Businesses at risk of collapse after being declared bankrupt now have a grace period of 30 days to salvage their ventures.
This was after the Business Registration Service (BRS) disclosed the application of Insolvency Act Amendments meant to enhance the recovery rate.
Through a statement dated Tuesday, November 1, distressed companies will have a 30-day pre-insolvency moratorium period to consider options for saving their businesses.
The 30-day pre-insolvency moratorium will act as an emergency mechanism to offer businesses some breathing space. According to the Act, entrepreneurs can utilise the extended time to negotiate with creditors and even file court cases over harmful interests imposed by lenders.
"A holder of a floating charge can now apply to the court to challenge a distribution to unsecured creditors where the effects unfairly harm its interests," BRS stated.
"These amendments increase the recovery rate and reduce the time taken to resolve insolvency cases," it added.
The new law prevents businesses from being placed under receivership after being declared bankrupt.
By applying for a pre-insolvency moratorium, a business owner, in retrospect, indicates during that 30 days period it can raise funds to bankroll its operations and thus revive it.
This law retains the company's autonomy and further protects its assets from legal action.
The law came after the Register of Companies indicated that over 100 companies had applied to be struck out of its records.
"The Registrar of Companies gives notice that the names of the companies specified hereunder shall be struck off from the Register of Companies at the expiry of three months from the date of publication of this Notice, and invites any person to show cause why the companies should not be struck off from the Register of Companies," read the statement in part.
The closure was attributed to inflation pressure and the global recession, which had affected the companies.
