• Insolvent Companies: Changes to Regulation
  • December 30, 2015 | Author: Jacy A. J. Whittaker
  • Law Firm: ParrisWhittaker - Freeport Office
  • Insolvency in The Bahamas

    The Bahamas has recently modernised its insolvency legislation to reflect international developments. It’s important to note that the legal system in The Bahamas is based on English common law (supplemented by local laws such as the International Business Companies Act 2000 and the Bahamas Companies (Winding up Amendment) Act 2011).

    The UK’s Insolvency Act 1986 has been the primary law on insolvency for many years, ad important amendments and clarifications have been made to the 1986 Act1 which sets out a new regulatory framework for administrations of insolvent companies, with potential implications for insolvencies in The Bahamas. The new framework also increases flexibility for insolvency practitioners which is of great benefit both to lawyers and insolvent companies.

    What’s new?

    The changes include:

    In relation to a director:
    • requiring the courts to consider a wider range of matters than previously, including the director’s track record, and the nature of those who have suffered due to the misconduct, when deciding whether or not to disqualify
    • enabling disqualification proceedings to be taken in the UK where there has been misconduct, or directors have been convicted, in overseas companies
    • enabling proceedings to be taken against a person who has caused a director’s unfitness
    • increasing the time period within which disqualification proceedings may be taken following a formal insolvency from 2 to 3 years
    In relation to Office-holder actions:
    • fraudulent and wrongful trading actions can now be brought by an administrator (not only liquidators as previously)
    • corporate office-holders may now assign causes of action or the proceeds arising from them, in respect of activity such as fraudulent and wrongful trading and extortionate credit transactions
    This means potential additional recoveries by office-holders in situations where a claim may have good prospects of success, but the estate may be without funds to pursue it. Furthermore, any recoveries from such claims will not be included in assets available to meet the claims of floating chargeholders.

    In relation to Creditors:
    • physical meetings of creditors will no longer be the default mechanism for their decision-making in insolvency proceedings.
    • there is a new deemed consent procedure in certain cases, meaning that a proposed decision will be deemed approved unless sufficient creditors object (and if an objection is made, then the office-holder must use a qualifying decision procedure or creditors’ decision procedure)
    Various changes in relation to the Administration itself include:
    • the period by which an administration may be extended with creditors’ consent is extended from six to 12 months
    • where there is a prescribed part available for distribution to unsecured creditors, administrators no longer need to seek the court’s permission to make such a distribution. That said, administrators will still need the court’s permission to make a distribution of funds to unsecured creditors which are not derived from the prescribed part
    There are also new provisions in relation to small debts, trustees in bankruptcy and voluntary arrangements. If you need information about any of these changes and how they may affect your company, contact us now.

    How can we help?

    If your company is insolvent, or you are going through an administration, the expert commercial lawyers at ParrisWhittaker are available to give you urgent advice and representation to help you company through the process. Contact us now.

    1 Under the Small Business, Enterprise and Employment Act 2015