The Hon. Ravi Karunanayake

¶ 01 Thank you, Mr. Presiding Member, for giving me the opportunity to speak on this Bill.

¶ 02 While stating that the introduction of this Rescue, Rehabilitation and Insolvency (Corporate and Personal) Bill is timely, I must also tell you that it was commissioned through Mr. Chanaka de Silva, President’s Counsel, in June 2023.

¶ 03 Sir, it needs many corrections. I spoke to the Hon. Minister of Justice and National Integration today and he said that owing to the time factor, they would like to see this legislated and that amendments could be brought in later. I wish to contribute, within my limited time, to make it more meaningful.

¶ 04 Insolvency is different from bankruptcy. There are liquidation laws, but no mechanism to resuscitate a business that is under-capitalized or not solvent enough though it has a good business proposition. There is personal and corporate insolvency. The 1853 Ordinance was amended in 1888; the Companies Acts No. 17 of 1982 and No. 07 of 2007 dealt further with liquidation. But no system was introduced like Chapter 11 in the USA or India’s restructuring process that permits a good but under-capitalized company facing bankruptcy to be pulled out through an insolvency process.

¶ 05 While appreciating this legislation, the required rectifications are as follows: - The 60-day time frame is hardly sufficient given our decision-making pace. A 180-day initial period, routed through courts with a wind-up officer, is more realistic. - Prioritize SMEs. About 60–65 per cent of our companies are SMEs; they are most affected. - Establish specific district courts, akin to commercial courts, to fast-track these cases. While we cannot go islandwide at once, start in a few places and expand with success. - Temporary suspension of parate law is important, but parate needs separate reform.

¶ 06 On cross-border insolvency, we must consider foreign exchange implications. The Central Bank’s Foreign Exchange Department must assess the impact of internationalizing local debt. If distressed companies are syndicated and taken overseas, you risk foreign domination and dollar exposure; country risk and the acceptance of dollar-for-rupee conversions by the Central Bank need careful consideration.

¶ 07 Prioritization in receivership matters: if Government taxes get first priority, it could negatively impact revival. Look at business revival first—employees and the company—so success can carry the firm to the next level.

¶ 08 Taxation should be addressed via tax laws, not solely in the Insolvency Act. As Mr. Suresh Perera of KPMG noted, incorporate changes through tax amendments; otherwise Inland Revenue may say it does not apply, undermining the Act’s value.

¶ 09 Banks fear parate repercussions. With stress seen even in institutions like NDB, a bank itself might seek redress under this law. View this practically: insolvency can arise from bad policies, poor decisions, or high interest rates—as on 12th April 2022 when effective rates shot to 70 per cent—while firms are unprepared for shocks. Help SMEs and good businesses lacking sufficient capital.

¶ 10 When a company goes into liquidation, banks trigger receivership under parate. Sri Lanka is the only country in the region implementing parate with preferential treatment to banks, and it is now used to the detriment of the business sector. Please ensure parate is reviewed and amended; SMEs are disproportionately affected.

¶ 11 Also, consider the proposed amendments to make the Rescue, Rehabilitation and Insolvency (Corporate and Personal) Act more consistent and practical in implementation.

¶ 12 Thank you, Sir.