Background
The Cabinet Memorandum on Insolvency Law Reforms No: 2023/Cab Memo/J/L/60 dated 07 th June 2023 mentioned that and effective insolvency law is essential to improve domestic economy and attract international investors. As such, it is imperative to recognize the importance of a robust restructuring and insolvency regime that aims to safeguard viable businesses as going concerns and enable the fast and efficient exit or liquidation of non- viable, insolvent ones. The memorandum further highlighted that the economic reasons for strengthening the insolvency regime are numerous including: Access to credit is improved as creditor risk is better priced, Jobs and supply chains are preserved, Entrepreneurship is promoted and Economic efficiency is enhanced. The Cabinet Memorandum has identified several gaps and lapses in the existing Insolvency Ordinance 1853 and provisions for corporate insolvency being in the Companies Act No.07 of 2007.
Therefore the Cabinet of Ministers proposed and approved that a unified insolvency law should be developed which incorporates recognized global “best practices” tools for the restructuring of viable business in distress; contains clear rules for the disclosure of non- viable businesses , which is supported by a legal and administrative framework that facilitate the effective application of these provisions would meet the needs of the foreign
investors and would strengthen the domestic economy.
The Cabinet of Ministers mandated the Law Commission to draft the required legislation to address the above issues with relevant stakeholders and to submit a proposal.
Present Status
The Law Commission appointed a Subcommittee on Insolvency Law Reforms
- Mr.Chanaka de Silva P.C - Chairperson
- Dr. Harsha Cabral P.C
- Mr.Parinda Ranasighe P.C
- Mr.Nirmalan Wignesharan
- Mr.Niran Ankatell
- Ms. Shehara Weerakoon from the Legal Draftsman’s Department
Preliminary Discussions: 08
World Bank Representatives: The Law Commission had 06 preliminary discussions with the World Bank representatives via virtual meetings on the following dates:
- 17.08.2023
- 23.08.2023
- 09.08.2023
- 17.08.2023
- 05.09.2023
- 12.09.2023
The following topics were discussed as the initial discussions:
- Sri Lanka Insolvency Law Reforms – Key Policy Issues and Policy Questions
- Personal Insolvency Policy Issues - Research and country examples of personal bankruptcy
Meetings with Stake Holders - 02 meetings held on the following dates
- 12.09.2023 –Insolvency Consultancy meeting , coordinated by the Presidential Secretariat
- 14.09.3023- 02 meetings were held with the Private Sector stake holders, coordinated by the Presidential Secretariat. Many leading law firms, accountancy firms and banks were represented. The property excluded from seizure in execution of a decree on unsecured debt and some decisions of courts on insolvency issues were discussed.
Discussions held Progress review meeting with Presidential Secretariat: -03.10.2023
- Meetings with World Bank representatives in Colombo at the Head Office of World Bank Sri Lanka - 25 th September 2023 –06 th October 2023
Developed the draft and opened for the comments of Private Sector, Judicial Sector and the Government Officials.
Number of Law Commission Meetings discussed the progress of the Reforms: 08
