Monday, August 29, 2011
Monday, August 29, 2011
The Bahamas has to boost its recovery of losses in insolvency cases, says Edmund Rahming, managing director of Krys Global, a multi-jurisdiction financial services firm specializing in insolvency, fraud and forensic accounting matters.
“Much consideration needs to be given in formulating a strategy that will allow for the maximum recovery against third parties,” says Rahming, who along with other industry experts, is vetting a proposed insolvency legislation package. “Given the cross-border nature of many Caribbean appointments, insolvency practitioners often have to seek recognition of their appointment in onshore jurisdictions to give them standing to pursue third party claims by litigation.”
If a foreign-owned company–incorporated in The Bahamas with substantial assets and business activities elsewhere–went bankrupt, an offshore liquidator would have to commit a large amount of time and resources in investigating the company’s bookkeeping records, identifying and securing assets, while establishing a means of correspondence with creditors and investors.
“Given that a number of the higher profile insolvency matters in the Caribbean involve cross-border issues, we are finding that a number of the developments in the application of the laws onshore arise from Caribbean-based cases,”?says Rahming.
Cases such as Fairfield Sentry Ltd–a feeder fund that transferred $3.2 billion to convicted fraudster Bernard Madoff. The company is being liquidated under the supervision of the Commercial Division of the High Court of Justice in the British Virgin Islands. Krys Global’s chief executive officer Kenneth Krys and managing director Joanna Lau are the court appointed co-liquidators.
By the time Madoff’s Ponzi scheme was uncovered, Fairfield Sentry had a reported value of $6 billion. At last reports only about $100 million had been recovered and another $70 million frozen in Ireland.
Like Bermuda, The Bahamas is in the process of updating its companies laws and insolvency procedure rules to bring them in-line with other jurisdictions in the region. It is hoped that any updates would modernize procedures and better facilitate international cooperation, says Rahming.
“When businesses suffer from a lack of liquidity or poor management, it may be possible to find means to enhance profitability, improve performance, and minimize the risk of loss,” Rahming says. “Liquidation is always a last resort for a business and should be taken when all other options fail.”