Insolvency Law at Malawi
Malawi's insolvency framework is governed by the Insolvency Act, 2016 (Chapter 11:01), which modernised and consolidated previous legislation, including the Bankruptcy Act and the Deeds of Arrangement Act. The Act, which came into force on 20 May 2016, provides comprehensive procedures for both corporate and personal insolvency, aiming to balance the interests of debtors and creditors while promoting economic recovery. (Insolvency Act - MalawiLII)
⚖️ Key Features of the Insolvency Act, 2016
1. Corporate Reorganization
Company Reorganization Orders: A company facing financial difficulties can apply to the High Court for a reorganization order. If granted, an administrator is appointed to manage the company's affairs with the goal of returning it to solvency. (Insolvency Act - MalawiLII)
Eligibility for Reorganization: The court will grant a reorganization order if satisfied that the company is or is likely to become unable to pay its debts as they fall due and that the order is reasonably likely to achieve the objective of reorganization. (Insolvency Act - MalawiLII)
2. Liquidation Procedures
Winding-Up Orders: If reorganization is not feasible, a company may be placed into liquidation. A liquidator is appointed to wind up the company's affairs, sell assets, and distribute proceeds to creditors. (Insolvency Act - MalawiLII)
Creditor's Role: Creditors have the right to petition the court for a winding-up order and to participate in meetings to appoint a liquidator. (Insolvency Act - MalawiLII)
3. Personal Bankruptcy
Adjudication of Bankruptcy: An individual (including a sole proprietor or partnership) can be adjudicated bankrupt if unable to pay debts. Bankruptcy can be initiated by the debtor or a creditor. (Insolvency Act - MalawiLII)
Discharge from Bankruptcy: An undischarged bankrupt is prohibited from engaging in business without the consent of the Official Receiver or the court. (Insolvency Act - MalawiLII)
4. Insolvency Practitioners
Qualifications and Registration: Individuals must be qualified to act as insolvency practitioners, typically requiring qualifications in law or accountancy. They must be registered with the Director of Insolvency. (Insolvency Act - MalawiLII)
Duties and Powers: Insolvency practitioners are responsible for managing insolvency proceedings, including asset realization and distribution to creditors. They must act impartially and in accordance with the law. (Insolvency Act - MalawiLII)
5. Cross-Border Insolvency
Recognition of Foreign Proceedings: The Act provides a framework for recognizing and assisting foreign insolvency proceedings, allowing foreign representatives to apply to the Malawi courts for orders related to the debtor's assets in Malawi. (Insolvency Act - MalawiLII)
📌 Practical Considerations
Threshold for Bankruptcy: A debtor must owe a prescribed minimum amount to be eligible for bankruptcy proceedings. (Insolvency Act - MalawiLII)
Duration of Proceedings: The duration of insolvency proceedings can vary depending on the complexity of the case and the cooperation of stakeholders.
Creditors' Rights: Creditors have the right to be informed of proceedings, to vote on reorganization plans, and to receive distributions from the liquidation of assets. (Insolvency Act - MalawiLII)
RELATED Blog
0 comments