St. Kitts And Nevis Parliament To Repeal Century-Old Bankruptcy Act
BASSETERRE, ST. KITTS, JULY 16TH 2013 (CUOPM) – A Bill, which seeks to make provision for the law, practice and procedure of both individual and corporate insolvency will be debated in the National Assembly of St. Kitts and Nevis on Wednesday.
The Bankruptcy and Insolvency Bill, 2013, replaces the Bankruptcy Act passed in 1889 that came into force in September 1st 1893.
The new Act, in the name of Attorney General, the Hon. Jason Hamilton, is divided into Eleven Parts also seeks to facilitate the rehabilitation of the insolvent debtor and to provide for the effective or efficient delivery of insolvency service and for related or incidental matters.
According to the 163-page legislation, Part I of the Bill deals with matters of a preliminary nature, that is to say, the short title of the Bill and definitions of certain terms or words used in the Bill. Certain terms have been carefully defined with a particular purpose in mind. For instance, the term “books and records” is given a contemporary definition in order to march with modern trends.
The definition seeks to include documents as well as data maintained or processed manually, mechanically, photographically or electronically by any information storage device. This definition would be very crucial in establishing whether a person is insolvent or bankrupt. Further, it should be observed that the term “corporation” as defined means that the legislation is not intended to apply to banks and insurance companies, since they are regulated under different legal regimes in that area.
Part II of the Bill makes provision for administrative officials, namely, the Supervisor of Insolvency, and trustees. In that connection, this Part seeks to set up the office of Supervisor of Insolvency as a public office and to set out the duties of the Supervisor, while it also seeks to make provision for the licensing, conduct and duties of trustees.
Clause 4 seeks to establish the post of Supervisor of Insolvency, whose office is to be a public office. The Supervisor shall be responsible for supervising the administration of all estates and matters to which this Act would apply. The Supervisor will have power to intervene in any matter or proceeding to which the Act would apply where the Supervisor considers it convenient to do so.
Clause 5 seeks to give the Supervisor access to, and the right to examine, the banking accounts of a trustee in which estate funds may have been deposited.
Clause 6 seeks to make provision for suspected offences, and in that connection the Clause seeks to empower the Supervisor to carry out or to make enquiries or investigations where he or she has reasonable grounds to suspect that a person has committed an offence in connection with the estate or matter to which the Act applies.
Clause 7 makes provision for the maintenance of public records relating to insolvencies. This Clause provides that the Supervisor shall keep or cause to be kept a public record of proposals, bankruptcies, licences issued to trustees by the Supervisor and notices sent to the Supervisor under section 66.
Clause 8 seeks to empower the Supervisor to issue licences to trustees.
Clauses 9, 10, 11, and 12 make provision in respect the form of licence, licence fees, validity of licence, and suspension and cancellation of licence, respectively.
Clauses 13, 14, 15, and 16 make provision for the conduct of trustees.
Clauses 17 to 20 deal with the substitution of a trustee, whiles Clauses 21 and 22 deal with the removal of trustee by Court and appointment of non-licensed trustee by the Supervisor.
Clause 23 seeks to provide that where a trustee accepts an appointment in relation to matters relating to assignments, bankruptcy orders or proposals, such trustee shall perform the duties required of a trustee until he or she is discharged or another trustee is appointed in that trustee’s place. It also seeks to provide that a trustee will be protected from damages for environmental liability which arose before or after the trustee’s appointment as long as the trustee is not found guilty of gross negligence.
Clauses 30 to 50 make provision for the duties and powers of trustees. Clause 51 seeks to allow a party that is aggrieved by any act or decision of a trustee to apply to Court for an order to reverse or modify the act or decision.
Clause 52 seeks to allow a creditor, with Court approval, to pursue necessary action where the trustee refuses or neglects to act.
Clauses 53 and 54 make provision for the remuneration of trustees.
Part III of the Bill makes provision for the making of bankruptcy orders and assignments. Clause 56 sets out the circumstances in respect of which a debtor commits an act of bankruptcy.
Clause 57 seeks to allow creditor(s) to file a petition in Court for a bankruptcy order against a debtor where it is alleged in the petition that the debt or debts owing to the petitioner(s) amount to $1,000.00, and that the debtor has committed an act of bankruptcy.
Clauses 60 to 74 make provision for the appointment of interim receivers, their duties and other related matters.
Clause 75 makes provision for persons who can make an assignment. It also seeks to provide for the filing of a sworn statement of affairs at the time of filing of the assignment into bankruptcy, which statement is to enable a trustee to notify creditors and start on his or her administration.
Part IV of this Bill primarily seeks to provide for the making of proposals, the voting procedure for a proposal, the commencement of proceedings, the duties of a trustee and the refusal, approval or annulment of a proposal.
Clause 76 seeks to specify the persons who can make proposals and the persons to whom proposals may be made. The Clause sets out the voting procedure and provides that a proposal may include or exclude secured creditors, according to the wishes of a debtor. Under this Clause, the trustee is required to make an appraisal of the financial affairs of the debtor in order to ascertain the cause of the debtor’s financial difficulties or insolvency.
Further, a trustee appointed under a proposal is required to monitor the business affairs of an insolvent until a meeting of creditors is held as provided in Clause 82. Finally, this Clause requires the trustee to prepare and submit to the creditors and the Supervisor a report on the state of the business and financial affairs of the insolvent person.
Clause 77 makes provision for the filing of a secured claim with the trustee by a creditor to whom a proposal is made and for such other matters related thereto.
Clause 80 seeks to allow an insolvent person to file a notice of intention with the Supervisor before the insolvent person lodges a copy of a proposal with a licensed trustee.
Clauses 81 to 84 make provision in respect to assistance in preparation of proposal by trustee; meeting of creditors; adjournment of meeting; and voting prior to meeting by proven creditors.
Clause 85 seeks to allow creditors to vote on the proposal by separate classes established by the debtor and based on the commonality of creditors’ claims. It also seeks to require a special resolution of creditors for the acceptance of a proposal.
Clauses 86 and 87 seek to make provision for the inclusion of terms of supervision in a proposal, and the appointment of inspectors by creditors, respectively.
Clause 88 seeks to provide that where the creditors reject or refuse a proposal the rejection or refusal shall result in the debtor’s deemed bankruptcy.
Clause 90 makes provision for the making of an application to Court for approval where a proposal has been approved by creditors.
Clause 91 makes provision for a situation where the Court may refuse a proposal if the Court is of opinion that the terms of the proposal are not reasonable or are not calculated to benefit the general body of creditors.
Clause 92 seeks to allow Court to refuse to approve any proposal which does not provide for the payment in priority to other claims of all claims directed to be so paid in the distribution of the property of a debtor and for the payment of all proper fees and expenses of the trustee.
Clause 99 makes provision for the effects of the filing of a proposal and provides that specified agreements may not be terminated or amended. The Clause also seeks to prevent service providers from discontinuing service to an insolvent person in specified cases.
Part V of the Bill makes provision for the property of the bankrupt which is available to the bankrupt’s creditors, establishes preferences in relation to claims by unpaid sellers, farmers and fishermen for products supplied prior to bankruptcy.
Clause 102 specifies or identifies the property that is divisible among the bankrupt’s creditors.
Clause 103 seeks to provide for a situation where an individual bankrupt would be required to pay to his or trustee, for the benefit of creditors, a portion of his or her excess income, referred to as “surplus income” while bankrupt. The surplus income would be determined from standards to be prescribed by the Minister.
Clauses 105 to 107 seek to provide that a stay of proceedings against a debtor and his or her property will arise upon the bankruptcy of a debtor and upon the filing of a proposal. The stay of proceedings is necessary in order to allow the trustee to administer the bankruptcy properly or to allow the debtor to restructure his or her business.
Clause 113 seeks to provide that landlords will also be subject to the stay of proceedings and allows them to have preferred claims for arrears of rent, while Clause 114 seeks to provide that where the bankrupt owns real property, the trustee may realize upon it as the trustee would realize upon any other asset of the bankrupt.
Clause 115 seeks to allow a bankrupt’s spouse to claim one-half interest in the equity of a matrimonial home, or a home shared by cohabitating partners with the primary intention of improving the rights of women.
Clause 116 seeks to provide that certain transactions concerning real property affected by a bankruptcy order or an assignment shall be valid unless the bankruptcy order or assignment has been registered against the property in the appropriate registry prior to the registration of the transaction.
Clause 121 seeks to give persons who are claiming an ownership interest in property controlled by the trustee, the right to file with the trustee a demand for the return of property, and the trustee may return the property or reject the claim.
Clause 122 seeks to allow an unpaid supplier of certain goods the right to demand and recover such goods not paid for by the bankrupt within the established time frame. The provision is intended to prevent a debtor from “feeding the security” or increasing inventories to avoid personal guarantee to a secured party.
Clause 123 seeks to allow farmers and fishermen a super priority for the return of goods supplied within the fifteen days prior to bankruptcy but not paid for.
Clauses 124 and 125 seek to make provision for the protection of parties claiming a patent or copyright.
Clause 127 seeks to provide that the property of a limited partnership shall vest in the trustee where all the general partners of the limited partnership become bankrupt.
Clause 128 provides for unsecured State claims.
Clauses 130 to 140 make provision respecting voidable settlements and preferences, and Clause 139 seeks to permit the trustee to void, by court order, transactions between related parties entered into within twelve months preceding bankruptcy where the consideration received by the bankrupt is conspicuously less than fair value.
Part VI of the Bill seeks to address the procedure for meetings of creditors, the appointment of inspectors, the admission of claims and simplified procedures referred to as “Summary Administration” for small bankruptcies.
Clause 143 makes provision for the first meeting of creditors and sets out the duties of the trustee in relation to the first meeting.
Clause 147 provides that one creditor entitled to vote or the representative of that creditor constitutes a quorum for a meeting of creditors.
Clause 157 seeks to provide that the creditors shall, at the first or subsequent meeting of creditors, appoint one or more but not exceeding five, inspectors of the estate of the bankrupt for the purpose of overseeing the administration of the trustee.
Clause 176 makes provision for the examination of proofs of claim of security by the trustee, and seeks to provide that the trustee may disallow, in whole or in part, any claim or right to a priority under the applicable order of priority or security.
Clause 187 seeks to require the trustee to remit to the Supervisor a 5% levy on all distributions made to all creditors.
Clause 191 seeks to provide for the preparation of a final statement of receipts and disbursements where the trustee has realized all the property of the bankrupt.
Clause 192 seeks to provide for the submission of the statement of receipts and disbursements to the inspectors for their approval, and to require the trustee to forward a copy of the statement and dividend sheet to the Supervisor after they have been approved by the inspectors.
Clause 195 seeks to make provision for summary administration of certain estates and remuneration of the trustee.
Part VII of the Bill seeks to provide for financial counseling of bankrupts and to outline their duties.
Clause 198 seeks to require a trustee to provide two counseling sessions to individual bankrupts, and the sessions are to be held following the date of the bankruptcy and are designed to educate debtors on credit and budgeting. In order for a first – time bankrupt to obtain a discharge from bankruptcy, attendance at both counseling sessions will be necessary.
Clause 199 seeks to set out the duties of a bankrupt, while Clause 200 deals with bankrupt corporation and seeks to require the officer appointed by the directors to execute an assignment of the company into bankruptcy to attend before the Supervisor for examination and to perform the duties imposed on a bankrupt under Clause 197.
Clauses 203 to 207 seek to provide for investigation regarding the bankrupt; examination of the bankrupt or any other person by the trustee on ordinary resolution passed by the creditors or on the written request or resolution of majority of inspectors; compelling of persons to deliver records and property of the bankrupt in their possession; examination of persons outside Saint Christopher and Nevis.
Clause 209 seeks to set out circumstances in which the Court may order the arrest and detention of a bankrupt and the seizure and retention of any books, papers and property in his or her possession.
Clause 210 seeks to introduce provisions relating to automatic discharge of first – time bankrupts, so as to simplify the discharge process for most individual bankrupts and eliminate unnecessary Court time.
Clause 213 seeks to provide that where the trustee opposes the discharge of a bankrupt, a court application for the discharge would be required and the trustee is to recommend to the court terms, if any, that may be ordered by the court on the application.
Clause 223 seeks to empower the Court to annul a bankruptcy where the Court is of the opinion that the bankruptcy order ought not to have been made or an assignment ought not to have been filed.
Part VIII of the Bill addresses the jurisdiction of the Court. This Part does not allow creditors to apply to Court for a committal of an insolvent debtor because the focus of the Bill is on rehabilitation of the debtor, and for that reason bankruptcy will no longer be viewed as a crime.
Clause 227 spells out the general powers of the Court, while Clause 232 relates to evidence in Court. This Clause seeks to provide that any affidavit to be used in court may be sworn before any person authorized to administer oaths.
Part IX of the Bill makes provision for international insolvencies and addresses the situation where a foreign proceeding has commenced with respect to a debtor who has property in Saint Christopher and Nevis, and provides that the Court may make such orders as it considers appropriate to coordinate the insolvency proceedings including the appointment of a trustee, the granting of a stay of proceedings, and the making of any other appropriate order.
Clause 237 seeks to provide that a stay of proceedings which operates against creditors of a debtor in a foreign proceeding shall not apply in respect of creditors who reside or carry on business in Saint Christopher and Nevis with respect to property in Saint Christopher and Nevis, unless the stay of proceedings is the result of proceedings taken in Saint Christopher and Nevis.
Clause 238 seeks to permit a foreign representative to commence and continue specified proceedings in respect of a debtor, while Clause 239 seeks to allow the Court to seek the aid of a court, tribunal or other authority in a foreign proceeding.
Clause 241 seeks to permit a foreign representative to make an application to the Court under this Part notwithstanding the fact that proceedings by way of appeal or review have been taken in a foreign proceeding.
Clause 243 seeks to provide for claims for a debt that is payable in a foreign currency.
Part X of the Bill makes provision for certain offences which can be committed by bankrupts, creditors, inspectors, trustees and others and to prescribe appropriate penalties. However, this Part allows for the making of a community service order by Court.
Part XI of the Bill deals with matters of a miscellaneous nature and in that connection, the Bill makes provision for making of rules and regulations, and other related matters.