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Bankruptcy law proclaimed seven years later
The Bankruptcy and Insolvency Act, 2006, which was passed in 2007 but never proclaimed, will soon come into force. The Ministry of Finance said in a statement yesterday that lack of this legislation caused T&T to show poorly in the Ease of Doing Business ratings and the Global Competitiveness Index 2013-2014. “Formerly, businesses in financial difficulty had few options. With bankruptcy protection unavailable, it was difficult to restructure while continuing to operate and pay off creditors. Most chose to wind up and proceed into receivership. Workers were sent home and the company’s assets sold to pay off as many creditors as possible,” the ministry said. “The problem with this scenario was that often the money received from the forced sale of a company’s assets was not enough to settle all the company’s debts. As a result, creditors frequently found themselves out of pocket for substantial sums with no legitimate way to get their money from an entity now permanently out of business.”
Finance Minister Larry Howai and Trade Minister Vasant Bharath had the necessary regulations drafted for the legislation to take effect. The law has been proclaimed with the exception of Part 11, International Insolvencies. This was done on the advice of the World Bank which said the United Nations Commission on International Trade Law Model Law on Cross Border Insolvencies on which it was based, had been revised. Part 11 will have to be updated before it can be proclaimed. The Finance Ministry recently hosted a workshop on Insolvency Reform to ensure all stakeholders are fully au courant with the new arrangement.