The Association is of the belief that an effective law on corporate insolvency would enable companies to fall on options to recuperate rather than closing the company, as is the common prescription under the country’s current laws.
Mr. Jacob Saah, the Executive Secretary of GARIA made the call during a panel discussion held in Accra on the Ghana Journalists Association’s programme dubbed: ‘Business Advocate’ on Ghana Television.
The programme is supported by the BUSAC Fund, DANIDA, the United States Agency for International Development and the European Union.
Speaking on the topic, “Rescuing Businesses from Insolvency”, Mr. Saah explained that insolvency was the legal term describing the situation of a debtor who was unable to pay its debts.
He distinguished between two primary types of insolvency – cash flow and balance sheet.
“In cash flow insolvency, the debtor suffers from a lack of financial liquidity making it impossible to pay debts as they fall due. This is the type of insolvency most individuals experience prior to filing for bankruptcy.
“Balance sheet insolvency, on the other hand, involves having negative net assets, where one’s liabilities exceed their assets. This is the form of insolvency normally described by corporate entities prior to filing for bankruptcy”, he explained.
Mr Saah said the current bill in cabinet highlights on cross-border insolvency issues, duties of insolvency practitioners, and insolvency service department among others.
He appealed to the Attorney General’s Department to speed up the process to get the bill passed into law to protect companies in distress.
Ghana recently put together a team of legal experts headed by Justice Date-Bah, to review the legal framework governing corporate entities, which has seen a review of the Companies Act, 1963, Act 179.
Mr Saah said insolvency was caused when a company’s liabilities exceeded its debts, adding that an efficient insolvency law would encourage the restructuring of viable but financially troubled companies.
He said insolvency law policies and regulations played an important role in the economy and in society, in that it allowed honest but unfortunate debtors to obtain a fresh start by relieving them from their debt.
“Insolvency law policies also allow resources to be quickly returned to productive use by enabling viable but financially troubled companies to restructure instead of filing for bankruptcy”, he added.
Mr Clifford Mpare, the Chief Executive Officer of Frontline Capital Advisors called for awareness creation and stakeholder education on the bill, since it was critical to the success of companies.
He said in any business venture, there should be an alternative in case of insolvency, and as such the law in place would address the situation and build the confidence of investors willing to invest in the country.
He noted that the bankruptcy and insolvent Act provided a legislative framework for the liquidation of the assets of an insolvent individual, corporation or partnership, and the distribution of the proceeds in a fair and orderly way among the creditors.
Alternatively, he believed that the Act provided ways for insolvent businesses or consumer debtors to avoid bankruptcy by negotiating arrangements with their creditors for the compromise of their debts and the reorganization of their financial affairs.
Ms Domtie Afia Sarpong, Principal State Attorney at the Registrar General’s Department said their outfit was responsible for administering the law, and that it was prudent for government to ensure the speedy passage of the bill into law.
By Kodjo Adams, GNA