A BILL seeking to provide for a statutory restructuring procedure to assist companies to remain in business has been passed by Parliament in a unanimous vote.
The passage of the Corporate Insolvency Bill, 2019 will help establish a comprehensive legal framework for insolvency matters in the country, and will co-exist with the reformed Companies Act, 1963 (Act179) as well as complement the regime of winding up of companies under Act 179.
Parliament’s Constitutional, Legal and Parliamentary Affairs Committee said in its report that a workshop on corporate insolvency held under the auspices of the Private Enterprises Foundation in September 2009 opened the door for consultations with stakeholders to discuss a draft report prepared by the Ghana Association of Restructuring and Insolvency Advisors (GARIA).
In the 1960s, the corporate laws of Ghana, notably the Companies Act, 1963 (Act 179) and the Bodies Corporate (Official Liquidations) Act, 1963, (Act 180) were considered to be some of the progressive pieces of legislation passed within the English Commonwealth.
Developments in the country and elsewhere have since elucidated some shortcomings of the laws due to changing environment of doing business and the significant change in insolvency regime by legislation to conform to international best practices.
The bill forms part of the process 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 absence of legislation to deal with corporate insolvency reveals a huge loophole in Ghana’s commercial laws. It is said to be a bane to economic growth and development and a handicap to many businesses.
The new law offers opportunity for companies with good prospects to be given the chance to start afresh when they are on the brink and has a primary objective to raise the present standard of business ethics.
The clauses 1 to 78 introduce the legal framework for the corporate restructuring process by which a distressed company restructures its business or assets to bring it back to profitability.
According to the bill, the rationale for corporate restructuring is the promotion of business and the preservation of jobs.
The process is similar to judicial management procedure under sections 99 to 113 of the Insurance Act, 2006 (Act 724), the Committee stated.
By Ernest Kofi Adu, Parliament House