BELIZE Law and Practice Contributed by: Tim Prudhoe, Nadia Chiesa and Lemelko Missick, Stanbrook Prudhoe
defines the restructuring as a contractual compromise between a debtor and its creditors, but with statutory supervision and enforceability under the Act. Under Section 43 (1) of the Act, where a proposal is approved at a creditors’ meeting, the arrangement is binding on the company and on each member and each creditor of the company as if he or she was a party to the arrangement. However, where a proposal is approved by a creditors’ meeting, the arrangement is binding on the debtor and on every creditor of the debtor, whether or not he or she was present or represented at the meeting, as if he or she were a party to the arrangement (Section 62). Once the creditors approve the proposal, the follow - ing applies: • the arrangement binds all creditors, whether they voted for or against it, or even if they did not attend the meeting; • it also binds the debtor (company or individual) and, in the case of a company, its members; and • dissenting or absent creditors cannot later chal - lenge or opt out of the arrangement except on limited grounds (such as unfair prejudice or mate - rial irregularity, under Sections 43 and 72). However, there are limits to the binding effect regard - ing secured and preferential creditors, unless they consent in writing. According to Section 15 (4) of the Act, an arrangement shall not, except with the written agreement of the secured creditor or the preferential creditor concerned: • affect the right of a secured creditor of the debtor to enforce his or her security interest or vary liability secured by the security interest; or • result in a preferential creditor receiving less than he or she would receive in a liquidation or bank - ruptcy of the debtor had it commenced at the time approved by the arrangement. Secured and preferential creditors are not automati - cally bound by an arrangement unless they explicitly agree.
Although a creditors’ arrangement is negotiated and approved outside formal liquidation or bankruptcy, it acquires statutory effect once filed and recognised under the Act. For example: • Section 33 of the Act requires the supervisor to file notice of appointment with the registrar (giving the arrangement official status); and • Section 42 of the Act allows applications to the High Court “where an arrangement is approved or modified”, thus demonstrating that disputes or enforcement issues fall under judicial oversight. 4. Statutory Restructuring, Rehabilitation and Reorganisation Proceedings 4.1 Opening of Statutory Restructuring, Rehabilitation and Reorganisation Under Section 20 of the Act, the board of a company, other than a company that is in liquidation or in admin - istration, may propose an arrangement and nominate an interim supervisor to act in relation to the proposed arrangement if the following apply. • It believes on reasonable grounds that the com - pany is insolvent or is likely to become insolvent. • It has passed a resolution: (a) stating its belief that the company is insolvent or is likely to become insolvent; (b) approving a written proposal containing the information prescribed; and (c) nominating an eligible insolvency practitioner to be appointed as interim supervisor. The decision to file rests entirely with the company’s board, as they are not legally obligated to do so, even in the face of likely insolvency. Where a company is in administration or liquidation, the administrator or liquidator may make a proposal and appoint another eligible insolvency practitioner as the interim supervisor (Section 22 (1))). Therefore, the procedure may also be initiated by an administrator or liquidator who is acting on behalf of a company currently subject to formal proceedings.
71 CHAMBERS.COM
Powered by FlippingBook