Harmonize insolvency laws in EAC states

 In October last year, Uchumi supermarket folded

Official receivers from the five East African states have called for harmonization of the insolvency laws in the region, to enable cross boarder insolvency practice, and alleviate suppliers from losses, whenever a regional company folds.

The meeting, according to the Uganda Registration Services Bureau (URSB) managing director, Bemanya Twebaze, was also tailored towards protecting EAC companies in financial distress across the borders.

"In October last year, Uchumi supermarket, for example, folded leaving suppliers stranded over their pay. Several other companies in Uganda and the region have done the same, so now we want to discuss a way forward, and how to save the distressed companies from total collapse," Twebaze said.

This was on the side-lines of the insolvency week celebrations held in Kampala.

He said insolvency in the EAC region has been previously looked at with stigma, forcing shareholders into hiding, yet financial distress is a common occurrence for most companies.

Insolvency is the state of being completely unable to pay the money owed by a company or individual, at the time when it is due.

Winfred Talinyebwa, a URSB legal consultant advocated for all regional countries to adopt the ANCITRAL modal laws on insolvency, which she said will enable cross border litigation and relief.

"We need access to local courts across the region by representatives of creditors and also define mechanisms for proceedings across the region," she said.

She added that representatives of both parties should also be allowed to seek relief across the borders and also introduce joint hearings to avoid multiple proceedings and uphold consistency.

The United Nations Commission on International Trade Law (UNCITRAL), Law is designed to assist States in reforming and modernizing their laws on arbitral procedure so as to take into account the particular features and needs of international commercial arbitration.

It covers all stages of the arbitral process from the arbitration agreement, the composition and jurisdiction of the arbitral tribunal and the extent of court intervention through to the recognition and enforcement of the arbitral award.

Kenya's official receiver, Benith Kashegu, said since the regional countries have for some time been trying to amend their laws, they should therefore harmonise these laws as a region to benefit all citizens. 

Meanwhile, Twebaze also said the bureau has come up with a corporate rescue program that seeks to help local companies under financial distress to recover.

He said the corporate rescue plan will also help the country improve in the World Bank ease of doing business report, since resolving insolvency is one of the areas the World Bank measures in the rankings.

"In the 2017 World Bank report, Uganda improved from position 122 to 115 attributed in part to business registration and handling of the winding up process. And with these new interventions, we believe the rankings for 2018 will definitely increase," Twebaze said.