Restructuring companies in Sri Lanka

Kandiah Neelakandan Precedent Partner Murugesu and Neelakandan

The paper presented at 23rd LAWASIA Conference held in New Delhi, India from November, 12 to 14 on State of Insolvency Laws and Procedures

Corporate Rescue

Taking some action to continue to carry on business and eventually extricate the Companies from their financial problems - commonly referred to as Corporate Rescue - is one of the important matters which attract the attention of every government.

Central Bank Governor Nivard Cabraal in his address to Insolvency Practitioners said “If many businesses fail, the repercussions of such failures are felt by the respective sectors, the bankers, the economy and the people. Therefore the economy of the country would be adversely affected through business failures.”

Of course, all companies cannot be rescued. First, there are those which enter some process in order to see if rescue is possible but they continue to fall deeper into debt or simply cannot make any headway and meet their responsibilities under terms of any rescue package.

Second, other companies are not even able, because of the fact that their financial position is so bad, to consider some rescue process. With both types of companies the only thing that can be done is to end the life of the company. This is known as dissolution.

Before being dissolved the company will enter a process known as winding up or liquidation and this process prepares the company for dissolution.

Introduction - Insolvency and Corporate Rescue

The desire to encourage the enterprise culture by promoting the corporate rescue has culminated in a number of legal reforms being made to the law of insolvency in a few countries.

For example, United Kingdom introduced the Enterprise Act 2002, Part 10 of which radically altered the then existing administrative regime under the Insolvency Act 1986 (‘IA 1986’) with the objective of furthering timely rescue of ailing corporate entities.

It was designed to strengthen the foundations of an enterprise economy by establishing an insolvency regime that encourages honest but unsuccessful entrepreneurs to persevere despite initial failure.

In other words, the aim was to promote a culture in which companies that could be rescued were, in fact, rescued.

Traditionally, Sri Lanka’s insolvency procedures which also followed the English system till 2007 were considered to be ‘creditor wealth maximisation’ processes, and were seen as methods of obtaining the best possible returns for creditors.

In attempting to achieve this end, our system, like the English system, has narrowly focused on the interests of creditors, mainly secured creditors, and ignored the interests of other important stakeholders, such as shareholders and employees.

Under the law prior to 2007 there was no adequate legal procedure to facilitate the rescue and rehabilitation of companies experiencing financial difficulties. Instead, a company in financial trouble was generally subject to the process of winding up.

This observation made by a learned author on the English system applied to the Sri Lankan system also:

‘Some visions of insolvency processes and laws are highly unsympathetic to the whole notion of corporate rescue’.

In order to overcome the drawbacks of the then existing ‘creditor-favouring’ regime, the Cork Committee laid the foundations in U.K. for a ‘rescue culture’ by introducing administration as an alternative to administrative receivership or liquidation.

On the recommendations of the Cork Committee, the administration procedure was introduced by Part II of the IA 1986, providing for the appointment of an administrator.

Although, the insolvency regime as envisaged by Cork was to ‘provide an impetus for rehabilitation of the business of the company rather than leaving it to face the surgery of receivership or the burial of liquidation’, the administration procedure ultimately introduced by the IA 1986, ss 8-27 only partially gave effect to the Cork Rescue approach itself.

In a practical context, this court-based administration procedure, for a number of reasons, proved to be of little use to ailing companies which were looking for a temporary breathing space from its creditors for the purposes of rehabilitating the company or reaching a suitable compromise or arrangement with its creditors.

However, when Sri Lanka enacted the new Companies Act in 2007 a simplified procedure for administration was introduced enabling the Board of Directors of the company concerned to resolve to appoint an Administrator without an order of Court but subject to creditors’ approval within two weeks. (Sections referred to in this Paper, unless otherwise specified, refer to Sections in the Companies Act No. 7 of 2007 of Sri Lanka).

The Commercial High Court has been vested with jurisdiction to intervene only if a creditor or shareholder of the company seeks relief to protect his interests during the period of administration. At the same time a salutary provision has been included in the Act in that the Administrator can seek the assistance and guidance of Court by obtaining directions in relation to any matter arising in connection with the carrying out of his functions.

Legal framework under the CompaniesAct No. 7 of 2007

New Companies Act No. 7 of 2007 (‘the Act’) also does not adequately deal with restructuring of Companies or business recovery. It was decided to leave that part of Corporate Law (i.e. rehabilitation of companies, eg. Insolvency Act of England). The thinking has been that it ought to be dealt with in a different manner.

However, Section 57 has introduced the ‘solvency test’ to ensure that corporate bodies ought to maintain strict financial discipline. This is considered as a golden thread that runs through the Act.

This is to ensure that the Companies maintain proper solvency levels at all times. The procedure that has been laid down is to give proper warning signals before the companies go under.

Provisions for administration

The provisions of Part XIII of the Companies Act No. 7 of 2007 (‘the Act’) enable the board of a company which is or is likely to become insolvent to appoint an administrator, for defined purposes, the principal of which is the survival of the company as a going concern.

Section 401 (2) of the Act provides as follows:-

“The purposes for which an administrator may be appointed are:-

(a) the survival of the company and the whole or any part of its undertaking as a viable concern;

(b) the preparation and approval of a compromise under Part IX or a compromise or arrangement under Part X; or

(c) a more advantageous realisation of the company’s assets than would be likely on a winding up.”

Where the board of a company considers that:-

(a) the company is or is likely to become unable to pay its debts as they fall due; and

(b)the appointment of an administrator will be likely to achieve one or more of the purposes referred to in Section 401 (2)

the board may resolve to appoint an administrator of that company

The Board must be satisfied:-

(a) Firstly, that the Company is or likely to become unable to pay its debts as they fall due;

(b) Secondly, that the appointment of an administrator will be likely to achieve one of more or the purposes referred to in Section 401(2) of the Act.

However, such a resolution cannot be passed by the Board where:-

(a) an order has been made for the winding up of the company;

(b) a receiver has been appointed in respect of the whole of the property and undertaking of the company, unless the person by whom or on whose behalf the receiver was appointed has consented to the making of the order; or

(c) an administrator has been appointed by the company on a previous occasion, unless the leave of the court to make the further appointment is first obtained

Effect and appointment of Administrator

From and after the appointment of an administrator, until the end of the initial period of two months:-

(a) no resolution may be passed or order made for the liquidation of the company;

(b) subject to the provisions of section 402, no steps be taken to enforce any security over any property of the company or to repossess any goods in the company’s use or possession under any hire-purchase agreement, except with the consent of the administrator or with the leave of the court and subject to such terms as the court may impose;

(c) no other proceedings and no execution or other legal process may be commenced or continued and no distress may be levied against the company or its property, except with the consent of the administrator or with the leave of the court and subject to such terms as the court may impose.

However, such leave of the court is not required for:-

(a) filing a petition to wind up the company; or

(b) giving notice in relation to a default under a charge over property of the company or under an agreement relating to property in the use, possession or occupation of the company.

In other words there will be a moratorium in force at least in a limited sense.

Steps to be taken by Administrator

An administrator should within ten working days of being appointed, send a written notice to all creditors of the company so far as he is aware of their addresses:-

(a) advising them of the appointment of an administrator; and

(b) calling a meeting of creditors to consider whether the appointment should be confirmed.

Where no meeting of creditors is held before the expiry of the initial period the administrator shall cease to hold office at the expiry of that period.

Where a meeting of creditors under this section does not confirm the appointment of the administrator, the administrator shall cease to hold office with effect from the close of the meeting.

Where a meeting of creditors under this section confirms the appointment of the administrator, the administrator will continue in office and should prepare proposals in accordance with the provisions of the Act.

After the Initial Period

During the period for which an administrator holds office after the expiry of the initial period

(a) no resolution may be passed or order made for the winding up of the company;

(b) no receiver of the property of the company may be appointed;

(c) no other steps may be taken to enforce any security over any property of the company or to re-possess any goods in the company’s use or possession under any hire-purchase agreement, except with:-

(i) the consent of the administrator; or

(ii) the leave of the court and subject to such terms as the court may impose;

(d) no other proceedings and no execution or other legal process may be commenced or continued and no distress may be levied against the company or its property, except with:-

(i) the consent of the administrator; or

(ii) the leave of the court and subject to such terms as the court may impose;

However, such consent of the administrator or the leave of the court is not required for:-

(a) filing a petition to wind up the company; or

(b) giving notice in relation to a default under a charge over property of the company or under an agreement relating to property in the use, possession, or occupation of the company.

Administrator’s Proposals

Within two months after the end of the initial period or such longer period as the court may allow, the administrator should prepare a statement of his proposals for achieving the purpose or purposes specified in the order appointing him;

The Administrator should call a meeting of Creditors to consider the Administrator’s statement of proposals not less than five and not more than ten working days after the date on which copies of the statement had been sent to the Creditors.

Approval of the Proposals at a Creditors Meeting

Such a meeting of creditors should decide whether to approve the administrator’s proposals.

The meeting may approve the proposals with modifications, if the administrator consents to the modifications. Where the administrator’s proposals are approved, the administrator can continue in office if the proposals so provide or should cease to hold office in the circumstances set out in the proposals. Where the administrator’s proposals are not approved, the administrator should cease to hold office five working days after the date of the meeting.

Powers of Administrator

(a) An administrator:-

i. should manage the affairs, business and property of the company;

ii. may do all such things as may be necessary or desirable for the management of the affairs, business and property of the company;

iii. without limiting the powers specified in paragraphs (a) and (b), shall have all the powers that could be exercised by a receiver of the whole of the property and undertaking of the company under sections 443, 445 and 446.

(b) The administrator may apply to the court for directions in relation to any matter arising in connection with the carrying out of his functions.

(c) Where the exercise of any power conferred on the company or its board or officers by this Act or by the company’s articles could interfere with the exercise by the administrator of his powers, such power should not be exercised by the company, its board or officers, as the case may be, except with the consent of the administrator, which may be given generally or in relation to particular cases.

(d) Without limiting the generality of (c) above any disposal or other dealing with the property of the company without first obtaining the consent of the administrator, which may be given generally or in relation to particular cases, shall unless the court otherwise orders, be void.

(e) In exercising his powers the administrator is deemed to act as the company’s agent, and a person dealing with the administrator in good faith and for value, should not be required to inquire whether the administrator is acting within his powers.

General Duties of Administrator

(a) The administrator on his appointment should take into his custody or control, all the property to which the company is or appears to be entitled.

(b) The administrator should manage the affairs, business and property of the company:-

(i) at any time before a proposal has been approved under section 407 in accordance with any directions of the court; and

(ii) at any time after a proposal has been so approved, in accordance with the proposal as from time to time revised and with any directions of the court.

(c) The administrator should summon a meeting of the creditors of the company if:-

(a) he is requested to do so in writing by one tenth in value of the creditors; or

(b) he is directed to do so by the court

Protection of interests of creditors and shareholders

The creditors or shareholders of the company can apply to court and obtain order to protect the interests during any time at which the administrator holds office under the provisions of Section 425

Application to administrator of provisions relating to receivers

Certain provisions contained in the Act apply to an administrator and to a company under administration with necessary modifications,

It is relevant to refer to a few other provisions in the Act which assist the corporate rescue. These provisions include compromises with creditors, arrangements and amalgamations.

Compromises with creditors

Scheme of arrangement with creditors

A Company trying to avoid winding up could attempt to enter into an informal arrangement with its creditors, but the chances of such an agreement being successful is precarious.

A formal scheme of arrangement has long been possible with the sanction of the Court.

This type of arrangement may be useful to a Company in financial trouble but due to its being procedurally complex and expensive it has only really been available to large undertakings.

The UK Parliament followed the Cork recommendations in general terms in creating administration and voluntary arrangements. This concept was incorporated principally in the Insolvency Act 1986.

Administration only applies to companies and was originally intended to provide a breathing space for the company free from hassle from its creditors. The idea was to allow the company a set period of time to try to get its act together and come up with a plan for its rescue or at least a beneficial disposal of its assets.

The idea for administration in the UK came from the Cork Report’s view that, although receivership was by no means a collective process, it often had a positive impact upon the company’s ailing business.

The introduction of an outside manager, usually an accountant, as receiver of the company, frequently had the consequence that the company was managed in a far more efficient manner than had been the case when under the control of the company’s directors.

Administration has, as its origins, the idea that the imposition of a professional to manage a company’s business can lead to the business being turned around and saved.

Part IX of the Act contains special provisions for compromises with creditors.

This Part enables companies to enter into a binding compromise with creditors without the need for court involvement. This was introduced to ensure that such compromises can be effected at lower cost, and within the short time-frame which is usually necessary for a compromise of this kind, but which court involvement can substantially impede.

“Compromise” means a compromise between a company and its creditors, including a compromise-

(a) cancelling all or part of any debt of the company;

(b) varying the rights of its creditors or the terms of a debt;

(c) relating to an alteration of a company’s articles that affects the likelihood of the company’s ability to pay a debt.

Compromise proposal

Any of the following persons may propose such a compromise, if that person has reason to believe that a company is, or is likely to become, unable to pay its debts as they fall due-

(a) the Board of the company;

(b) a receiver appointed in relation to the property and undertaking of the company;

(c) an administrator of the company appointed under Part XIII;

(d) a liquidator of the company;

(e) with the leave of the court, any creditor or shareholder of the company

Where the court grants leave to a creditor or shareholder the court may make an order directing the company to supply to the creditor or shareholder, within such time as may be specified, a list of the names and addresses of the company’s creditors, showing the amounts owed to each of them or such other information as may be specified, to enable the creditor or shareholder to propose a compromise

Steps to be taken

(a) The Proponent should compile a list of creditors and give notice with a statement as required by the Act

(b) The Compromise should be approved by the Creditors.

(c) Such a compromise may be varied as prescribed for in the Act.

Any compromise (including any amendment) approved by the creditors binds the creditors as provided for in Section 250.

Powers of Court

On the application of the proponent or the company, the court may:-

(a) give directions in relation to a procedural requirement imposed under provisions of this Part, or waive or vary any such requirement, if the court is satisfied that it would be just to do so; or

(b) order that, during a period specified in the order, beginning not earlier than the date on which notice was given of the proposed compromise and ending not later than ten working days after the date on which notice was given of the result of the voting on it:-

(i) proceedings in relation to a debt owing by the company be stayed; or

(ii) a creditor should refrain from taking any other measure to enforce payment of a debt owing by the company

Rights of secured creditor are reserved

The powers of the Court referred to shall not affect the right of a secured creditor during that period to seize, realise, appoint a receiver in respect of, or otherwise deal with, property of the company over which that creditor has a charge

Right of a creditor to seek court relief

Creditors have been given rights to seek relief on grounds such as insufficient notice of the meeting or of the matters required to be notified being given to that creditor; there was some other material irregularity in obtaining approval of the compromise; or in the case of a creditor who voted against the compromise, the compromise is unfairly prejudicial to that creditor, or to the class of creditors to which that creditor belongs.

Where a compromise is approved, under section 250, the court may on the application of the company, a receiver appointed in relation to property of the company, an administrator or with the leave of the court any creditor or shareholder of the company, make such order as the court thinks fit with respect to the extent, if any, to which the compromise will, if the company is put into liquidation, continue in effect, and be binding on the liquidator of the company.

Where a compromise is approved under section 250 and the company is subsequently put into liquidation, the court may then also make similar orders.

Approval of arrangements, amalgamations and compromises by court

Part X of the Act contains provisions in respect of approval by Court of arrangements, amalgamations and compromises.

“Arrangement” includes a re-organisation of the shares and/or the stated capital of a company;

The Court has been given wide powers to approve arrangements, amalgamations and compromises, and order that those shall be binding on a company. (notwithstanding the provisions of the Act or the provisions of the articles of association of a company). Such orders can be made on application of-

(a) A company

(b) an administrator

(c) with the leave of the Court, any shareholder or creditor of a company.

The powers vested in the Court are set out in Sections 256 and 257

The Court has wide powers to make orders to give effect to any arrangement amalgamation or compromise. (Sec. 257)

However, it must be noted that the court should not approve an arrangement or amalgamation or compromise under section 256 if it could be effected under Part VIII which has certain specific provisions for short and long forms of amalgamations, or under any other provisions of the Act, unless it is satisfied that it is not reasonably practicable to do so.

Powers of court in applications for oppression/mismanagement and in winding up applications

In applications made by minority shareholders under Section 224 or 225 to prevent oppression and/or mismanagement the Commercial High Court has wide powers.

Orders can provide for regulation of the conduct of the Company’s affairs and for purchase of shares or terminating Directors’ contracts.

These provisions can be also in a way considered as those which can restructure companies.

It may be also pertinent to point out that even in winding-up applications where the court is of the opinion that to wind-up the company would be prejudicial to the interests of a shareholder the Court can act under Sec. 224 or 225 and make orders.

Intervention by the Central Bank of Sri Lanka to rescue a Bank

Having highlighted the legal remedies available in Sri Lanka for restructuring companies in Sri Lanka, I now wish to tell you all how our Central Bank acted swiftly and rescued the fourth largest bank in Sri Lanka.

SEYLAN BANK PLC was a Public Quoted Company which is the fourth largest Bank in Sri Lanka with 3,733 employees, and with assets worth over Rs 100 billion.

IT was confronted by a sudden unexpected crisis of public confidence in December 2008

There was widespread uncertainty in the wake of the global economic downturn. It was triggered by Highly Published Financial collapse of Golden Key Credit Company which was also in the same Group. As a result many concerned customers rushed to withdraw their deposits. Rs 7 billion was withdrawn in a few days, creating a run on the Bank.

The ensuring period of instability threatened the very future of a 20 years old Bank, and Sri Lanka Central Bank intervened with the full support of GOSL quickly halted a run that could have been catastrophic.

The Monetary Board - governing authority of CBSL - acted under the Monetary Law Act. The Board of Directors of Seylan Bank was dissolved.

State owned Bank of Ceylon was asked to appoint a new Board and to provide management support to Seylan Bank PLC. The new Board of Directors was appointed.

Eminent Persons of several disciplines are now managing the bank. One is our former BASL President, Nihal Jayasinghe, P.C.

Of course, the General Manager and staff were retained. Thus the Seylan Bank PLC was thus saved.

It ensured the continued Resumption of the business of the Bank

The Central Bank made clear that the intervention of The Monetary Board was SPARKED not simply by the plight of the depositors but by the broader threat to economic equilibrium.

The Central Bank in its announcement said:- “The difficulties of Seylan Bank PLC presented a Potential danger of the stability of the financial system. Therefore the Monetary Board is of the view that immediate measures are Required to be taken to stabilise the Financial System.”

The Central Bank decided to re-capitalize Seylan Bank. Rs 1.1 billion was raised by private placement. Rs 1.9 billion was raised through Public Offering. In fact it was over-subscribed. It is a real success story. The well-orchestrated intervention was led by the Central Bank Governor Sri Lanka who was really brought in as the Governor by the President from the private sector. Cabraal was an active practitioner of standing and former Institute of Chartered Accountants President. He was the founder and first President of Bripasl.

Around the world prominent banks dragged down by global financial crisis had been rescued with Government bails-out either in the form of massive infusion of capital or in a few cases outright Nationalisation.

Timely intervention by CBSL enabled Seylan Bank to regain its equilibrium. Of course, this is outside company law but it is not the law but the timely action of the Regulator that rescued the Bank.

Proposal for law reform

As stated by a Member of the Company Law Advisory Commission of Sri Lanka which finalized the new Act of 2007:-

“It is a fact that the new law on companies too does not deal adequately with business recovery in that sense. Since it was decided by the reformers to leave that part of corporate law, i.e. rehabilitation of companies etc., to be dealt with by a separate regime like in certain other jurisdictions, (eg. Insolvency Act of England and Chapter 11 of the UIS) it was not made part of that statute.

The thinking has been that insolvency and related matters especially restructuring companies ought to be dealt with in a different manner.

However, it should be noted that with the introduction of the ‘solvency test’ for companies, corporate bodies ought to maintain strict financial discipline unlike under the old regime (vide Section 57 of the Act ‘Solvency Test’). This indeed is the golden thread that runs through in the fabric of the new statute, namely to ensure that companies maintain the proper solvency levels at all times. The procedure that has been laid down ensures that proper warning signals are made in companies long before they go under!”.

Business Recovery and Insolvency Practitioners’ Association of Sri Lanka (‘BRIPASL’) (which is the Sri Lanka Chapter of the global organisation INSOL) whose godfather is the present Governor of the Central Bank of Sri Lanka, Ajith Nivard Cabral has been advocating the enactment of suitable legislation in Sri Lanka for corporate turn-around and insolvency in line with the current legislation of other developed jurisdictions.

With that objective having studied the Indian and English experiences in the background of developments in other developed jurisdictions such as Chapter 11 in the United States and Dhanahartha in Malaysia, to name a few, BRIPASL presented a draft legislation for Revival and Rehabilitation of Companies.

This proposal did not find favour with the authorities and the message given to BRIPASL was to suggest an amendment to the Companies Act No. 7 of 2007.

Therefore, BRIPASL has submitted an amendment by way of an additional new Part XIIIA for Revival and rehabilitation of Companies, which is to empower the Commercial High Court to entertain applications to consider and approve a scheme for Revival and Rehabilitation of the company on application made by the Board of Directors of the Company and at the same time giving an option for the Registrar-General of Companies, a creditor or a shareholder to make such an application if such applicant has satisfied the Court that the Board of Directors should have made the application as the company is or is likely to become unable to pay its debts as they fall due and or the net assets of the company are less than half of the Stated Capital of the company and can be revived and rehabilitated.

If the proposed law is enacted, if the board of a company considers that-

(a) (i) the company is or is likely to become unable to pay its debts as they fall due; and/or

(ii) the net assets of the company are less than half of its stated capital; and

(b) the company can be revived and rehabilitated;

the board can resolve and within a period of 20 working days from the date of such resolution make an application to the Commercial High Court, with a scheme prepared for revival and rehabilitation of the Company.

Such an application is to be by way of petition and affidavit accompanied by a certificate from an auditor qualified in terms of section 157 certifying -

(a) the inability of the Company to pay its debts; and/or

(b) the net worth of the Company being fifty percent or less than fifty per cent of the stated capital; (as the case may be)

The Registrar General of Companies, a creditor, a shareholder or shareholders who are entitled to make an application under Section 226 of the Companies Act, a licensed commercial or specialised bank within the meaning of the Banking Act No. 30 of 1988 (as amended), a registered finance company registered with the Central Bank of Sri Lanka under the Finance Companies Act No. 78 of 1988 (as amended) or the Securities and Exchange Commission in the case of a Public Limited Company listed on a stock exchange may, if he or it has sufficient reasons to believe that, the board should have made an application may make an application in respect of such company to the Court for determination of the measures which may be adopted with respect to such company:

The Court may, after inquiring into the application pass an order as to whether a company in respect of which a reference has been made should be revived and rehabilitated and such other orders as it thinks just and equitable.

Provided, however, no application or reference under sub-section (1) or sub-section (3) can be entertained by the Court if.

(a) an application has been made for the winding up of the company under the provisions of the Companies Act No. 07 of 2007; or

(b) a receiver has been appointed under the Section 437 in respect of the whole of the property and undertaking of the company; or

(c) an administrator has been appointed by the company under Part XIII

The Court will have the power (if it deems necessary or expedient so to do for the expeditious disposal of an inquiry) require any operating agency to enquire into the scheme for revival and make a report with respect to such matters as may be specified in the order.

The operating agency should complete its investigations as expeditiously as possible and submit its report to the Court within twenty-one days from the date of such order: Provided that the Court may extend the said period to forty days for reasons to be recorded in writing for such extension.

The Court should conclude its inquiry as expeditiously as possible and pass final orders in the proceedings within sixty days from the commencement of the inquiry:

Provided that the Court may extend the said period to ninety days for reasons to be recorded in writing for such extension.

Where the Court deems it fit to make an inquiry or to cause an inquiry to be made into any company, it may by an interim order appoint one or more persons who possess knowledge, experience and expertise in management and control of the affairs of any other company to be a special director or special directors on the board of such company on such terms and conditions as may be stipulated by the Court for safeguarding its financial and other interests or in the public interest.

The special director or special directors so appointed under sub-sectin five shall submit a report to the Court within sixty days from the date of appointment of such director or directors about the state of affairs of the company in respect of which reference has been made and such special director or directors shall have all the powers of a director of a company under this Act, necessary for discharge of his or their duties.

During the period for which a special director is appointed under sub-section 5 every director of such company shall unless expressly authorized to do so by the Court cease to exercise perform and discharge any powers, duties and functions with respect to the Company.

The proposed law further provides for wide powers to be given to the Commercial High Court to make orders for sanction of schemes, moratorium and also for provision of financial assistance.

Where the Court, after making inquiry and after consideration of all the relevant facts and circumstances and after giving an opportunity of being heard to all concerned parties, is of the opinion that the subject company is not likely to make its net worth exceed the accumulated losses within a reasonable time while meeting all its financial obligations and that the company as a result thereof is not likely to become viable in future and that it is just and equitable that the company should be wound up, it may make an order for winding up under Section 273.

We have also suggested that the Mortgage Act should be amended suitably enabling a mortgagee to institute an action by way of a special procedure and that such special procedure can be similar to the one that is set out in the Debt Recovery (Special Provisions) Act No. 2 of 1990 (as amended)

This draft prepared by BRIPASL is now before the Authorities and it is hoped that the new legislation will pave the way for a meaningful corporate rescue in Sri Lanka. The Executive Committee of BRIPASL has recently appealed to the Government to include the proposed amendment as a budget proposal and give speedy attention to the enactment thereof.

I am pleased to note that Sumant Batra the current Chairman of INSOL is also joining us in this Session as another speaker. Batra has been visiting Sri Lanka and encouraging BRIPASL in its endeavours.