Rwanda's Ministry of Trade is struggling to popularize the Law of Insolvency among the business community here but success continues to elude its efforts. Since its enactment in May 2009, the Insolvency Law still struggles to be accepted in the business community and is yet to serve its purpose, that of helping insolvent firms sort out their affairs. The law hands down procedures through which indebted businesses that can't pay creditors can declare themselves insolvent or bankrupt. With such a declaration, the office of the Registrar General of companies appoints an administrator to dissolve the company. Under the insolvency law, the administrator takes over responsibility of the insolvent company from its directors before re-evaluating the company's total assets that can be sold to pay off creditors. Upon settling creditors' claims, the company can be listed as inactive in both the registrar's records and those of RRA which means the firm is relieved of its tax obligations. According to the Registrar General of Companies, the law has several advantages to the business owners including relief from tax burdens as well as being helped through the administrator to pay off creditors mainly through liquidating the company's assets. However, this is simply not working out. According to the Registrar's office, only about 100 files were registered for insolvency throughout last year yet they believe many could be folding quietly without applying procedures under the law. The Practice itself is not yet popular with commercial lawyers who would otherwise work as administrators this is because there are not enough cases to handle. A source in the commercial courts told East African Business Week that only less than five cases have been brought to their attention and this is just too small a number to attract serious practice. Yet despite all challenges, Rwanda, will be looking to make the Law gain ground as a major reform for Doing Business with the next World Bank Report for 2013 expected soon. Read more.
