evaluate the pricing strategy and whether it is aligned with the market demand.
  7. Assess Risk Management: Consider the risks associated with investing in co-working spaces, such as economic downturns, changing work trends, competition, and lease obligations. Evaluate the risk mitigation strategies employed by the co-working space, such as diversification, tenant retention programs, and contingency plans.
  8. Seek Professional Advice: Consult with professionals who specialize in real estate investment or commercial property management. They can provide insights into the local market, and legal requirements, and help you navigate the investment process.

After you Launch your space

  1. Network and Partnerships: Build relationships with industry professionals, co-working space operators, and potential partners. Attend industry events, join networking groups, and engage with stakeholders to gain valuable insights and potential investment opportunities.
  2. Monitor and Adapt: Once you invest in a co-working space, actively monitor its performance and adapt as needed. Stay updated with market trends, adjust pricing strategies, and explore opportunities for expansion or diversification to maximize returns.

Remember, investing in co-working spaces carries risks, so it’s crucial to conduct thorough research and due diligence before making any investment decisions. Our Real Estate team is always available to provide support in this regard.

What does Assignment mean in Law?

Are you about to start a property transaction?

Assignment defines a legal transaction where an individual, the “assignor,” transfers rights, property, or other benefits to another person. This receiver is known as the “assignee”. When a right is assigned, the assignee enjoys all the rights that were enjoyed by the assignor. They are also required to perform all the obligations that were performed by the assignor

The concept of assignment is used in both contract and property law. It basically means a sale of legal rights.This means that a few important rules apply to assignments.

First, you cannot validly assign what you do not legally own. Even where a person is the equitable owner of a property, the right to assign the property still remains with the legal owner.

corporate insolvency

A GENERAL DISCUSSION OF THE CORPORATE INSOLVENCY PROCESS

The corporate insolvency process is essential within the context of general commerce and financial transactions. During this process, commercial law is usually ruthless, because at this point, the existing assets are insufficient to pay all the creditors. As a result, the principal goal of the Insolvency process is to gather in and distribute the limited assets to business creditors in an orderly manner. Other objectives include rescuing the business, restructuring the business or rebuilding the business’ capital structure.

Cash is king for any business venture. Business operations and growth usually consume a substantial amount of the business capital. Consequently, when a business runs out of cash, it tends to be the end of the road for that business. That is, unless the founders, managers or investors are willing to take some drastic action to refinance the business. This situation can happen fast (such as when the business gets hit by a disaster) or the business may slowly bleed cash over a period.

Furthermore, the proceedings occur in an emotionally charged environment because lenders and creditors feel betrayed. The company may also need to fire some staff. Thus, unless the law chooses which creditors should be paid, a free-for-all ensues, as creditors fight for a piece of the small pie.

Creditors: Who are they?

  1. Banks
  2. Bond Holders
  3. Investment Companies (these include Venture capital companies, Hedge funds, and other non-bank lenders).
  4. Employees
  5. Suppliers
  6. Landlords
  7. Tax authorities
  8. Judgment creditors

Precursors to the Corporate Insolvency process

Insolvencies may be caused by misfortune or mismanagement, or both. Mismanagement revolves around poor financial and cost controls. These include creating a poor product, borrowing too much, hiring too many employees and imprudent business ventures. Some insolvencies occur due to internal or external fraud and embezzlement. Misfortunes occur where the business takes a reasonable risk, but the investment loses value to natural, political, economic, operational or social disasters. This includes fires, natural disasters, and the insolvencies of major debtors.

In order to trigger insolvency proceedings, some events usually occur:

  1. There must have been a prior commercial relationship between the debtor and the creditors. This transaction must have given rise to certain obligations between the parties. These include payment and performance obligations.
  2. An event of default (EoD) must have occurred or the debtor must have been unable to meet an agreed obligation(s).
  3. The offended party usually gives the other party some time to repair the default (Cure Period). This could vary, but it usually ranges from 1 week to 3 months. If the Cure Period lapses or there isn’t one to begin with, the creditor has a right to pursue legal action against the company for the immediate payment of all outstanding obligations (Acceleration).

Features of the Insolvency Process

Insolvency has a profound effect on normal legal relationships. The directors are disqualified from working, assets are seized without compensation, and contracts are voided. Employees sometimes lose their jobs and pensions, and secured interests are debased. The market loses another potentially profitable business.

The insolvency process is a collective process and it has the following features:

  • Actions against the business by individual creditors are frozen. As a result, disappointed creditors will be legally prevented from seizing the assets of the business. The right of execution are stayed and replaced by a right to claim a dividend payment from the pool of assets.
  • All assets of the company are gathered into a pool, which will be used to pay creditor claims. However, due to the substantial amount of exceptions to this rule, the applicability of this feature is doubtful in reality. In many situations, creditors are paid according to a hierarchy of payment.
  • Creditors are paid pari passu. This means they are supposed to be paid pro-rata out of the assets of the company, according to their claims. In reality, this may be wishful thinking, as various creditors are paid according to their negotiating positions.

Policies of Corporate Insolvency Law

Insolvency law is pre-occupied with the following interests:

  • Protection of Creditors equality by preventing disorderly and discriminatory actions by individual creditors.
  • Maximisation of creditor returns
  • Protection of the debtors interests and company (where possible). This is done by levelling down security interests, termination of onerous contracts, and refusal of insolvency set offs.

These interests are shaped by ancient attitudes to commerce and finance such as financial discipline and prudence. Formerly, the insolvency regimes favoured by many jurisdictions expressed moral disapproval of defaulting debtors. However, attitudes are rapidly changing towards a desire to save and rescue businesses that have potential.

Governments now aim to help deserving businesses survive a temporary cash-flow challenge. Corporate law generally recognizes insolvency risks, and many corporate governance and accounting rules have evolved to anticipate and prevent insolvencies. In addition, most commercial agreements contain protections against insolvency.