Massive overhaul of proposed bankruptcy act insolvency bill
Daraine Luton, Senior Staff Reporter
The proposed changes to the country's bankruptcy and insolvency law has been overhauled after several deficiencies were pointed out by stakeholders.
The bill, which seeks to repeal the existing bankruptcy law and to create new provisions to govern the regulation of bankruptcy and insolvency in Jamaica, has been criticised by stakeholders, and Justice Minister Mark Golding told the Senate last Friday that given the large number of amendments proposed in the 113-page report, it was decided to prepare a new bill.
"The process could have proceeded by way of those amendments being put into a report and that report being taken in the Senate by way of amendments to the bill. However, given the large number of amendments that have been formulated, we thought that for good order, and in order to better enable the persons who will be participating in the debate on the bill to better appreciate the bill as a composite document, we would table a special report, and we would have the bill, in its amended form, presented as a new bill, which would be introduced into the House by the Minister of Industry, Investment and Commerce," said Golding.
The bill outlines the circumstances under which an act of bankruptcy is committed, the procedures for filing a bankruptcy petition and the procedures to be followed in respect of the administration of the estates of bankrupts.
Under Jamaica's agreement with the International Monetary Fund (IMF), the amended legislation should be passed by month's end, and Golding noted that it has been withdrawn from the table of the Senate and is to be introduced through the House of Representatives.
It is expected that with the IMF deadline being so close, Anthony Hylton, the minister of Industry, Investment and Commerce, will seek to have the insolvency bill tabled on Wednesday when the House meets.
Some 21 meetings were held by the committee, which received submissions from the Bank of Jamaica, the Jamaica Bar association, the Financial Services Commission, the Private Sector Organisation of Jamaica, the Office of the Trustee in Bankruptcy, the Jamaica Chamber of Commerce, and the Institute of Chartered Accountants of Jamaica.
The committee agreed that for greater clarity, it should be stated in the bill that the legislation is seeking to, "create an environment which aids in the rehabilitation of debtors and the preservation of viable companies, having regard to the protection of the rights of creditors and other stakeholders".
The committee further agreed that the bill would create the environment for a fair allocation of the costs of insolvencies, with the overriding interests of strengthening and protecting the country's economic and financial system and the availability and flow of credit within the economy.
Among the amendments made to the bill is the replacement of the term "looming insolvent" with "person facing imminent insolvency". The term captures a person who resides, carries on business or has property in Jamaica, whose liabilities to creditors amount to at least $150,000 or to an amount prescribed by the minister, who reasonably anticipates that he will, within a period of 12 months, be unable to meet his obligations as they generally become due.
The committee has set the threshold of debt for which a creditor can seek a receiving order at $300,000, a limit that can be varied by the minister.
In addition, the maximum period that a debtor will have to file a petition with a registered trustee under the proposed act is five months and 21 days. The process, which is outlined in a special report prepared by the joint-select committee, involves an insolvent person being required to file a cash-flow statement with the trustee within 14 days of a notice of intention being filed against him.
The filing of a notice of intention is a procedure under the act which will allow a looming insolvent person the opportunity to restructure his affairs. If a notice of intention is filed, the person has 14 days in which to file a cash-flow statement with the trustee.
The proposal, which mirrors Chapter 11 bankruptcy proceedings in the United States, seeks to allow a person or entity, who anticipates that they will be unable to pay debts within 12 months, to seek to arrive at a settlement to stave off bankruptcy proceedings.
Under the five-month 21-day scheme, the debtor has nine days after the filing notice of intention to supply a cash flow statement. During this nine-day period, the trustee would have time to do his vetting of the documents, given that he would also have to sign the proposal.
The proposed law also calls a meeting to be held with creditors within 21 days of the filing of the proposal. The creditors must be given at least 10 days notice of the meeting. If an agreement is struck, it is binding on all parties, except a secured creditor, who may opt not to participate in the arrangement. The failure of the parties to arrive at an agreement will pave the way for the bankruptcy proceedings to be initiated against a debtor.