Changes brought by the Company's Act, 2011 to liquidation of companies in Lesotho

• Date: 01 January 2016
• DOI: 10.10520/EJC196792
• Pages: 47-97
• Author: Kuenaesele Thamae
• Published date: 01 January 2016

CHANGES BROUGHT BY THE COMPANY’S ACT, 2011 TO

LIQUIDATION OF COMPANIES IN LESOTHO

Thamae, Kuenaesele*

Abstract

The Companies Act, 2011 repealed the Companies Act,

1967 which had lost touch with curren t developments in

company law and practice. Liquidation of companies is

one aspect to which significant changes have been

introduced by the 2011 Act. This paper looks at the

reformed process of liquidation as provided for under the

2011 Act and identifies the extent of the changes

introduced by the Act. The paper is divided into three

main parts. The first part covers changes introduced by

the 2011 Act which were not previously provided for

under the repealed law. The second part outlines

provisions of the 1967 Act that have been abolished by

the new law and the last part are provisions that have

been retained under the new law which were also

provided for under the 1967 Act. The analysis shows

that the 2011 Act is clearer, more user friendly than its

predecessor and less bulky yet comprehensive enough to

cover the relevant aspects of liquidation. These changes

have significantly improved the liquidation regime to

enable it to be more efficient and predictable for the

benefit of creditors.

1.0 Introduction

The Companies Act, 2011 is the first reform to be made to Lesotho’s

company law since the enactment of the repealed law in 1967 and it

has brought about significant changes to company law in Lesotho,

including liquidation of companies. The need for reform was

48 LLJ Vo l. 24 NO. 1

brought about by considerable changes in economic and social

needs of the country that had occurred over 44 years since 1967.

Vast changes in the way business is conducted and the need to

stimulate and support economic growth formed the underlying

reasons for the reform. As a result, the 2011 Act seeks to facilitate

the setting up of business and exit of ailing companies. Regarding

liquidation of companies, the aim was to simplify the process of

liquidation as one of the aspects to which the statute applies by

making it simple, efficient and more user-friendly. The preamble to

the Companies Act, 2011 describ es the statute as “an Act to provide

for standard and adaptable requirements in the incorporation,

organization, operation and liquidation of companies…”

The Companies Bill, 2011 stated its purpose as follows:

To make registration of companies short, simple

and responsive to the needs of the business

community. The Bill has been modernized to take

into account several business reforms already tak-

ing place within the Ministry of Trade and

Industry, Cooperatives and Marketing including

the establishment and operation of the One Stop

Business Facilitation Centre with a view to make

doing business in Lesotho easier and less

costly…and imposes minimum formalities yet

capable of meeting diverse needs and

circumstances of the business…Finally, the Bill

aims to introduce a simple and transparent exit

mechanism for companies so that companies that

wish to exit the market can do so without any

burdensome administrative requirements. The

Companies Act of 1967 had a number of

shortcomings which proved to be barriers to doing

49

business in Lesotho. These included, among others,

cumbersome procedures which make formation

and operation of companies an expensive and time

consu ming exercise and complex requireme nts

which were difficult for companies to comply with.

Consequently, the Bill repeals the 1967 Companies

Act.

For the purpose of this paper, focus is on the changes brought by

the 2011 Act to liquidation of companies. The paper looks at Part

XVI of the Companies Act, 2011 which governs liquidation and

judicial management of insolvent companies with the aim to

analyse the extent of changes introduced by the Act to corporate

insolvency in Lesotho. The paper is divided into three main parts.

The first part looks at the new provisions introduced by the 2011

Act that were not provided for by the repealed statute. The second

part looks at aspects of the liqui dation process that were provided

by the 1967 Act but have been abolished in the 2011 Act. The third

part consists of provisions that were provided by the 1967 Act and

have been retained in the 2011 Act. The last part of the paper is a

conclusion.

The paper shows that the changes introduced by the 2011 Act have

made the liquidati on process more elab orate, c lear and predictable

while being concise than the repealed 1967 Act. The statute enables

more participation from creditors in the liquidation process, it has

aligned liquidation of insolvent companies with provisions of the

Insolvency Proclamation, 1957, which is the main insolvency

legislation in Lesotho, in respect of meetings of creditors, claims

and rights of the creditors. The statute has abolished voluntary

liquidation and the role of contributories, reduced the number of

grounds for liquidation, increased the powers of the liquidator,

introduces clear er and more elaborate duties of the liquidator,