East Africa moves to ease cross border insolvency

Friday November 18 2016



The East African Community (EAC) is hatching 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 an the launch of the insolvency week in Kampala, Mr Bemanya Twebaze, the registrar general Uganda Registration Services Bureau (URSB),said resolving insolvency is one of the areas that the World Bank bases in preparing its easing of business report.

The World Bank Doing Business Report 2017 which is its 14 edition and themed ‘Equal Opportunity for All’ released in Washington DC on October 25, shows that Uganda moved from 122 in 2015 to 115 in 2016 out of 190 economies.

Mr Twebaze, 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.


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 Mr 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 further explained.

The registrar general Kenya, Ms Bernice Gachegu, said the adoption of a mutual law should simplify the judicial processes of insolvent companies across countries.

“If there is insolvency in a company that is 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, Mr Francis Butagira, resounded a need to revive insolvent companies instead of winding them up. He noted 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.