New Insolvency law introduced

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By Itumeleng Koleile

Portfolio Committee on Law and Public Safety has recommended Parliament must pass into law the Insolvency Bill 2021 that was formulated by a collaboration of the Justice and law and Trade and Industry ministries.

The Bill was tabled in the National Assembly of Lesotho by the Minister of justice and law, Advocate Lekhetho Rakuoane with the intention to repeal the Proclamation of 1957.

The Bill, Rakuoane told the august House that is aimed at providing for the recovery for individuals or companies in the need of rescue from insolvency.

The draft law, KDNews understands will also “afford employees to save their employment and engage them as creditors during the rescuing process, as well as establish business relations and grow investment in or outside the country”.

Not only will the Bill provide for the recovery upon the need for rescue, but Rakuoane said it will also introduce the “concept of cross-border insolvency, which will accommodate conditions where insolvent estate debtors have assets or liabilities in more than one state”.

In its report, the Committee said once put into action the Insolvency law will modify, modernize and simplify the insolvency process in the country.

“This type of insolvency will promote cooperation between the court and other authorities within Lesotho and those of foreign states.

“A greater legal certainty for trade and investment, protection of assets of debtors, assist in the facilitation to rescue financially challenged businesses, protect investment and preserve employment,” read the committee’s report.

The report further added that “…it introduces new alternative procedures to liquidation that is provided for in the Proclamation of 1957”.

The committee also said the Bill is intended to establish an office of an insolvency Regulator, define its functions and powers.

The office of the insolvency regulator, the committee said “will also work closely with the Office of the Master of the High Court in dealing with the liquidation of natural persons while also working with the Office of the Registrar of companies on liquidation of companies”.

The committee said the Registrar of companies and the Master of the High Court will also be responsible for producing notices during the winding-up period when a business liquidates and ceases operations permanently.

“This will save time, costs and will also increase the recovery rate of the insolvent estates,” reads the committee’s report.

The Bill, the committee said also caters to individuals who are under financial distress, as it will introduce a pre-liquidation process; which will give creditors an opportunity to recover their money without following the liquidation process.

“To save businesses under financial distress from being salvaged, the Bill will further introduce business rescue proceedings.

“A cooperate rescue can be applied for when a company is financially distressed and there is a reasonable prospect for rescuing such a company,” reads the report.

The committee has reported that although the establishment of the office of the Insolvency Regulator will come with costs government, there will also be revenue generation from the costs of liquidation as well as fines attached to offenses committed as per the provisions of the law.