What is insolvency?
A company is insolvent when it is generally unable to pay its debts as they fall due or that its liabilities exceed the value of its assets.
A company is deemed unable to pay its debts if-
a) a creditor to whom the company owes in a sum exceeding $10,000, has demanded payment and the company has neglected to pay the debt;
b) a company fails to satisfy execution or other process issued on a judgment, decree or order of any Court in favour of the company; or
c) it is proved to the satisfaction of the Court that the company is unable to pay its debts.
Ease of Doing Business
Brunei Darussalam stands at 98 in the ranking of 189 economies on the Resolving Insolvency Index. The rankings are benchmarked to June 2015 and based on the average of each economy’s distance to frontier scores. In addition, Doing Business evaluates the adequacy and integrity of the existing legal framework applicable to reorganisation and liquidation proceedings.
The Resolving Insolvency Index tests whether economies adopted internationally accepted good practices in four areas namely commencement of proceedings, management of debtor’s assets, reorganisation proceedings and creditor participation.
The strength of insolvency framework index ranges from 0-16 with higher values indicating insolvency legislation that is better designed for rehabilitating viable firms and liquidating non-viable ones.
Introduction of Insolvency Order, 2016
Brunei Darussalam has introduced the Insolvency Order, 2016, a new legislation that consolidates all provisions relating to insolvency under the Companies Act (Chapter 39) with some new provisions adopted from the United Kingdom and Singapore.
It is intended to create a shift in insolvency culture, with a greater emphasis placed on company rescue and rehabilitation, and protection for all creditors and debtors. The Insolvency Order, 2016 covers corporate insolvency only and the Bankruptcy Act (Chapter 67) governs bankruptcy regime relating to individuals.
What’s NEW! in the Insolvency Order?
- Introduction of a new chapter on company voluntary arrangement.
Voluntary arrangement under the Order may include –
(a) a composition in satisfaction of its debts;
(b) restructuring of debts through restatements of assets and liabilities and agreement with creditors on maintaining payments;
(c) reorganising the company by restructuring the ownership and management of the company to lead to better decision making and execution; or
(d) any other acts as may be necessary for the rehabilitation or rescue of the company.
- Amendment to the provision relating to preferential payments that shall be paid in priority to all other unsecured debts.
To download the Insolvency Order, 2016, please click here
For more information on the Insolvency Order, 2016, download the booklet here
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