The Insolvency Act, 2014 - Help in times of financial trouble
With the general election out of the way, the governor general in fulfilling his duties under the Constitution, will in the next few weeks swear in a prime minister and several ministers of Government.
However, after the end of the political storm, hopefully, calm will return to the lives of all. With the advent of calm, issues such as insolvency on a national, corporate and personal level will once more occupy the minds of ordinary Jamaicans and business operators. Generally, the results of the general election will not immediately resolve insolvency issues at the corporate and individual levels, if at all, so those individuals and corporate entities with serious indebtedness may lean on the Insolvency Act, 2014, (hereinafter referred to as 'the Act'), which has repealed and replaced the Bankruptcy Act.
An insolvent person is defined by the Act as a person who resides, carries on business or has property in Jamaica and whose liabilities to creditors, provable as claims under the Act, amounts to not less that $300,000 and who is unable to meet his obligations as they generally become due, who has ceased paying his current obligations as they become due or whose property, if sold by way of a fair valuation, would not be sufficient to enable payment of his obligations.
A person facing imminent insolvency, that is to say, a person who reasonably anticipates that for any reason within the period of 12 months, he will be unable to meet his obligations as they become due, shall be treated as an insolvent person. Under the Act, 'person' has been given a very wide meaning to include an individual, partnership, unincorporated associations, administrators or other legal representatives.
The objectives of the Act is, among other things, to create an environment to help with the rehabilitation of debtors and the preservation of viable companies but with regard to the rights of creditors and stakeholders. It also takes account of the fair allocation of the costs of insolvency, while at the same time taking into consideration the local economy and the financial system.
Pursuant to Section 11 of the Act, the process starts with a proposal from a person facing imminent insolvency, an insolvent person, a receiver of an insolvent person, a liquidator of an insolvent person's property or a trustee of the estate of a bankrupt. Before filing the proposal, the person making the proposal may file a notice of intention setting out the debtor's intention to make a proposal within 30 days from the filing of the notice of intention. If the person is a company, notice shall also be served on the Companies Office of Jamaica.
In keeping with the provisions of Section 12 of the Act, five days after the notice of intention is filed, the trustee is obliged to send a copy of the said notice to all known creditors; and 14 days after the said notice is filed, the insolvent person shall file a cash flow statement. The proposal must then be filed 30 days after the notice of intention is given.
Next week in Part 2, this column will examine in further detail some aspects of the insolvency process and the role of the court in the process.