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Pakistan to introduce insolvency law amid 'national emergency' - Naveed Yaseen - 05-01-2009 06:13 AM
KARACHI: Pakistan’s corporate regulator will introduce an insolvency law by July to enable companies hit by the economic downturn to be revived or taken over.
“There’s a national emergency,” Salman Ali Shaikh, chairman of the Islamabad-based Securities and Exchange Commission of Pakistan (SECP) said in an interview. “Growing closures in the industrial sector and increasing non-performing loans in banking make it imperative to act.”
Pakistan’s textile makers and engineering companies are losing business as the nation’s economy grows at the slowest pace in eight years, global demand declines and the government struggles to combat al-Qaeda and Taliban militants along the border with Afghanistan, he added. South Asia’s second-biggest economy had a total of 52,643 registered companies as of December 21, according to the SECP.
Under the so-called Corporate Rehabilitation Act, the judiciary will approve plans filed by debtors or creditors on how to revive a troubled company. The law, which provides for the setting up of a resolution trust corporation, was modeled on the US Chapter 11 procedure and Mexico’s insolvency law, 2000, Shaikh maintained.
“This law will help companies survive in difficult conditions,” Iqbal Ebrahim, managing director of al-Karam Textile Mills Ltd said. “Existing laws make it even harder for companies which are already in trouble.”
Non-performing loans at Pakistani banks rose 30 percent to 325.4 billion rupees ($4 billion) in the six months ended December 31, according to the central bank.
“Instead of resorting to a default culture, we need to have structures to enable troubled companies to get a soft landing,” said Shaikh, who worked at the regulator as a commissioner for four years before being appointed chairman on April 13. “We need this law now because non-performing loans will rise by July.” courtesy bloomberg
http://www.dailytimes.com.pk/default.asp?page=2009\05\01\story_1-5-2009_pg5_2