Insolvency Legal Framework: Insolvency Order, 2016 REGISTRY OF - - PowerPoint PPT Presentation

REGISTRY OF COMPANIES & BUSINESS NAMES DIVISION MINISTRY OF FINANCE AND ECONOMY BRUNEI DARUSSALAM

Insolvency Legal Framework: Insolvency Order, 2016

Registry of Companies and Business Names

The Insolvency Order, 2016

Brunei Darussalam has introduced the Insolvency Order, 2016 which is effective

• n 1st March 2016. The Insolvency Order, 2016 is legislation which consolidates

all provisions relating to insolvency under the Companies Act (Chapter 39) and introduces in court reorganisation mechanisms.

 It is intended to create a shift in insolvency culture, with a greater emphasis

placed on company rescue and rehabilitation, and protection for all creditors and

• debtors. The Insolvency Order, 2016 covers corporate insolvency while the

Bankruptcy Act (Chapter 67) covers bankruptcy regime relating to individuals.

Registry of Companies and Business Names

WHAT IS INSOLVENCY?

A company is insolvent when it is generally unable to pay its debts as they fall due

• r that its liabilities exceed the value of its assets.

A company is deemed unable to pay its debts if –

 a creditor to whom the company owes in a sum exceeding $10,000, has

demanded payment and the company has neglected to pay the debt;

 a company fails to satisfy execution or other process issued on a judgement,

decree or order of any Court in favour of the company; or

 it is proved to the satisfaction of the Court that the company is unable to pay its

debts.

Registry of Companies and Business Names

INSOLVENCY PROCEDURES

Insolvency procedures available under the Insolvency Order, 2016 are:



Company Voluntary Arrangement;



Receivership;



Judicial Management;



Winding up by members or creditors (voluntary); and



Winding up by the court (involuntary).

Registry of Companies and Business Names

COMPANIES ACT (CAP. 39) PROVISIONS THAT ARE REPEALED

PARTS / SCHEDULES TITLE Section 149 A – 149 U Provisions on Executive Manager and Judicial Management Order Part V Winding Up Part VI Receivers and Managers Part VIII Winding up of Unregistered Companies Seventh Schedule Provisions which do not apply in the case of a Winding up subject to supervision of the Court Tenth Schedule Scale Fees Twelfth Schedule Winding up Rules Thirteenth Schedule Powers of the Executive Manager and Judicial Manager Fourteenth Schedule Companies (Judicial Management) Rules Registry of Companies and Business Names

WHAT’S NEW IN THE INSOLVENCY ORDER?

 Introduction of a new chapter on Company Voluntary

Arrangement (CVA)

 Introduction of insolvency practitioners  Amendment to Preferential Payments

Registry of Companies and Business Names

PREFERENTIAL PAYMENTS

Before the Insolvency Order, 2016 After the Insolvency Order, 2016 Section 250 of the Companies Act, CAP. 39 (Preferential payments) Section 147 of the Insolvency Order, 2016 (Preferential payments) Priority to all other debts: 1. Any Municipal Board

• 2. Income Tax
• 3. All wages or salary of any clerk, servant, labourer
• r workman not exceeding $1,000
• 4. Deposit liabilities

Priority to all unsecured debts: 1. Creditors

• 2. Cost and expenses of the winding up
• 3. All wages and salary of any employee
• 4. Retrenchment benefit / Ex gratia benefit
• 5. Contributions payable
• 6. All remuneration payable
• 7. All tax or rates assessed

Amendment to the provision relating to preferential payments that shall be paid in priority to all other unsecured debts

Registry of Companies and Business Names

INSOLVENCY PRACTITIONERS

 A person acts as an insolvency practitioner in relation to a company by acting

–

a)

As its liquidator, provisional liquidator, judicial manager or receiver; or

b)

As nominee or supervisor, where a voluntary arrangement in relation to the company is proposed or approved.

 Important issues of suitable qualifications, technical knowledge and skills,

standards of competence, expertise, integrity and professionalism of the practitioners in insolvency proceedings are central to the proper functioning

• f an insolvency regime.

 The Minister may designate a recognised professional body to regulate the

practice of the Insolvency practitioners.

Registry of Companies and Business Names

POST COMMENCEMENT FINANCING

Registry of Companies and Business Names

COMPANY VOLUNTARY ARRANGEMENT

Voluntary arrangement under the Order may include –

 A composition in satisfaction of its debts;  Restructuring of debts through restatements of assets and liabilities and

agreement with creditors on maintaining payments;

 Reorganising the company by restructuring the ownership and

management of the company to lead to better decision-making and execution; or

 Any other acts as may be necessary for the rehabilitation or rescue of

the company.

Registry of Companies and Business Names

COMPANY VOLUNTARY ARRANGEMENT

Voluntary Arrangement proposal can be made to the creditors of a company by –

1)

The directors of a company;

2)

Judicial Manager (if the company is in judicial management); and

3)

The liquidator (if the company is being wound up) The proposal for a voluntary arrangement proposal shall provide for a nominee either as trustee or otherwise to supervise its implementation Who is the nominee? Must be a person who is qualified to act as an insolvency practitioner or authorised to act as nominee

Registry of Companies and Business Names

MORATORIUM

 The directors of a company may take steps to obtain a moratorium for the

company, if they intend to make a proposal for a voluntary arrangement.

 A company is eligible for a moratorium if it meets the requirements as follows:

 It effects or carries out contracts of insurance, but is not exempt from the general prohibition;  It has permission under the Securities Markets Order, 2013 to accept deposits;  It has a liability of a deposit; and  A party to market contract or any of its property its subject to a market charge or a system-

charge.

Registry of Companies and Business Names

Company Voluntary Arrangement With and Without Moratorium

Registry of Companies and Business Names

RECEIVERSHIP

 A receiver is a person who is appointed to collect, protect and receive property and

income from property. A receiver may be appointed in respect of a company encompassing its entire business and undertaking, or in respect of a particular asset or assets of the company.

 The Court however, may appoint the liquidator as a receiver on behalf of the debenture

holders or other of the Company’s creditors if the Company is being wound up by the Court.

 A corporation, an undischarged bankrupt, a mortgagee of any property of the company,

auditor, secretary or employee of the company or of any corporation or any person who is neither an approved liquidator nor the Official Receiver cannot be an appointed receiver.

Registry of Companies and Business Names

RECEIVERSHIP

The receiver are not the same as the official receiver. The receiver’s task is to recover enough money to pay:

 their costs  the preferential creditors  the floating charge holder’s debt

If the floating charge was created not at the time in the course of being wound up allows the holder to appoint an receiver only in connection with floating charges granted in relation to:

 Debts which in every winding up are preferential debts and are due by way of wages, salary,

retrenchment benefit or ex gratia payment, vacation leave or superannuation or provident fund payments; and

 Any amount which in a winding up is payable in pursuance of section 147 [Preferential payment] of the

Insolvency Order, 2016.

Registry of Companies and Business Names

JUDICIAL MANAGEMENT

OBJECTIVE

a) The survival of the company, and the whole or any part of its undertaking, as a going concern; b) The sanctioning under section 151 of the CA, of a compromise or arrangement between the company

and any such persons as are mentioned in that section;

c) A more advantageous realization of the company’s assets than would be effected on a winding-up.

EFFECT

a) The affairs, business and property of the company shall be managed by the Judicial Manager; b) The powers of the directors to manage the affairs, business and property of the company shall be

suspended; and

c) Any power conferred upon the company or its directors or officers or shareholders, whether under

this Act or by the memorandum and articles or otherwise, which could be exercised in such a way as to interfere with the exercise by the Judicial Manager of his powers, is not exercisable except with the consent of Judicial Manager.

Registry of Companies and Business Names

JUDICIAL MANAGEMENT

Requirements to apply for a Judicial Management Order and the appointment of a Judicial Manager to the Court: The company or the creditors of the company consider that:

• 1. The company is or will be unable to pay its debts;
• 2. There is a reasonable probability of rehabilitating the company or of preserving all or part of

its business as a going concern or that otherwise the interests of creditors would be better served than by resorting to a winding up.

Registry of Companies and Business Names

WINDING UP

Winding up is the process of winding up the affairs of a company before dissolution and can be used in solvent (Members’ Voluntary Winding Up) and insolvent (Creditors’ Voluntary Winding Up

• r Winding Up by Court) situations.
• The Liquidator is unlikely to become involved in trading the business and has limited powers to

do so. The liquidator will instead sell assets for the best possible price and where possible pay a distribution to creditors, after costs.

• A Liquidator cannot deal with assets covered by a fixed charge holder, without the fixed charge

holder’s consent.

• The Liquidator in an insolvent liquidation will be responsible for investigating directors’ conduct

and prior transactions.

• In a Winding up by Court process, all disposition’s of the company’s property following the

presentation of a winding up petition are void.



Registry of Companies and Business Names

WINDING UP PROCESSES

Members' Voluntary Winding Up

Statutory declaration of solvency resolved by members The Company passes resolution for liquidation and appoint liquidator Company in liquidation

Creditors' Voluntary Winding Up

Members and the Creditors to agree on to resolve for Voluntary Winding Up The Company passes resolution for liquidation and appoint liquidatior Company in liquidation

Winding up by Court

Application to the Court be by petition presented by the company, any creditor, contributory, minister of finance. Copy of Winding up Order must be forwarded to the Registrar who notes this in the Registry Company to commence in winding up process either when company pass a resolution to wind up; or when the petition to wind up presented to the Court.

Registry of Companies and Business Names

END

Thank You

Insolvency Order, 2016 http://agc.gov.bn/AGC%20Images/LAWS/Gazette_PDF/2016/EN/S001.pdf For Enquiries info.rocbn@mofe.gov.bn +673-2-383505 (General Line) +673-2-383503 (Fax)

Registry of Companies and Business Names