SWAKOPMUND – Minister of Justice Sacky Shanghala says there is a need for the Law Reform and Development Commission (LRDC) to also include cross-border insolvency when formalising the Insolvency Bill that will eventually replace the Insolvency Act of 1936.
Cross-border insolvency, also referred to as international insolvency, regulates the treatment of financially distressed debtors when they have assets or creditors in more than one country.
Shanghala, who was addressing the commission earlier this week in Swakopmund, said that foreign-owned and run companies such as Foschini, Standard Bank and Woolworths are all business that operate cross-border.
Hence he says it would only be fair to address cross-border insolvency as it will be of immense help for local creditors in debt recovery.
He says one should wonder what would happen if one of these entities can no longer pay their debts as the current act limits the seizure or liquidation process for such property within the country.
According to Shanghala, the current Insolvency Act and absence of clear cross-border legislation will not give Namibia any jurisdiction in any insolvency-related litigation in foreign jurisdictions as well.
The minister then made reference to the Pescanova matter, which was a subject of insolvency proceedings in Spain. Pescanova had subsidiary companies in South Africa which also operated in Namibia (NovaNam).
“In this instance the business of Pescanova averted liquidation and was salvaged. However one still wonders if their creditors in Namibia and South Africa would have had the same rights in Spanish courts or would those courts have considered depositions in South Africa or Namibia or the position of creditors in these jurisdictions equally with those in Spain in this matter,” the minister said.
Shanghala added that Namibia’s national insolvency laws are not capable of efficient solutions in cross-border proceedings and though the issue speaks largely to juristic persons it remains relevant to all.
“Therefore the focus for cross-border insolvency is for us to be prepared when we are faced with the issue. Hence the reform should also trigger a larger conversation at regional level to ensure SADC is aligned and continues to collaborate on such matters,” he said.
According to Shanghala, reform of Namibia’s legal insolvency framework is not popular but is crucial in a feuding recovering developing economy such as Namibia’s and hence is it necessary for the entire economies of SADC members.