Pitfalls of insolvency provisions under the Zambian companies' ACT
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Date
2015
Authors
Bwembya, Anthony
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Journal ISSN
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Publisher
The University of Zambia
Abstract
The purpose of this study was to establish whether the provisions of the Zambian Companies’ Act in relation to insolvent companies do provide an effective mechanism for protecting the wider interests of different stakeholders who include shareholders, employees, tax authorities, suppliers and customers. The insolvency provisions in the Zambian Companies Act, like those in many other commonwealth countries are premised on English law. Many jurisdictions including England have undertaken insolvency law reform to introduce modern and workable concepts such as those aimed at facilitating corporate rescue, enhancing director’s responsibility, providing for expeditious and non-court based procedures, among others. In Zambia however, the Companies Act is still premised on the repealed English Companies Act of 1948. The problem is that it is not known whether the current insolvency provisions are capable of providing safeguards to guarantee equitable and fair outcomes for all stakeholders in situations where debtor companies undergo financial distress. This approach adopted was a desk research method encompassing mainly collection of primary data in the form of local and foreign legislation, law reports and secondary data from text books, newspaper articles, journals, internet and dissertations and obligatory essays. The major research findings were that, insolvency provisions in the current Zambian Companies’ Act fall short of international best practice in that they lack any effective mechanism for corporate rescue and cross border insolvency. The said provisions are also incapable of fostering accountability, transparency and fairness among liquidators and receivers. The conclusion from the study was that insolvency provisions in their current form are incapable of safeguarding the interests of any of the stakeholders when a company has become insolvent. The major recommendations arising out of this research include the need to; strengthen provisions of the Zambian Companies’ Act relating to director’s duties and responsibilities; introduce provisions aimed at corporate rescue; introduce provisions aimed at improving accountability, expertise and fairness among Receivers and Liquidators in their practice; introduce provisions to cater for cross border insolvency and reform the judiciary in order to make it effective in dealing with cases of insolvency
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Keywords
Business failures--Law and legislation--Zambia , Bankruptcy--Zambia