KAMPALA - The East African Community (EAC) bloc is mooting a plan to harmonise laws that will regulate cross border insolvency. Insolvency occurs when an organisation or individual is unable to pay debts on time. An insolvent company can either wind up or be restructured.

Speaking to journalists during the launch of the insolvency week in Kampala, Bemanya Twebaze, the registrar general Uganda Registration Services Bureau (URSB), said the move is timely as countries shift towards borderless trade.

"Trade across borders is a daily occurrence so what happens in a situation where a company which is trading across the region goes into liquidation,” he said at the Regional Official Receivers’ Forum on Wednesday.

Twebaze noted that resolving insolvency is one of the areas that the World Bank bases in preparing its easing of business report. He said a common insolvency law is very vital for countries in the bloc as they attract more investments. "Investment decisions will be taken when investors are clear about the legal regime especially on insolvency,” he said.

According to Mustapher Ntale, the manager liquidation URSB, the current practice makes it difficult for a thriving company in one country to transfer its assets and save an insolvent company in another country.

"If you have this law, it is a matter of contacting the official receiver in Kenya with a claim and make sure creditors are paid and, even if there are no assets in Uganda, they will be able to comply,” he explained.

The Registrar General Kenya, Bernice Gachegu, said the adoption of a mutual law would simplify the judicial processes of insolvent companies across countries. "If there is insolvency in a company that has presence, say in Uganda and Tanzania, in which jurisdiction will the case be held?” she wondered.

Commenting on the current legal framework, Uganda’s former ambassador to Germany, Francis Butagira, resounded a need to revive insolvent companies instead of winding them up.

He argued that salvaging bankrupt companies would create a more vibrant economy.

The insolvency week was aimed at bringing together practitioners, judicial officers, regional official receivers from the East African Community and the business community to share experiences and challenges facing the region’s insolvency landscape.

Agencies