EDITORIAL - Keep bankruptcy bill under review
We, too, welcome the new insolvency bill passed by the House this week, although we are unable to muster Anthony Hylton's seemingly unbridled enthusiasm for its potential to alter how people approach business and the stigma faced by risk-takers whose enterprises fall into trouble and/or fail.
For the law, although superior to what existed for decades, and is better than what was initially before the House, doesn't go far enough. We suppose, however, it is the best that we could get at this time. In that respect, we would suggest that, when it reaches the Senate, a clause be inserted for a formal legislative review after it has been in force for three years.
Our more specific concern is the bill's failure to expressly declare, rather than imply these values, the protection that firms that face financial stress can seek from creditors and that, in such circumstances, these entities, with oversight from the court, should continue as going concerns and, except it would be deleterious to the business, under existing management.
It is not lost on us that the bill allows for "a person facing imminent insolvency" to lodge a proposal for the payment of creditors with the authorities that will have responsibility for bankruptcy arrangements. It was probably intentionally to be symbolic that the list of persons/entities who have proposed these schemes of arrangements fall into a revised Section 11 of the bill. Somebody may want to suggest that it is analogous to Chapter 11 of America's bankruptcy code.
Indeed, such a filing by a potentially insolvent or bankrupt firm or individual affords them a stay of action by creditors who might otherwise have sought to enforce their claims against the distressed firms. In the past, businesses with good underlying qualities which, eased of some of the burden of debt, might have been saved to the value of the economy, are driven to the wall. They now, as Mr Hylton, the commerce minister, suggests, have a better shot at survival.
Or, as he remarked in Parliament: "We simply cannot go forward with our current insolvency laws if we are serious about enterprise and growth."
While remedy about which Mr Hylton is apparently so gung-ho is implicit in the law, we would have preferred that the understandings of America's bankruptcy code Chapter 11 be expressly stated in this law, even as we appreciate that the insolvency bill has to be read in concert with the provisions of the Companies Act.
We, for instance, had hoped that stressed companies could proceed more directly and quickly to a judge with their reorganisation plans; that would be a specific acknowledgement of the ability to own/manage to operate the business as 'debtor in possession'; and that they would have the right to do all the strategic things that businesses engage in for their survival and growth.
Nonetheless, even as we look forward to the continued refinement of this law, there is little doubt that it represents a move in the right direction, not least by the fact that it sets a far less cumbersome route back for individuals who become bankrupt.
But the law is one thing. More important for Jamaica is creating a culture of entrepreneurism and risk-taking in which a failure in business is not a cause of stigma, but a blip in the effort at wealth creation.
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