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A supplier ships ₦45 million worth of cement to a construction firm in Lekki. Six months pass. Invoices go unanswered, calls get dodged, and the construction firm’s site office suddenly looks a lot emptier than it used to. At some point, chasing payment stops being about patience and starts being about use. Winding up the debtor company is that use.

Winding up for unpaid debt is the court-supervised process of closing down a company that cannot pay what it owes, so its assets are sold and the proceeds split among creditors under a fixed legal order.

Which court has jurisdiction to hear a winding-up petition?

Only one court in Nigeria can order a company wound up. The Federal High Court holds exclusive original jurisdiction over winding-up matters, and the petition must go to the specific Division covering the area where the debtor company’s registered office or head office sits. A State High Court cannot do it. Neither can the National Industrial Court or a Magistrate Court, no matter how straightforward the debt looks.

This matters more than it sounds. Creditors sometimes waste months filing in the wrong forum, or assume any commercial court will do. It won’t. If the debtor’s registered address is in Abuja but its real operations run out of Port Harcourt, you file where the registration sits, not where the trucks are parked.

Once filed, the petition doesn’t guarantee an order. A court hearing a winding-up petition can dismiss the application outright, adjourn it with or without conditions, or issue an interim order it thinks fits the circumstances. If the petition was brought because the company defaulted on a statutory meeting or failed to deliver a statutory report, the court can instead direct that the meeting happen or the report get filed, and order the people responsible to pay the costs.

Creditors’ voluntary winding-up requires gazette and newspaper publications

Debtors who go the voluntary route don’t get to quietly fold the company and walk away from what they owe. A company must publish notice of the creditors’ meeting once in the Federal Government Gazette and at least twice in daily newspapers circulating where its registered office or main place of business sits. That’s public exposure a debtor company cannot avoid once the process starts, and it’s often the first real signal to other unpaid creditors that something is wrong.

This publication rule exists because creditors need a fair shot at the meeting, not a courtesy phone call after the decisions are already made. If you’re a creditor and you spot this gazette notice, treat it as a trigger to act, not a formality to file away.

The directors also have to hand over a full statement of affairs before that meeting happens. It must list the company’s assets, its debts and liabilities, and a list of creditors with the estimated amount each is owed, and it must reach each creditor no later than 14 days before the meeting where the directors present it, under the same CAMA provisions. That 14-day window is the creditor’s chance to check the numbers before the meeting, not after.

Here’s what the statement of affairs actually solves for a creditor. Without it, you’re negotiating blind, hoping the company is telling the truth about what’s left to go around. With it, you can compare the declared asset position against what you know about the business, and flag a director for understatement before assets move anywhere.

Don’t confuse this with a member’s voluntary winding-up, which is only available where directors swear the company can pay its debts in full within 12 months. A creditor’s voluntary route is the admission that the company cannot.

Procedure for Creditor-Initiated Winding Up

The path a creditor actually walks looks different from the voluntary route above, and it starts with proving the debt rather than proving good faith.

A company is treated as unable to pay its debts if it owes a creditor, by assignment or otherwise, a sum exceeding ₦200,000, after the creditor has formally demanded payment and the company has ignored or refused it. The same applies where a court judgment against the company has gone unsatisfied, in whole or in part, after execution was attempted.

Notice the figure. ₦200,000 is a low bar by the standards of a ₦45 million unpaid invoice, which tells you the threshold isn’t the obstacle in most commercial disputes, proof and procedure are. A debt of that size clears the statutory line easily; the real fight is building a record the court will accept.

Insolvency itself has no neat legal definition beyond this mechanism. A 2024 doctrinal review in the African Journal of Law, Economics and Education points out that CAMA 2020 gives no clean test for a company that has money but simply refuses to pay, as distinct from one that genuinely has none. The statutory demand and unsatisfied judgment routes exist precisely because “inability to pay” is proved by conduct, not by an accountant’s opinion.

Once a winding-up order is made, the company’s debts don’t get paid in the order creditors shout loudest. Local rates and charges owed by the company at the relevant date, where they fell due within 12 months before that date, rank ahead of ordinary unsecured debt. Pay-as-you-earn tax deductions and other assessed taxes up to the last assessment year before the relevant date get the same priority treatment, capped at one year’s assessment for PAYE deductions.

What that means for an ordinary trade creditor: tax authorities and local government charges eat into the pool first. If a liquidator reports an estate of ₦80 million against total claims of ₦150 million, the preferential creditors get paid out in full before unsecured creditors like a cement supplier see a kobo of the remainder, assuming anything is left at all.

What winding up is not

Winding up is not the same as a statutory demand. A demand is the warning shot, the formal letter telling a debtor company to pay up or face consequences. Winding up is the consequence, and it only follows once the demand has been ignored.

It’s also not liquidation in the member’s voluntary sense, where solvent companies close down on their own terms because directors swear the business can pay everyone within 12 months. Creditor-driven winding up assumes the opposite: the company cannot pay, and a court or liquidator has to force the issue.

Don’t confuse it with striking off either. A Voluntary Striking Off removes a dormant or inactive company from the register administratively. It isn’t built for contested debt recovery and gives unpaid creditors no structured claims process.

When it matters

This process matters most for creditors holding debts well above the ₦200,000 threshold who’ve already tried a demand letter and got nowhere. It also matters where a judgment has been obtained but execution came back unsatisfied, because at that point winding up becomes one of the few remaining levers against a company hiding behind its corporate shell.

It matters less for small, recoverable disputes where a payment plan or a straightforward lawsuit gets the money back faster and cheaper. Winding up ends the company. That’s a serious step, and creditors chasing one invoice from an otherwise healthy business should weigh whether they actually want to kill the debtor or just get paid. Before going this far, many creditors first work through practical recovery steps to see if the debt can be collected without court.

Frequently Asked Questions

How much money has to be owed before you can file a winding-up petition?

A debt exceeding ₦200,000 qualifies, provided the creditor has already made formal demand on the company and it has ignored or refused to pay, or a judgment against the company has gone unsatisfied after execution.

Can a creditor file for winding up without first suing the debtor?

Yes. A formal written demand for payment that the company ignores is enough to establish inability to pay, without a separate lawsuit, though a prior unsatisfied judgment also qualifies.

What happens to employees and contracts when a company is wound up?

A liquidator takes over, sells the company’s assets, and distributes proceeds according to statutory priority before the company is formally dissolved and ceases to exist.

Does winding up guarantee a creditor gets paid in full?

No. Preferential debts like local rates and PAYE deductions get paid first, and unsecured creditors only share what remains, which can be little or nothing if the estate is small.

Is winding up the same as insolvency?

No. Insolvency describes the financial state of being unable to pay debts. Winding up is the legal process a court or creditors use once that state is established.