The Corporate Insolvency Bill 2019, which has just been passed into an Act by Parliament, is expected to provide some relief for distressed private businesses.
The new Act offers distressed companies with good prospects another opportunity to restart operations, while providing the framework for closing and transferring assets of failed businesses.
“Companies with good prospects must be given the opportunity to start afresh when they are on the brink of no longer being going concerns” a Parliamentary report has revealed.
According to a memorandum accompanying the Bill, the primary object of the Act is to raise the present standard of business ethics and to promote private enterprise in Ghana.
The Act, which is awaiting Presidential assent, facilitates the access to timely, efficient and impartial insolvency proceedings. More so, there is a reduction of the burden of insolvency through higher and equitable distribution of assets of a company to creditors.
The Act also spells out that the administration of business, property and affairs of company in a manner that provides an opportunity for the company or as much as possible of its business, to continue as a going concern [assumes that the business will remain in existence long enough for all the assets of the business to be fully utilized].
It also provides for the temporary management of the affairs, business and properties of the distressed company, places a temporary freeze on the rights of creditors and other claimants against the company.
Additionally, it allows the development and implementation of a restructuring plan which results in a better return for the creditors and shareholders of the company than would result from the immediate winding-up of the company.
The Act seeks to provide for a statutory restructuring procedure to assist companies to remain as going concerns, re-enact the Bodies Corporate (Official Liquidations) Act,1963 (Act 180) to incorporate an enhanced dimension of the liquidation of companies and the regulation of insolvency practitioners to ensure that there is appropriate oversight of private insolvency practitioners for the proper administration of insolvency proceedings, accountability and efficiency.
The Bill seeks to promote private enterprise in Ghana. It also forms part of the processes of legal reform initiated by the Ministry of Justice and is aimed at improving the quality of the legal regime for corporate bodies and their administration when they become insolvent.
The passage of the Insolvency Act, 2006 (Act 708) established a comprehensive legal framework for personal insolvency matters. Even though there appears to be some piecemeal efforts to address issues related to the administration of insolvent companies, there is no comprehensive piece of legislation that addresses these issues holistically.
For example, the Insurance Act, 2006 (Act 724) and the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930) contain some provisions on the administration of corporate entities in distress and their administration. The current regime is emphatic on liquidations and receiverships but lacks the provision for corporate restructuring to provide a range of solutions for distressed but viable companies.