The interplay between Netting Agreements and Insolvency under the Companies and Allied Matters Act 2020

Netting is generally referred to as the consolidation of multiple positions or payments being owed between two or more parties so that a net balance payment is simply owed from one of the parties to the other while a netting agreement is simply an agreement that provides for or documents the netting arrangement or terms.

Prior to CAMA, there were no specific statutory provisions regarding netting under Nigerian law and recourse was always had to general principles of contract. Under that old regime, while parties were generally free to enter into netting agreements under Nigerian law, they ran the risk of not being able to take advantage of their netting agreements in the case of their contract counterparty’s insolvency.

In this article we discuss the regime for netting agreements under CAMA.