SUPREME COURT JUDGMENT ALERT: THE BOARD RETAINS POWER TO APPOINT COMPANY’S LEGAL REPRESENTATIVE DESPITE APPOINTMENT OF RECEIVER-MANAGER.

The Supreme Court has yet again delivered a landmark decision earlier this month on the 10^th day of April 2026 in the case of NECONDE ENERGY LTD V. FBN QUEST MERCHANT BANK LIMITED & 4 ORS (SC/CV/48/2026). The decision has notably set a precedent for a company’s legal representation in the midst of a pending litigation of debt recovery.

The issue of legal representation of a company during the appointment of a receiver-manager is one of the most common conflicts arising in debt recovery proceedings.

A receiver-manager, either appointed by the court or the lender company, is a person appointed to take possession of, protect, and manage the assets and business undertaking of a company to realise security and satisfy debt. Their role includes managing the business as a going concern, with a view to recovering the amount due to the secured creditor, or even selling the company as a going concern. (Section 556 of CAMA 2020)

This newsletter will briefly discuss the decision of the Apex court regarding legal representation of a company in a receiver-manager battle while in a pending debt recovery proceeding and its implications for company procedures.

OVERVIEW OF THE JUDGMENT

The sole issue for the dispute was whether a receiver-manager appointed by a lender company can exclusively determine the legal representative of the company even when the validity of the said receiver-manager is being challenged. The question facing the court was whether the company, through its Board of Directors, retains the power to act in that circumstance.

In the lead judgment read by Justice Mohammed Baba Idris, the five-member apex court held that it was a “legal anomaly” to allow lawyers appointed by the receiver-manager to also represent the companies, citing a conflict of interest. The courts held, stating that“where the dispute concerns the legality, validity or scope of the receivership, the company cannot be stripped of its residual authority to act through its directors in defence of its corporate existence and interests. Therefore, the defence of the appellant through its Board of directors, and the counsel retained by them, cannot be said to be incompetent merely because a receiver had been appointed over certain assets of the company.”

The Supreme Court specifically faulted the Court of Appeal, setting aside its ruling delivered on 23^rd January 2026, which had earlier disqualified Chief Wole Olanipekun SAN, Dr Muiz Banire SAN, and their legal teams as the proper legal counsel for the Neconde Energy Ltd, and which recognised the receiver-manager appointed by the lender company as the sole authority competent to appoint the company’s legal counsel. The position taken by the Court of Appeal is considered erroneous as the Supreme Court pointed out that the Court of Appeal failed to perceive the inherent conflict in granting the receiver-manager the exclusive right to appoint a legal counsel for the company. In disqualifying Chief Wole Olanipekun SAN, Dr Muiz Banire SAN, and their legal teams, the Court of Appeal determined the merits of the suit still pending at the trial court in its substantive stage, thus rendering the question “whether or not the receiver-manager appointed by the lender company is valid?” unanswered.

Thus, the Supreme Court restored the legal counsels, Chief Wole Olanikpekun SAN and Dr. Muiz Banire SAN, and their team as counsels to Neconde Energy ltd and Nest Oil, respectively, to continue in the legal representation of the company in the debt recovery suit.

IMPLICATION OF THE SUPREME COURT JUDGEMENT

1. It creates limitations on the power of a receiver–manager of a company: Following the Supreme Court’s landmark decision in the aforementioned case, a judicial limitation is created on the powers of a receiver-manager in a company. The act of the receiver-manager in this case cannot be regarded as falling within the ordinary managerial functions of a receiver under section 556(3) and the Eleventh schedule to CAMA 2020.
2. It promotes the right to fair hearing: The decision of the apex court in the above-mentioned suit has fortified that section 36 of the Constitution of the Federal Republic of Nigeria 1999 (CFRN), as amended, not only applies to natural persons but can be extended to artificial persons. This judgment marks a critical affirmation of corporate rights under receivership and sends a strong signal against the misuse of receivership as a tool to stifle legitimate legal challenges.

This is a welcome involvement of the court in the affairs of a company. The decision of the court will go forward to caution the arbitrary/irregular appointment of a receiver as well as caution the exercise of the powers of a receiver-manager in times where its position is in conflict. The Board of Directors needs to be more vigilant in defending the rights of the company, especially in instances of liquidation of debt by lender companies.

This newsletter is provided for general information purposes only and does not constitute legal, regulatory, or professional advice. While reasonable care has been taken in preparing this publication, readers are advised not to rely on its contents as a substitute for specific legal advice. Institutions and individuals are encouraged to consult their legal, compliance, or other professional advisers to obtain advice tailored to their particular circumstances.