Groups sound Bankruptcy Act warning to Gov’t
THE Private Sector Organisation of Jamaica (PSOJ) has joined the Office of the Trustee in Bankruptcy (OTB) in cautioning the Government against proceeding with a Bankruptcy and Insolvency Act based primarily on the provisions of the Barbados Insolvency Act.
In a submission last week to the joint select committee reviewing the provisions of the proposed Act, the OTB said that, insofar as the Bill was modelled off of the Barbados Insolvency Act, great care should be taken to avoid the pitfalls of that Act which has resulted in it being under-utilised by Barbadians.
The OTB said that research shows that only five cases of bankruptcy have been commenced under the Act in the 12 years since its enactment, and that none of the cases has been completed. The Act is said to be modelled on the Canadian legislation.
In its submission, which was made available to the media during last week's sitting of the committee at Gordon House, the PSOJ pointed out that the Barbadian Act "has drafting issues that needed careful attention".
The Chris Zacca-led PSOJ noted that the Barbados Act has excluded from its operation certain deposit-taking institutions.
"In our context, however, we agree with the position, which has also been taken by the Bank of Jamaica, that our financial institutions should not be excluded from the regime of the Bill, unless some new regime was put in place for winding up such entities," the PSOJ said.
The PSOJ also suggested that the Bill should make provisions for the fact that winding up an insolvent company could commence voluntarily by the passing of a resolution, in accordance with the Companies Act, and any such legislation for corporate entities as may come on stream, and not only by court action as required in the Barbados legislation.
In its submission, the OTB pointed out that there is no shortage of exemplary Acts to advise Jamaica's move towards reform of its insolvency legislation, which, although spurred by the requirements of the International Monetary Fund (IMF), follows a trend among jurisdictions across the globe over the past decade.
The OTB pointed out that in 1999, the IMF's own legal department published 'Orderly and Effective Insolvency Procedures' outlining the objectives and features of insolvency procedures, with specific attention being paid to liquidation and rehabilitation procedures.
In addition, it notes that the World Bank in 2001 recognised the importance of effective insolvency administration in the creation of financial stability, and published 'Principles for Effective Insolvency and Creditor Rights System', articulating the principles necessary to guide system reform, "particularly in developing countries, and international best practices with respect to the management of insolvency".
The OTB urged the Government to ensure it gets it right, by exploring the wide range of insolvency legislation and systems which are available, and not rely primarily on the Barbados Act.
"If the deficiencies in Jamaica's insolvency administration regime are to be cured, so as to contribute to national development, by promoting foreign investment in the economy and risk-taking by local entrepreneurs, the onus is on the legislators to ensure that the provisions of the proposed new legislation contain all the key features of an effective insolvency administration framework identified in the documents mentioned above, particularly those that foster the type of efficiency and balance to satisfy the various stakeholders in the process," the OTB said.
There is every likelihood of, at least, one more meeting before the committee, chaired by Minister of Industry, Investment and Commerce Anthony Hylton, makes its report to Parliament. However, the number of concerns being raised by both public and private sector organisations, suggest that the committee may need more meetings to resolve the issues. Last week's meeting was chaired by Security Minister Peter Bunting in Hylton's absence.