THE Institute of Chartered Accountants of Jamaica (ICAJ) is insisting that, under the insolvency law, secured creditors ought to be required to prove outstanding debts.

ICAJ fellow Caydion Campbell said this recommendation is being made against the background of the discovery, through court cases, that some entities claiming to be secured creditors have proven not to be.

A secured creditor is an entity that has a legal right to claim specific assets of a company if the company fails to repay its debts.

“A recommendation has been made that secured creditors should not be required to prove their debts. But given decisions in our court, not not just international decisions, but even in our local courts where secured creditors have been held to have not perfected their security and are thus unsecured, they should be required to prove their security. It should not be automatic that because they assert that they are secured that they are deemed secured, but they should be required to prove it to the trustee,” Campbell said at Thursday’s meeting of the joint select committee of Parliament currently reviewing proposed amendments to the Insolvency Act.

Under the insolvency law, a trustee is licensed and appointed by the supervisor of insolvency to administer the property or assets of a debtor for the benefit of creditors. In order to access the insolvency regime, the debtor must do so via a trustee.

Before the committee accepted ICAJ’s recommendation, its chairman, Government legislator Senator Aubyn Hill, commented that “as a banker, I don’t see how you can say you have a debt and you don’t want to prove it. So that just doesn’t make sense to me.”

The committee also accepted the institute’s suggestion that a debtor be given 14 days to appeal following the refusal of a proposal and not seven days as was originally being proposed. Under the regime, a debtor may make a proposal or arrangement with creditors which they will either accept or reject.

“The recommendation from the ICAJ is that that should also be 14 days in keeping with the same 14 days that the creditors may appeal the approved proposal. So to make both the debtor and the creditor have a 14-day appeal period,” Hill said.

Pointing out that there is presently no such provision in the Act and that this would be a new clause, Acting Supervisor of Insolvency Fayola Evans Roberts said she supported the recommendation.

Additionally, the committee was in agreement with the ICAJ that the objects of the Act should not be amended by the suggestion to delete the provision for the preservation of viable companies.

“We do not believe that this should be done. It in effect would be penalising entrepreneurs who decide to organise their affairs via business, which is what we are encouraging. So it should be an explicit objective as it is in the Act that the preservation of viable accompanies is part of the duty and the role that a trustee would seek to perform as far as practical,” he said.

Evans Roberts said that this is actually the priority for the Act, noting that “the preservation of viable companies deal with the proposal aspect, the rehabilitation aspect of the Act, so yes, it should be there. It should be kept, it should be maintained.”

Opposition member Anthony Hylton said he strongly supported the view that the objective of preserving viable businesses remains central to the operation of the Act.

“It was one of the key objects of the legislation and I cannot imagine that anyone would think otherwise. So I strongly support its retention,” he said.

The Insolvency Act is intended to aid in the rehabilitation of debtors and the preservation of viable companies, having due regard to the protection of the rights of creditors and other stakeholders.

Enacted in 2015, it provides for the regulation of insolvency for both individuals and businesses. The legislation also ensures the fair allocation of the costs of insolvency with the overriding interests of strengthening and protecting the country’s economic and financial system and the availability of flow of credit within the economy.

The Act is administered by the Office of the Supervisor of Insolvency (OSI), a department of the Ministry of Industry, Investment, and Commerce.

The OSI regulates the licensing of insolvency practitioners, inspects or investigates the administration of estates by the trustees, records complaints regarding the administration, and intervenes in court proceedings when it is expedient to do so.