Insolvency Law at Rwanda
Rwanda's insolvency framework is governed by Law No. 75/2021 of 30/12/2021, which repealed the previous Law No. 23/2018. This comprehensive legislation outlines procedures for both corporate and individual insolvency, aiming to balance creditor rights with debtor rehabilitation. (Law relating to Insolvency - RwandaLII)
š¢ Corporate Insolvency
1. Insolvency Proceedings
Insolvency proceedings can be initiated by a debtor or creditor when a company is unable to pay its debts. The court appoints an insolvency practitioner to manage the process. The proceedings may involve liquidation or reorganization, depending on the company's circumstances. (Law relating to Insolvency - RwandaLII)
2. Liquidation
Liquidation involves selling the company's assets to pay off creditors. The proceeds are distributed in a specific order:
Costs of the insolvency proceedings. (Law relating to Insolvency - RwandaLII)
Secured creditors.
Preferential creditors, including employees' wages and social security contributions. (Law relating to Insolvency - RwandaLII)
Unsecured creditors.
Any remaining assets are returned to the debtor.
3. Reorganization
Reorganization allows a company to continue operations while restructuring its debts. A reorganization plan must be approved by creditors and the court. The plan may include debt rescheduling, asset sales, or other measures to restore the company's viability.
š¤ Individual Insolvency
1. Bankruptcy
An individual may be declared bankrupt if unable to pay debts. The court appoints a trustee to manage the individual's assets and liabilities. The trustee sells assets to pay creditors and may propose a repayment plan.
2. Discharge
After fulfilling the bankruptcy terms, an individual may be discharged from remaining debts. However, certain debts, such as those arising from fraud or intentional misconduct, are not dischargeable.
āļø Legal Protections and Offenses
Essential Services: Suppliers cannot refuse services to a liquidator or debtor due to pre-insolvency arrears. (Law relating to Insolvency - RwandaLII)
Contractual Obligations: Existing contracts may continue, but the insolvency administrator can terminate unperformed contracts.
Fraudulent Activities: Offenses include asset concealment, fraudulent transactions, and unauthorized business operations during insolvency. (Law relating to Insolvency - RwandaLII)
Penalties: Convictions can result in imprisonment (up to 5 years) and fines ranging from RWF 500,000 to 5 million, depending on the offense.
š Cross-Border Insolvency
Rwanda recognizes foreign insolvency proceedings. Foreign creditors have equal rights as domestic creditors. The court may grant relief, such as asset protection or administration, upon request from a foreign representative. (Law relating to Insolvency - RwandaLII)
For detailed information, refer to the full text of Law No. 75/2021. Consulting with legal professionals specializing in Rwandan insolvency law is advisable for specific cases.
RELATED Blog
0 comments