NASSAU, BAHAMAS — The Economic Recovery Committee (ERC) has recommended that the government reform the country’s “antiquated” bankruptcy laws, noting that this should be treated as a “priority” for economic recovery.
In its executive summary released yesterday, the ERC noted that the country’s laws governing the financial affairs of an individual who has become insolvent, called the bankruptcy laws, are “antiquated, near punitive, and non-rehabilitative, in that they do not help in the financial recovery of the insolvent individual”.
“While the laws governing the financial affairs of an insolvent company are, in most respects, a modern liquidation and dissolution regime, they are incomplete as they do not go as far as to provide a rehabilitative component towards the financial rescue and recovery of a company to allow for restoration as a financially viable entity,” the ERC noted.
The report furthered that while the deficiencies in the country’s insolvency regime have resulted in “prolonged personal hardship for insolvent individuals, and the loss of insolvent enterprises which may otherwise be able to recover and contribute to the well being of society and the economy”.
It further noted that modern insolvency laws facilitate the extension of credit while also enabling growth in the private sector.
“The reform of the country’s insolvency regime should be treated as a priority for economic recovery,” said the ERC.
The ERC recommended that the Bankruptcy Act be repealed and replaced with a modern insolvency regime governing individual insolvency and amend the Companies Act to introduce ‘corporate rescue’ procedures.
“As an alternative, the Government of The Bahamas may wish to introduce a unified modern insolvency regime governing both individual and corporate insolvency, similar to what now exists in England,” the committee noted.
The ERC has also recommended the suspension of the filing of any bankruptcy and compulsory liquidation proceedings against an individual and company, respectively, for a prescribed period with respect to insolvencies which are due to the economic crisis resulting from the Covid-19 pandemic.
This it said would temporarily give businesses breathing space to make arrangements with creditors towards surviving this crisis and also allow time to implement insolvency law reform.
Accountant and insolvency practitioner Ed Rahming, the founder and managing director of Intelisys (Bahamas) yesterday backed the ERC’s recommendation.
Rahming said: “I fully agree with the recommendations of the ERC as it relates to insolvency reform. I think given where we are today (COVID-19 pandemic effects) that the insolvency laws addressing individuals probably need greater attention than the corporate insolvency regime.
“It is very important that the Bankruptcy Act be repealed and replaced with a modern insolvency regime governing individual insolvency. We need all Bahamians to be playing a meaningful part in our economy and moving us forward and therefore it is my view that having insolvency laws that are more rehabilitative in substance will assist not only the individual but the country.”