The Hon. Harshana Nanayakkara, Attorney-at-Law - Minister of Justice and National Integration

¶ 01 Hon. Speaker, I move, “That the Bill be now read a Second time.”

¶ 02 This is a landmark piece of legislation long awaited by the legal profession, academia and the business community. I thank the Government and all who contributed: the IMF for technical support, the Hon. Attorney-General, my Ministry legal team, the Legal Draftsman and the Government Printer. The Law Commission Subcommittee chaired by Mr. Chanaka de Silva, PC, provided invaluable leadership.

¶ 03 Overview: All economies function on credit; efficient credit management and recovery are essential. Without robust rescue/insolvency laws, financial distress can create chaos—favoritism, disorderly asset grabs, erosion of confidence—as seen during shocks like Cyclone “Ditwah” and COVID-19. Our current regime is archaic and liquidation-focused: the Insolvency Ordinance of 1853 (last amended 1884) for individuals/partnerships, and Companies Act No. 7 of 2007 with 1939 Winding Up Rules for companies. Limited restructuring options exist and are rarely used; none for partnerships/individuals. Thus, we are strong on liquidation, weak on rescue.

¶ 04 Shortcomings: Insolvency tests based on illiquidity cut off credit even to potentially viable businesses, pushing them into liquidation; stakeholders resort to opaque workouts; banks accumulate NPLs; value is destroyed.

¶ 05 Global approach: Developed systems embed rescue/rehab for corporates, partnerships and individuals—e.g., US Chapter 11, UK Insolvency Act 1986 (as updated), Singapore IRDA 2018, India’s IBC 2016. With World Bank assistance and learning from India’s IBC, we aim to shift culture—deterrence improves settlements and reduces transition from overdue to normal (India from ~300 days in 2020 to <90 by 2024). In FY 2024/25, IBC accounted for ~48–52% of bank recoveries; realizations via resolution plans averaged 171% of liquidation value; Gross NPA fell to 2.0% by Dec 2025 (RBI MPR, Apr 2026).

¶ 06 This Bill covers rescue and insolvency for corporates, partnerships and individuals, with special regimes for MSMEs. It provides creditor participation, moratoria during rescue, and orderly liquidation/bankruptcy if rescue fails. It establishes a Regulatory Authority and licensed insolvency professionals; court supervision is available but not always essential.

¶ 07 The Bill repeals the outdated Insolvency Ordinance, and amends the Companies Act and Inland Revenue Act to remove and replace liquidation/administration provisions within this Bill.

¶ 08 Special regimes: For debtors with “no assets” or “no income” (Part V, p. 107 onwards), fast-track resolutions exist. MSME restructuring (Part XI, from p. 314): MSMEs (total secured/unsecured debt < Rs. 50 million) may seek court-approved MSME Company Debt Restructuring Arrangements binding on affected creditors; upon completion, affected debts are cancelled (s. 291(4)).

¶ 09 “No assets, no income” debtor protection: For debts up to Rs. 2 million and monthly surplus income ≤ Rs. 100,000, the Official Receiver may recommend a Debt Rehabilitation Order (DRO). While in force, creditors cannot enforce. Upon completion (one year, extendable 90 days), discharge cancels covered debts including interest/fees.

¶ 10 I urge the House to support this comprehensive reform and pass the Bill today.

¶ 11 Question proposed.