On 27 December 2016, the Liberian legislature enacted a new version of Chapter 8 of the Liberian Commercial Code, entitled the Insolvency and Restructuring Act.
The new Act was intended to improve the availability of financing, and market conditions for businesses, by introducing a new insolvency regime with specific and tranparent procedures, and a balanced and comprehensive outlook. The key purposes of the 2016 Act are set out in §8.3.
The Act provides for two regimes: administration and liquidation. Administration appears to be the primary regime for dealing with an inability to pay debts. Liquidation is available only where reorganisation of the business is not feasible, or the debtor voluntarily seeks liquidation: §8.50.
The conditions for insolvency seem to be broadly similar to those at English law. A debtor is deemed to be insolvent if his debts exceed his assets at current valuation, or if he is unable to pay his debts as they fall due: §8.11.
Upon insolvency, the court will appoint an Administrator, who will have powers and duties as set out in §8.17. There does not seem to be a distinct office of Liquidator. The Administrator handles liquidations as well as administrations: §8.51.
The 2016 Act provides for a moratorium on legal actions upon the commencement of an insolvency proceeding: §8.27. Legal proceedings and other actions by secured creditors are also stayed for the duration of the insolvency procedure, unless otherwise ordered by the insolvency judge: §8.46.
Additionally, the 2016 Act also provides for rescission of preferences, undervalue transactions, and transactions defrauding creditors: §8.40.
The priority regime under the 2016 Act bears some resemblance to the English order of priority upon insolvency, with secured claims, unpaid employee wages, and administration fees, among other claims, taking priority over unsecured debts : §8.53.
Other notable features of the 2016 Act include:
- An explicit provision that limited liability is to be maintained in insolvency: §8.49
- Personal liability for the administrator, in the event of criminal activity, collusion, dishonesty, and gross negligence: ¶8.18
To read the text of the 2016 Act, please click here.
Liberia has enacted a Secured Transaction Law as part of a new Commercial Code (2010). It establishes a web-based registration system, together with a PPSA type notice filing system. The Secured Transaction Law is chapter 5 of the Commercial Code.