Insolvency Legal Framework: Insolvency Order, 2016 REGISTRY OF COMPANIES & BUSINESS NAMES DIVISION MINISTRY OF FINANCE AND ECONOMY BRUNEI DARUSSALAM Registry of Companies and Business Names
The Insolvency Order, 2016 Brunei Darussalam has introduced the Insolvency Order, 2016 which is effective on 1 st 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 or 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COMPANIES ACT (CAP. 39) PROVISIONS THAT ARE REPEALED PARTS / SCHEDULES TITLE Section 149 A – 149 U Provisions on Executive Manager and Judicial Management Order Part V Winding Up Part VI Receivers and Managers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 Amendment to the provision relating to preferential payments that shall be paid in priority to all other unsecured debts Before After the Insolvency Order, 2016 the Insolvency Order, 2016 Section 250 of the Companies Act, CAP. 39 Section 147 of the Insolvency Order, 2016 (Preferential payments) (Preferential payments) Priority to all other debts: Priority to all unsecured debts: 1. Any Municipal Board 1. Creditors 2. Income Tax 2. Cost and expenses of the winding up 3. All wages or salary of any clerk, servant, labourer 3. All wages and salary of any employee or workman not exceeding $1,000 4. Retrenchment benefit / Ex gratia benefit 4. Deposit liabilities 5. Contributions payable 6. All remuneration payable 7. All tax or rates assessed Registry of Companies and Business Names
INSOLVENCY PRACTITIONERS A person acts as an insolvency practitioner in relation to a company by acting – As its liquidator, provisional liquidator, judicial manager or receiver; or a) As nominee or supervisor, where a voluntary arrangement in relation to the company is b) 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 of 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 – The directors of a company; 1) Judicial Manager (if the company is in judicial management); and 2) The liquidator (if the company is being wound up) 3) 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
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