HARARE: Zimbabwe has set up a special committee to fast-track the review of the Insolvency Act as part of measures to stimulate investment in the country. The legal reform is part of the on-going “ease of doing business” programme, which is spearheaded by the Office of the President and Cabinet in conjunction with the World Bank.
In an interview on the sidelines of the Institute of Chartered Accountants of Zimbabwe workshop in Bulawayo Friday, Grant Thornton managing partner, Reggie Saruchera, who is part of the team, said a committee was working on reviewing the Act to ensure it creates the right investment environment.
He said the new Act was going to overcome challenges related to the rapidly changing economic environment in the country with regards to the regulatory and operational regime for insolvency, bankruptcy and judicial management of local companies. “The insolvency laws or framework are being looked at currently as we speak and they’re being reviewed,” said Saruchera.
“The judicial management law is being reviewed so that it can move to business rescue, which is more positive and enables the resuscitation of business. “The revised legislation is expected to come out sometime in January after approval by Parliament.”
He said the government had set up various committees looking at different legal provisions relating to investment including resolving insolvency and the ease of access to credit facilities for local businesses. Grant Thornton Zimbabwe is one of the growing professional firms in the country, providing audit and assurance, tax and specialist business advisory services to listed companies.
Saruchera said his firm was part of the review process. It also makes proposals for bringing the law into accord with current national and international trends. Under the legislative reforms, focus would also be on developing a coherent insolvency and business rescue regime consistent with international best practices.
In addition, the reforms will focus on developing a regime for out of court workouts, an approach that will keep potentially viable, but distressed businesses alive instead of liquidation. This would enable creditors to recover part or all of what they would be owed, preserve jobs and sustain customers and the supplier network.
Businesses will face insolvency proceedings or liquidation sanctioned by the court. In some cases, some companies may be placed under judicial management or curatorship, but this did not yield positive results in Zimbabwe in terms of turning around struggling entities.
The reforms also seek practical training for insolvency practitioners, capacity building for the Master of High Court office and regime for licensing insolvency practitioners.
In recent years, many creditors failed to recover substantial amounts when the companies owing them were either placed under judicial management or curatorship in the case of banks. When a business is declared insolvent, its current liabilities exceed current assets meaning that entity may not be able to repay debts.
The thrust of the meeting was to discuss ways of enhancing investment and business turnaround strategies. Business executives and chartered accountants attended the meeting.
