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Insolvency reform 'very significant' to financial services

By NEIL HARTNELL

Tribune Business Editor

INSOLVENCY law reforms will bring "very significant" benefits to the Bahamas' financial services industry, but a leading accountant called on the sector to "more aggressively" promote these and other positive changes to global markets.

Ed Rahming, managing director of KrYs Global (Bahamas), told Tribune Business that the Companies (Winding Up Amendment) Act "will assist the Bahamas" when it came to attracting financial services business and foreign direct investment (FDI), providing further evidence of this nation's intention to remain competitive against major international players.

Pointing out that the Companies Act and its International Business Company (IBC) counterpart were "fundamental to the way you conduct your business", Mr Rahming said the insolvency-related reforms made to both would further bolster investor confidence, as the required procedures were now codified in law.

"I believe the changes and improvements are good for the Bahamas' financial services industry given the increasingly active insolvency market," Mr Rahming told Tribune Business.

"The new law provides insolvency practitioners with greater ability to act with confidence, and to communicate with their counterparts in the region using a common nomenclature. The commencement of the new law shows our competitors that we are serious about modernising our laws to compete effectively in the financial services arena."

He explained that the Cayman Islands' Companies Amendment Law 2007 was used as the "base, and improved on for the Bahamas'" amendments.

"It validates a lot of practices relating to insolvency law in the Bahamas that have been followed for quite some time," Mr Rahming told this newspaper. "Insolvency practitioners now know what the practice is based on law - something that must be followed.

"It's very significant for the financial services industry and the Bahamas at the end of the day. I think it will have a significant impact there."

One international investors assessed the Bahamas and whether to put capital to use here, Mr Rahming said "one of the first things they look at" is the Companies Act and IBC Act.

With amendments to both their winding-up regimes now in play, he added: "These are simple improvements in how we deal with Bahamian companies and IBCs in the Bahamas.

"It shows that in terms of procedures, in terms of laws, that we're using the same regulations and laws as used elsewhere, that we want to be competitive and have confidence in what we do as it relates to our companies."

Mr Rahming said the insolvency reforms would aid the Bahamas' "in terms of perception" alone, but said this nation's financial services industry needed to do much better in promoting the products and services it offered.

"I think we need to talk more about it, whether here or at conferences abroad," he told Tribune Business. "We have to let people know we have instituted new laws as it relates to the winding-up of companies, we do allow for greater international co-operation and are in line with model law.

"It depends on the parties in the sector. It's something we can trust when talking to players looking to bring business to the Bahamas, and it's something insolvency practitioners can trust as well when talking about developments in insolvency in the Bahamas.

"It depends how we promote it, how aggressive we are, but certainly local insolvency practitioners and other persons in the financial services industry can be proud of it. It's fairly significant, and shows we are committed to improving all areas of the financial services industry, our insolvency regime and how we deal with companies."

Mr Rahming said the importance of codified insolvency/winding-up procedures lay in the reality that "no business lasts for ever" .

"To have that laid out in law and updated regulations is good for the Bahamas," he added. "It allows for a level playing field and greater transparency."

Mr Rahming told Tribune Business that the reforms would allow the Bahamas "to keep pace with what is happening as it relates to insolvency requirements in the region", as Sections 251 and 252 in the Act had devolved "substantial rule-making scope" to a Liquidation Rules Committee.

This was designed to avoid the need to go back to Parliament every time reform is desired. The Committee includes the Chief Justice and Attorney General, or their nominees; persons appointed by the Chief Justice, and legal and insolvency practitioners from the Bahamas Bar Association and Bahamas Institute of Chartered Accountants (BICA).

In addition, Mr Rahming said the reforms allowed remuneration paid to Bahamian liquidators to be based "on a percentage of realisations or distributions" to creditors.

"However much you collect in assets or distributions to creditors is how you are remunerated. That's very significant," Mr Rahming said.

"This more closely aligns economic interests of creditors and investors with the liquidators. Foreign practitioners may only be appointed jointly with a Bahamian insolvency practitioner."

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