Minister of Industry, Investment and Commerce, Hon. Anthony Hylton, says draft legislation for a new 'Insolvency Act' could be before Cabinet by early next year.
Addressing a Breakfast Forum hosted under the theme, ‘Booms need Bust: Reforming Insolvency Legislation’, Minister Hylton told guests that a reform of the current insolvency legislation is urgently needed, as it has become outmoded and is out of step with the realities of the modern global business environment.
“We don’t need a crystal ball to know that we cannot go into the future with the current insolvency law,” the Minister told the group of largely business persons.
He explained that "reform of the insolvency and bankruptcy laws are of paramount importance, not just in terms of streamlining the process, but also in terms of establishing an insolvency framework that increases direct investments and encourages greater risk-taking. The law has to be more predictable and must be designed to remove the stigma associated with business failure," the Minister said.
Mr. Hylton said that despite the best efforts of those involved, some businesses will fail. He noted however, that sound insolvency laws must be implemented to promote the efficient redistribution of the assets of these businesses, allowing those assets to be put to the most productive use.
He informed that the insolvency law reform is part of a broader legislative agenda being advanced by the Ministry,to improve the business environment.
Citing the World Bank’s Doing Business Report 2012, which states that resolving insolvencies in Jamaica takes 1.1 years on average and costs 18 per cent of the debtor’s estate, with an average recovery rate of 65.3 cents on the dollar, the Minister said that alegislative framework that encourages entrepreneurship or risk-taking as the basis for new business formation, is critical to creating a dynamic business environment.
"We are, therefore, in support of insolvency or bankruptcy laws that foster entrepreneurship, because they absorb much of the risk that creating a new business necessarily entails, thereby reducing the cost of failure," Minster said.
In the meantime, Chairman of the Private Sector Organisation of Jamaica Insolvency Committee, Michael Hylton, QC, said his committee is looking to model Jamaica’s new Insolvency Act on that of the Barbados/Canadian legislation.
This decision was influenced by several factors, including the fact that Jamaica’s Company Act was largely based on the Canadian model. Also, the Canadian model would have the least infrastructural requirement for the government to implement. He noted however, that the committee has recommended sections of other legislations that it thought relevant and which would improve the Act.
Research Associate at the Caribbean Policy Research Institute (CaPRI), and Deputy Dean, Graduate Studies and External Affairs in the Faculty of Law, University of the West Indies (UWI), Suzanne Ffolkes Campbell, said the current insolvency legislation has a negative impact on development.
She outlined the need for a modern regime for bankruptcy that should be cohesive, accommodate all interests adequately and equitably, and create opportunities for rescue and rehabilitation.
The forum was organised by CaPRI, in partnership with the Jamaica Bankers Association (JBA), and the Jamaica Institute of Financial Services (JIFS), with the objective of highlighting and charting the path forward towards developing effective insolvency legislation.