Monday, November 28, 2011
Monday, November 28, 2011
The Attorney General and Minister of Legal Affairs John Delaney has held consultative meetings with industry, including insolvency practitioners, to discuss views on modernizing and improving the law governing the liquidations of companies under the Companies Act and International Business Companies Act.
Chartered accountants whose practice include company liquidations and the Bahamas Institute of Chartered Accountants (BICA) formed an ad hoc Insolvency Practitioners Group to facilitate working sessions with the Attorney General on the revamp of liquidation laws. Several working sessions were held at the Office of the Attorney General (OAG).
Some new features of the revised liquidation regime are:
- Standing is provided for a relevant regulator (Central Bank, Securities Commission, Insurance Commission, etc) in the case of a company carrying on a regulated business, to petition for the winding up of a company whose licence has been suspended or revoked;
- The meaning of insolvency is to include the balance sheet test–namely, where the value of the companies liabilities exceeds its assets;
- The court’s jurisdiction is expanded to order a winding up of a foreign company which has property located in The Bahamas;
- The term “shadow director” is introduced to apply regarding a person who, while not formally an officer or director of a company, is for practical purposes an officer or director. Such person may be held to account in the course of the liquidation as required of officers and directors formally appointed;
- Provisions are made for dealing with costs incurred in the liquidation process in dealing with assets (trust assets) that the company does not own but which the company held (in trust) for the benefit of other persons. This is a situation that is increasingly arising in this jurisdiction and which has given rise to recent adjudications. Currently no statutory provision addresses the matter. It is important in such circumstances that the company’s assets that should be used to satisfy creditors not be burdened by costs incurred for the benefit of third parties, while, at the same time, ensuring that such costs are equitably borne as amongst the third party persons who stand to benefit from the trust asset. The new provision (section 204) designed to address this situation is an example of how responsive and relevant the revision exercise has been to matters existing in The Bahamas.
- Liability for directors is provided for where they allow a company to trade while knowing it to be insolvent; and
- The court is empowered to make ancillary orders to facilitate in The Bahamas a foreign liquidation where the activities of the foreign liquidation include matters in The Bahamas.
Drafts of this bill were widely circulated over a period of approximately 12 months throughout the financial services industry, the legal profession and the accounting profession. The Attorney General together with law officers in the Law Reform and Revision Commission conducted consultations and received comments from many quarters–from which the drafting exercise benefitted greatly.