Business Expects New Bill to Simplify Insolvency Procedures
As submitted to the parliament of Georgia in February 2020, a bill drafted by the government government bill regarding business insolvency procedures aims to improve the business climate in the country.
As Nika Nanuashvili, the Legal Director of the Business Association of Georgia (BAG), told the TV Program Business Partner, the new bill on insolvency aligns the state with creditors, liberalizes the process and, in this way, the bill introduces the best modern practices.
Georgia is one of the leading countries, worldwide, when it comes to the simplicity of starting a business; however, it takes many years to withdraw from this business in the case of insolvency, Nanuashvili added.
The business sector expects this bill to essentially simplify insolvency procedures.
This bill is a real breakthrough, because it brings the state together with creditors, and this is an important innovation, Nanuashvili noted.
“When talking about the state, we mean the taxation office. Previously, the taxation office mostly acted as a creditor,, and this practice used to generate serious problems. There was the taxation office, on the one hand, and the Enforcement Bureau, on the other hand, as well as the court system. Naturally, there was the perception that the state was dominant in everything. Today, the state has become an ordinary creditor, and I would say that on this issue the state has slightly distanced itself from the whole process. Court supervision is maintained in this process, and the ability to tax revenue is also preserved.
The bill has just alleviated the burden of all these factors, be it rehabilitation or bankruptcy procedures. This will definitely bring about only positive results. This will add more buoyancy and freedom to the process, and bring it in line with modern practices”, Nika Nanuashvili said,
As explained by Lasha Nodia, head of the BAG committee for legislative development, the new bill differs from the current legislation dramatically and, in practice, it is a new legislation.
The bill allows for companies to know in advance where the process will proceed –rehabilitation, bankruptcy or so-called regulated agreements, whereas today all these procedures remain unclear, Nodia pointed out.
Furthermore, the bill abolishes bureaucratic chains such as the so-called Guardian Board, while the manager of rehabilitation will no longer be appointed by the Enforcement Bureau. The bill specifies timeframes to agree to a rehabilitation plan between debtors and creditors, and this enables the business to prevent the process of insolvency from lasting several years. The regulations for selling problematic business will become more flexible, too.
“In practice, this is completely new legislation, and it introduces a lot of new aspects that distinguish it from the current law. The general process has become more organized, and this aspect motivates everybody – creditors, debtors, tax office. The Government’s decision to bring the tax office into alignment with unsecured creditors is a serious breakthrough, and this is the ideal practice”, Lasha Nodia said.
The bill’s details are still being worked on, but the already agreed upon innovations are very important, and there are no necessary comments about them, Nika Nanuashvili noted.
“These innovations are very important, and positive. These remarks may refer only to aspects of the procedure that will be specified together with the bill’s authors. In addition, we are consulting with our members. Nevertheless, I can say that there are no necessary comments regarding this bill, and we back this initiative. This is a real breakthrough”, Nanuashvili noted.