LEGAL EVALUATION OF THE INABILITY OF A COMPANY TO PAY ITS DEBT AS A GROUND FOR WINDING UP PROCEEDINGS IN NIGERIA

The doctrine of legal personality accords a corporate entity an independent existence distinct from its members upon incorporation with the CAC. Consequently, a registered company enjoys perpetual succession, the capacity to acquire and dispose of property, enter into contracts, sue and be sued, incur obligations, expand, or suffer severe financial distress. Where financial hardship culminates in a company’s persistent inability to pay its undisputed debts, the law provides a legal mechanism to end its existence through winding-up proceedings. This process ensures that corporate assets are realized and equitably distributed to satisfy creditors and members according to statutory priority. Liabilities are discharged, and any surplus is distributed to members before the company is struck off the register. Thus, the process serves the dual purposes of creditor protection and the orderly dissolution of legal personality. This paper evaluates and analyzes the inability of a company to pay its debts as a pivotal statutory ground for corporate winding-up under Nigerian law. This study examines the historical and contemporary legal frameworks, contrasting the repealed Companies and Allied Matters Act 1990 with the Companies and Allied Matters Act 2020 as amended by the Business Facilitation (Miscellaneous Provisions) Act 2023. Through, an analytical examination of judicial precedents from both Nigerian and English jurisdictions, the legal threshold for establishing insolvency and statutory demand notices. Furthermore, it analyzes the statutory modes of winding up: compulsory winding up by the court, voluntary winding up (members or creditors), and winding up subject to the supervision of the court, offering critical insight into corporate insolvency resolution in Nigeria