Beyond COVID-19: Crisis response or road to recovery?
Crisis response or road to recovery?
Global law firm Norton Rose Fulbright announced today that, after three years of ground-breaking project counsel in Myanmar, a new insolvency and restructuring framework has been established by the enactment of the Insolvency Law 2020.
Myanmar’s Parliament enacted the new Law following its passage through both the lower and upper house late last year, and the President assenting to the law last week.
Read a first release of the new Myanmar Insolvency Law 2020 here.
Over a period of three years, Norton Rose Fulbright's Australian partners Scott Atkins and John Martin together with special counsel Rodney Bretag worked closely with the Union Supreme Court of Myanmar on the project to draft this Law, an essential pillar to the reinforcement of the rule of law in Myanmar, and part of the modernisation of the country’s economic laws fundamental to promoting success and prosperity in the conduct of trade and commerce.
The project was funded by the Asian Development Bank as part of its technical assistance to Myanmar, aimed at strengthening the legal and institutional framework of Myanmar for commerce and private sector investment. The engagement represented the first example of Myanmar’s Supreme Court working collaboratively with international consultants in a large project of this type.
The appointment of Scott and John as international experts in insolvency and restructuring law to draft the Law followed a competitive international tender. The engagement presented the challenge of designing a law that was reflective of international best practices, but which could be integrated into Myanmar’s existing legal, judicial and regulatory framework. Institutional experience of financial distress in Myanmar is very limited. Moreover, in a country whose economic development is in transition, the Law needed to be tailored to what is workable and practical now, as well as accommodating best practice as the economy develops.
The engagement was particularly challenging given there was no institutional knowledge within any of the governmental bodies relevant to administering an insolvency system, of how insolvency and restructuring processes would work in practice. With a command economy for a number of decades, and only a rudimentary system of credit, insolvency was not one of the challenges that had been faced in the country for a long time. However, with the country’s rapidly developing economy now experiencing the expanded availability of credit, as well as increasing international capital and investment, getting this piece of the economic jigsaw puzzle in place was an important goal.
The process adopted by John, Scott and Rod, with the assistance of the ADB, including an experienced translator, was to engage in deep consultations over multiple visits in both the capital Naypyidaw and the commercial hub Yangon, with those institutions and interest groups who would be major players in a new insolvency system. In relation to the public sector, consultations were undertaken with the senior officers, up to the level of Director-General, of the Departments of the Auditor-General and Attorney-General, the Central Bank, the Ministry of Planning and Finance, and the Directorate of Investment and Company Administration. Private sector consultations included the Myanmar Banks’ Association, the Myanmar Accountancy Council and the Myanmar Institute of Certified Public Accountants. Individual consultations were also conducted with various banks, accountants and legal practitioners.
Engagement was also undertaken with the country’s Parliament, including extensive consultations over multiple visits with parliamentarians, including the Law Reform and Bills Committees of the Parliament. Following detailed presentations to these bodies, John, Scott and Rod undertook lengthy Q&A sessions to ensure that parliamentarians understood the many and varied concepts addressed in the Law.
A principal goal in the engagement was to identify international best practice in the field of insolvency and restructuring. This involved both a comparative analysis of the insolvency systems of other, principally Asian, countries, but also detailed research with international NGOs, as the repositories of international knowledge and experience. Publications issued by the World Bank, the IMF and the United Nations trade body, UNCITRAL, were heavily consulted. Feedback on an early draft of the Law was also obtained from the World Bank and IMF in order to assist in ensuring that international best practice was captured within the terms of the new Law.
While the concepts of “liquidation” and “personal bankruptcy” are retained within the new Insolvency Law, there is a focus on both corporate rescue and personal debt rehabilitation, so that where appropriate, both companies and individuals can promptly be returned to productive economic life. This is identified as a priority objective, before recourse is had to “terminal” processes such as liquidation.
In addition, and having regard to the preponderance of micro, small and medium enterprises (MSMEs) as the life-blood of Myanmar’s economy, a specific stand-alone regime within the Insolvency Law is devoted to the financial distress of MSMEs, both in providing for corporate rescue, and where that is not feasible, for an efficient liquidation regime. The position here contrasts with Australia where a “one size fits all” approach is taken to insolvency, and there is no specific regime confined to MSMEs.
In tailoring the regime to the specific needs of a financially distressed MSME, whether it is a company or a sole trader, specific provision is made to address issues such as containing cost, achieving speed in securing an outcome and in protecting the integrity of the process.
Particularly pleasing is the adoption within the new Insolvency Law of the UNCITRAL Model Law on Cross Border Insolvency. This adoption should serve to assist in increasing the level of foreign capital deployed within Myanmar.
The overarching objective of these laws is to create a platform that both matches the present circumstances with Myanmar’s broader legal and commercial systems, and is sophisticated enough to maintain its relevance into the future as Myanmar’s economy develops.
We believe that the new insolvency law will complement the broader economic reforms already underway across the country. These laws will have a transformative effect on the country and its economy, and provide much needed support to the large numbers of small business enterprises in particular. It will also help to recycle capital in the economy in a way that will enable growth, create new jobs, and open the country to further foreign investment.
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