- newly passed Act 1015 brings in order and hope
- must complement other legislations for efficiency
The recently passed Corporate Insolvency and Restructuring Act, 2020 (Act 1015) couldn’t have come in at a better time to help viable but distressed businesses come back stronger and help others honourably exit in a post-COVID-19 recovery economy, Elsie Awadzie, Second Deputy Governor the Central Bank has said.
“A robust corporate insolvency regime has a critical role to play in facilitating the post-COVID economic recovery, by helping to resolve the inevitable debt-overhang that will be one of the legacies of the pandemic, and by helping to reorganize viable but distressed firms while ensuring the exit of non-viable ones. Act 1015 will therefore become very handy in the months and years ahead,” she said.
Speaking at a webinar on the Corporate Insolvency and Restructuring Act, 2020 (Act 1015) organised by the Ghana Association of Restructuring and Insolvency Advisors (GARIA), she noted that the importance of this Act, particularly at this time, cannot be overemphasized.
“If the recent banking sector cleanup is anything to go by, the orderly exit of non-viable institutions from the market place creates room for viable ones to thrive and support the economy better,” she stated, pointing out that without the orderly exit of these financial institutions, the entire system was at risk of collapse due to their level of interconnectedness.
“We see it [Act 1015] as an important addition to the framework for building a more buoyant economy, supported by a more efficient credit market. The recent banking sector cleanup has provided impetus for a more robust credit environment, as banks are now better capitalized and more liquid, than before,” she added.
Even though a lot has been done in the passage of the Act, Mrs. Awadzie noted that a lot more is needed to sensitize all key stakeholder groups, particularly the private sector, given the cultural context that makes talking about and doing something about distress and insolvency a taboo.
There is the need, she noted, to continue relentlessly to build the professional body of corporate insolvency and restructuring practitioners. “Act 1015 provides for licensing of insolvency practitioners. I urge GARIA to help to operationalize this licensing regime in the shortest possible time. The recent banking sector cleanup exercise brought to the fore, the shortage of professionals in the area.
I note that Act 1015 makes provision for the establishment of GARIA under an Act of Parliament within two years. This is an opportunity to further strengthen its role in spearheading the development of a strong cadre of professional insolvency and restructuring professionals for all sizes and categories of businesses,” she added.
She urged GARIA and other stakeholders to lead a review of the Insolvency Act of 2006 (Act 708), which focuses on personal insolvency, so that it is aligned with Act 1015 to provide options for restructuring for individuals and household debtors, particularly those that rely on consumer loan products of banks and SDIs.
To her, this will ensure that there is a comprehensive and modern insolvency ecosystem made up of personal and corporate insolvency regimes, supported by bespoke special resolution regimes for financial institutions such as that established by Act 930.
The Bank of Ghana, she stated, remains committed to promoting economic growth and the efficient operation of the banking and credit system in Ghana, and supports the development of an efficient corporate insolvency regime and the work that GARIA continues to champion.
She, thus applaud GARIA for championing the enactment of Act 1015 as a necessary accompanying legislation to the new Companies Act of 2019 (Act 992), and for the organisation’s tireless efforts to raise the level of awareness of the need for a strong insolvency regime as well as a well-established industry of insolvency and restructuring professionals.
Felix Addo, President of GARIA noted the Corporate Insolvency and Restructuring Act, 2020 (Act 1015) or CIRA, which repealed our erstwhile Bodies Corporate and Official Liquidation Act 1963 (Act 180), was signed into law on April 30, 2020 and has features which could go a long way to assist businesses not only to survive the pandemic, but also to recover.
“CIRA applies to all businesses registered under the Companies Act, 2019 (Act 992) with a few exceptions; namely, banks, insurance or any other business which is subject to special legislation, except instances where the special legislation does not provide a rescue provision such as the Security Industries Act, 2016 (Act 929),” he said.
He noted that despite the perfect storm the world and Ghana find themselves in, the timing of this law which enables restructuring of distressed companies could not have been more perfect. “Let us take advantage of the possibilities this new law offers, especially for our previously stressed companies (even before COVID-19), to make the necessary structural adjustments before they end up on the chopping block.”
He called for a focus on educating all stakeholders and encourage businesses to take advantage of its many features to preserve jobs, preserve economic value, preserve creditor interests, and other stakeholder interests in a balanced, fair and equitable manner and emerging “fit for purpose” for the long haul.