EDITORIAL - More flexibility in bankruptcy law

A bill to streamline Jamaica's bankruptcy laws, now being reviewed by a joint select committee of Parliament, is an important and welcome development.

It should help bring a greater level of certainty and order to the processes by which insolvent individuals and firms, and their creditors, can go about resolving their affairs. And, hopefully, this will get done quickly.

That is good for an economy long starved of growth and is now attempting to restructure itself into one where business can be conducted with less red tape and with great efficiency.

We appreciate the fact that the bill recognises the concept of 'looming insolvency', that is, the circumstance of individuals, or firms, which, while not insolvent, run the risk of becoming so in the absence of corrective action.

Pre-emptive action

Policymakers clearly recognise the need for individual firms, faced with problems with their creditors, to sometimes take pre-emptive action to stave off deeper crises.

We, however, do not believe that they have gone far enough in translating this recognition into the kind of flexibility managers can creatively exploit to shore up essentially viable firms that find themselves in trouble.

In that context, we believe that it would make sense, and be of value to the economy, if in such circumstances our lawmakers would also cause the legislation to recognise the concept of 'debtor in possession', allowing firms to seek, for a time, protection from creditors while they reorganise their affairs. The schemes they offer would, of course, have to be approved by a court and the views of existing creditors would have to be taken into account by the judge.

In other words, our recognition of the ability of firms facing the likelihood of insolvency to attempt pre-emptive action notwithstanding, we would have preferred if there was a specific, direct and robust path through the courts for firms, and individuals, to seek protection from creditors.

The availability of this option, this newspaper feels, would save some firms that might otherwise be liquidated, and in the process save jobs and be less stressful to the economy.

The idea, at the very least, is worth discussing.

The opinions on this page, except for the above, do not necessarily reflect the views of The Gleaner. To respond to a Gleaner editorial, email us: editor@gleanerjm.com or fax: 922-6223. Responses should be no longer than 400 words. Not all responses will be published.