Acknowledging that the existing bankruptcy and insolvency law is outdated and ill-suited for modern commerce, and was having a negative impact on development, Anthony Hylton, minister of industry, investment and commerce, has promised that the insolvency legislation reformation now under way would be a top priority.
"If we want to grow this economy, create jobs, encourage new business, and foster entrepreneurship, changes must be made to the existing laws. We cannot go into the future with the current laws," said Hylton.
The minister was speaking yesterday at The Knutsford Court Hotel in St Andrew during a breakfast forum addressing the reformation proposals for the new Insolvency Act. It was held under the theme 'Booms Need Busts: Reforming Insolvency Legislation'.
Hylton stated that according to the 2012 World Bank business report, resolving insolvencies in Jamaica takes one and a half years and costs 18 per cent of the debtor's estate. The report further said the average recovery rate was 65.3 per cent on the dollar.
"A modern bankruptcy and insolvency law is not only essential in the creation of a favourable business environment, but is also necessary to the stability of our financial system," he added.
Hylton said he was hoping to have the new act implemented by next year.
The current law on personal bankruptcy is found in the Bankruptcy Act of 1880, while the corporate insolvency provisions in the Companies Act 2004 are based on the provisions of the United Kingdom Companies Act of 1948.
According to Suzanne Ffolkes Goldson, the current bankruptcy law is "quasi-criminal" and appears to have "punishment as its main objective".
"The current insolvency regime is time-consuming and costly, creates stigma, creates little or no provision for rescue and rehabilitation of the business and affairs of the debtor, and consists of very few specialists," Ffolkes Goldson stated.
Caydion Campbell, senior manager in the deals practice of PricewaterhouseCoopers, noted that "oftentimes, the insolvent situation is a result of a good business concept poorly executed. It has nothing to do with the fundamentals of whether or not there is a demand for the products.
"Businesses don't fail because they are not profitable; it is because they run out of cash."
Campbell added, "Our present situation does not give businesses that breathing space to really give the business that second chance, which is the primary reason why we need modern insolvency laws."
Stating that the best option suited to Jamaica was the Barbados-Canada model, Michael Hylton, chairman of the Private Sector Organisation of Jamaica's Insolvency Committee, said given the high level of support from the Government and stakeholders, he was confident that the new Insolvency Act would move forward.