The Insolvency Law is a new business reform that the Government of Rwanda introduced recently to boost business transactions between investors in the country as advocated by the World Bank as way of improving the business climate.
George Mangula interviewed the Chief Operating Officer of the Rwanda Development Board (RDB), Clare Akamanzi on the significance and challenges facing this law. Excerpts follow.
GM:How Important is the Insolvency Law in promoting business in Rwanda?
Clare Akamanzi: The law is very important in the life cycle of a business in particular when the business is either financially weak such that it requires re-organization or when it is in too difficult a situation to come-back which in this case requires liquidation.
The insolvency law therefore lays down the procedures for the commercial recovery proceedings and settlement of issues arising from insolvency either of a trader or a company.
The law also helps creditors recover their monies which would have been difficult to get without insolvency proceedings. In the same spirit, the debtors use this law to file for bankruptcy such that, the companies can be relieved of distress.
It helps the suppliers or creditors to be cautious or even stop dealing with the debtor because filing of insolvency clearly indicates the financial weaknesses in the company.
GM: The 2012 Doing Business Report shows that Rwanda moved back from position 163 to 165. What are the reasons for this backward shift?
Clare Akamanzi: Normally one should worry about slight rank movements. There are several reasons of shift in the World Bank ranking. It may shift positively or negatively as it did on our rank.
In most cases, the introduction of new countries in the assessment does contribute to the re-calculations hence the shift in ranking.
The other reason could be some countries reforming better in resolving business indicator much as it could be some countries reforming negatively.
This also could trigger the shift in the ranking. In Rwanda’s case, we are still in the process of developing awareness and a culture of using insolvency proceedings.
GM: What is RDB doing to improve on this position for the next rankings?
Clare Akamanzi:This law is new in Rwanda and this could partly explain why the culture of closing business formerly was lacking. To this effect, RDB has carried out several workshops to the Judges, Lawyers, journalists and business community.
The training would help the business community understand the benefits of filing for insolvency for whereas the professionals would understand the best way to deal with such cases and the combination of the two would definitely result in the improvement of this indicator/rank.
GM: How would advise companies and businesses that are not utilising this law?
Clare Akamanzi: We strongly advise the companies to follow the laws. In this matter, if the company is following the company law properly, it means that, it will be filing its financial statements every year.
The good thing with this is that, the office of the Registrar General has capacity to detect companies that are on their way to insolvency. They can advise them on re-organisation and if possible to liquidate and come out of stress.
RDB has set up an insolvency desk in the office of Registrar General which will be tasked with assisting companies on insolvency. This will include how to file for insolvency, the benefits etc.
We advise companies that, filing for insolvency is the only way to fight the financial stress that normally business community faces. This is normal and there is no shame.
In the life cycle of a business, it goes through several stages right from starting a business and at time to closure.
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