Draft insolvency bill will replace three older laws to address corporate and personal insolvency in one legislation

Today is the registration deadline for the consultation meeting on the Myanmar Insolvency Bill

The draft Insolvency Bill will replace three older laws to address corporate and personal insolvency in one legislation and will carve out a separate corporate rescue and insolvency regime for smaller businesses.

Today, April 30, is the registration deadline for a publication consultation meeting on the Myanmar Insolvency Bill.

A consultation meeting on the Insolvency Bill organised by the Union Supreme Court with the support from the Asian Development Bank will be held on May 9 in Melia Hotel, Yangon. Registration can be done on the website of the Directorate of Investment and Company Administration (DICA).

The supreme court is currently undertaking a law reform process to prepare a new Insolvency Bill. According to the court’s brief paper, the bill seeks to introduce an effective insolvency regime to facilitate the timely, efficient and impartial resolution of insolvency. It will provide a transparent procedure which contains clear risk allocation rules and provides certainty to the market.

An effective insolvency regime allows parties to anticipate how their legal rights will be affected in the event when a party cannot meet their payment obligations. This allows creditors to assess their risks when considering lending and investments and allows both debtors and creditors to determine and evaluate their options when financial difficulties arise. In turn, transparency and certainty expand the availability of credit as creditors have confidence that their rights with respect to the debtor and its assets will be recognised and enforceable.

“The existing regime is in many respects out of date and does not reflect international best practice. In the case of corporate insolvency, the only corporate rescue mechanism set out in the Companies Act is by way of scheme of arrangement. This process is well understood and a common feature of most common law insolvency systems, but it is a rescue mechanism only feasible for large companies and complex corporate groups,” the briefing paper stated.

The draft law

The bill seeks to introduce a modernised Insolvency Law to align with international standards and modern business practices but “is also complementary to Myanmar’s broader economic, business and legal framework and circumstances.” It aims to promote access to finance by providing certainty, transparency and predictability for debtors and creditors with respect to regulation of their rights in an insolvency.

The draft legislation combines corporate insolvency and personal insolvency in the one legislation, and has a separate corporate rescue and insolvency regime for micro, small and medium-scale enterprises (MSME) sector. The purpose is to streamline and simplify the rehabilitation and liquidation process and establish a simpler and more cost effective system suitable for MSMEs.

“A modern insolvency regime includes corporate rescue processes that are more readily available to the majority of companies that are not large or part of a complex corporate group, and which provides a framework for the rehabilitation of a financially distressed, but viable, company,” the document explained.

Part V of the Companies Act, the Rangoon Insolvency Act (1909) and the Burma Insolvency Act (1920) will be repealed and replaced by the new law. 

(The Myanmar Times: https://www.mmtimes.com/news/draft-bill-combines-corporate-personal-insolvency-one-legislation.html )

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