Section 657 CAMA 2020

Section 657 Companies and Allied Matters Act is about Preferential payments. It is under Chapter 24 (Provisions applicable to every mode of winding-up) of the Act.

(1) In a winding-up, there shall be paid in priority to all other debts—

(a) all local rates and charges due from the company at the relevant date, and having become due and payable within 12 months immediately before that date, and all pay-as-you-earn tax deductions and other assessed taxes, property or income tax assessed on or due from the company up to the annual day of assessment next before the relevant date, and in the case of pay-as-you-earn tax deductions not exceeding deductions made in respect of one year of assessment and, in any other case, not exceeding in one year’s assessment ;

(b) deductions made from the remuneration of employees and contributions of the company under the Pension Reform Act ;

(c) contributions and obligations of the company under the Employees’Compensation Act ;

(d) all wages or salaries of any clerk or servant in respect of services rendered to the company ;

(e) all wages of any workman or labourer, whether payable for time or for piece of work, in respect of services rendered to the company ; and

(f) all accrued holiday remuneration becoming payable to any clerk,servant, workman or labourer (or in the case of his death to any other person in his rights) on the termination of his employment before or by the effect of the winding-up order or resolution.

(2) Where any compensation under the Employees’ Compensation Actis a weekly payment, the amount due in respect thereof shall, for the purpose of subsection (1) (e), be taken to be the amount of the lump sum for which the weekly payment could, if redeemable, be redeemed, if the employer made an application for that purpose under the Act.

(3) Where any payment on account of wages or salaries has been made to any clerk, servant, workman or labourer in the employment of a company out of the money advanced by some persons for that purpose, that person shall in a winding-up have a right of priority in respect of the money so advanced and paid up to the amount by which the sum in respect of which that clerk,servant, workman or labourer would have been entitled to priority in the winding-up has been diminished by reason of the payment having been made.

(4) The debts shall—

(a) rank equally among themselves after the expenses of the winding-upand shall be paid in full, unless the assets are insufficient to meet them, inwhich case they shall abate in equal proportions ; and

(b) if the assets of the company available for payment of general creditors are insufficient to meet them, have priority over the claims of holders of debentures under any floating charge created by the company and be paid accordingly out of any property comprised in or subject to that charge.

(5) Subject to the retention of such sums as may be necessary to discharge the costs and expenses of the winding-up, the debts shall be discharged immediately if the assets of the company are sufficient to meet them.

(6) Notwithstanding the foregoing and any other provisions of this Act and any other law applicable in Nigeria where it relates to settlement of claims in the winding-up of a company, claims of—

(a) secured creditors, as defined under this Act, shall rank in priority to all other claims, including any preferential payment under this Act or any other debts inclusive of expenses of winding-up ; and

(b) the equity holders shall rank last.

(7) In this section, “the relevant date” means—

(a) in the case of a company ordered to be wound up compulsorily which had not previously commenced to be wound up voluntarily, the date of the winding-up order ; and

(b) in any other case, the date of the commencement of the winding-up.