Africa-Press – Uganda. Principal Judge Flavian Zeija has said the Insolvency Act, has helped the Judiciary to rescue a number of businesses because it provides for rescue mechanisms of businesses under financial stress.
Speaking during a stakeholders meeting in Kampala, Justice Zeija said the Insolvency Act, which is the principal legislation governing insolvency, provides a cover for stressed businesses through which they can seek business continuity as they mobilise money to pay creditors.
“It is now possible for insolvent companies to seek protection from court and negotiate with creditors to enable them regain financial stability,” he said, noting that judicial officers should, before condemning a financially stressed business, to explore ways through which such a businesses are saved.
“In the past, as judicial officers, we were trained under the old law where if a company got problems, the only solution was the hammer,” Justice Zeija said.
Covid-19 has worsened the financial position of a number of companies, which, according to Justice Zeija, creates the need for special consideration for businesses facing challenges.
According to Uganda Registration Services Bureau (URSB), despite more than two challenging years for a number of businesses, the agency has only recorded two companies under administration while another two are in receivership.
Last year, the World Bank adopted Principles for Effective Insolvency and Creditor or Debtor Regimes, which emphasize, among others, striking a careful balance between liquidation and reorganisation of businesses, allowing for easy conversion of proceedings from one proceeding to another.
During the same meeting, Ms Mary Kainobwisho, the URSB registrar general, told stakeholders in the insolvency eco-system, which include policy makers, judicial officers, insolvency practitioners and creditors or debtors (which include business community, financial institutions, that it was now possible for businesses to recover.
“Before you give up on a company, just give it an opportunity through restructuring. As our economy is increasingly getting formalised, business failure has become a reality and insolvency law and practice is gaining center-stage than ever before,” she said.
Insolvency law
According to Ms Mary Kainobwisho, the URSB registrar general, the insolvency law has a breadth of options, which if well implemented, can reduce the rate of business failure, especially at a time when a number of businesses have been affected by Covid-19.
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