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Part XI · Micro Small Medium Enterprise (MSME) Company Debt Restructuring Arrangements

287. Eff ect of Court Confi rmation of MSME Company Debt Restructuring Arrangement

Official English translation. Where it differs from the Sinhala or Tamil text, the Act itself says which text prevails.

(1)

An MSME Company Debt Restructuring

Arrangement that is approved by the court is binding on all the creditors who are affected by the terms of the

Arrangement.

(2)

The court order confirming the coming into effect of the MSME Company Debt Restructuring Arrangement shall be conclusive as to the validity of the Arrangement.

(3)

Following the court order confirming the coming into effect of the MSME Company Debt Restructuring

Arrangement, the Arrangement shall remain in effect according to its terms until-

(a)

it is completed in accordance with its terms and section 291; or

(b)

it is terminated under section 290.

(4)

While an MSME Company Debt Restructuring

Arrangement is in effect, a creditor who holds a debt affected by the terms of the Arrangement-

(a)

shall not take any actions to recover or enforce the debt; and

(b)

in particular, shall not take any actions to –

(i)

contact a MSME debtor regarding payment of an included debt, otherwise than at the request of the MSME debtor or the personal insolvency administrator, or in accordance with the terms of the

Arrangement;

(ii)

initiate or continue any legal proceedings against the MSME debtor in relation to an included debt;

Rescue, Rehabilitation and Insolvency

(iii)

collect, secure, recover or demand payment of an included debt;

(iv)

subject to subsection (6), execute or enforce a judgment or order of a court or tribunal against the MSME debtor;

(v)

obtain a warrant;

(vi)

terminate, on the grounds of the MSME debtor’s default or insolvency, any agreement for the provision of any essential goods or services;

(vii)

obtain possession of a premises which the

MSME debtor is occupying under a rental agreement into which the MSME debtor has entered with the relevant creditor, otherwise than under the terms of the Arrangement;

(viii)

if the Arrangement so provides, take any of the actions in this subsection against another person who is jointly liable with the MSME debtor to whom the MSME Company Debt

Restructuring Arrangement relates;

(ix)

if the Arrangement so provides, take any of the actions in this subsection against another person who has guaranteed the debts of the MSME debtor to whom the MSME

Company Debt Restructuring Arrangement relates;

(x)

instruct an agent to take any of the actions mentioned in paragraphs (i), (ii), (iii), (iv), (v), (vi) or (vii).

(5)

While a MSME Company Debt Restructuring

Arrangement is in effect, a court may permit a creditor to take a step listed in subsection (4), where the court considers that-Rescue, Rehabilitation and Insolvency

(a)

it is reasonable to allow the creditor to take the necessary steps in exceptional circumstances;

and

(b)

the steps will not-

(i)

cause undue detriment to the MSME debtor to whom the Arrangement relates;

(ii)

unfairly prejudice any other creditor; or

(iii)

significantly undermine the objectives of the Arrangement.

(6)

Nothing in this section affects a creditor’s entitlement to the benefit of any execution or other legal process or distress against a MSME debtor or property of the MSME debtor where the execution or other legal process or distress was completed at least one hundred and eighty days before the court order confirming the coming into effect of the

MSME Company Debt Restructuring Arrangement, where-

(a)

an execution against movable or immovable property is completed by seizure, or the entry into possession of a receiver or appointee or a person charged with execution, and a completed sale; and

(b)

an attachment of a debt is completed by the satisfaction of the debt.

(7)

While the MSME Company Debt Restructuring

Arrangement is in effect, a supplier of any essential goods or services shall not –

(a)

refuse to supply the good or service to a MSME debtor, by reason of the MSME debtor’s default in paying charges due for the goods or services in relation to a period before the coming into effect of the Arrangement;

Rescue, Rehabilitation and Insolvency

(b)

make it a condition of the supply of the goods or services to a MSME debtor, that payment be made of outstanding charges due for the goods or services in relation to a period before the coming into effect of the Arrangement; or

(c)

rely on an insolvency-related term of the agreement for the supply of the goods or services, except with the prior, written consent of the personal insolvency administrator.

(8)

The personal insolvency administrator may give consent under paragraph (c) of subsection (7) where it is satisfied that the reliance on the insolvency-related term is necessary to put the MSME Company Debt Restructuring

Arrangement into effect and to serve the objectives of the

Arrangement.

(9)

The personal insolvency administrator is not liable in damages for declining to give consent under paragraph (c)

of subsection (7).

(10)

A Debt Restructuring Arrangement shall not prevent the commencement or continuation of any criminal proceedings against an officer of a MSME debtor.

(11)

Any action taken contrary to this section shall be null and void.

(12)

Where a person has acquired an interest in property or any other right under a transaction with a creditor which arose from an action taken by a creditor or creditor’s agent which was contrary to this section, the nullity of that action shall not prejudice the rights of that person, where that person dealt with the creditor in good faith and for value.

(13)

Where a MSME Company Debt Restructuring

Arrangement does not include terms modifying or limiting the rights of a secured creditor or a counterparty to a hire-purchase agreement, nothing in this section shall affect the

Rescue, Rehabilitation and Insolvency right of a secured creditor or counterparty to a hire-purchase agreement to enforce its rights over the property subject to the security or hire-purchase agreement.

(14)

Where a MSME Company Debt Restructuring

Arrangement includes terms modifying or limiting the rights of a secured creditor or a counterparty to a hire-purchase agreement, in a manner specified in section 280

or otherwise, a secured creditor or counterparty to a hire-purchase agreement may only enforce its rights over the property subject to the security or hire-purchase agreement in accordance with the terms of the Arrangement.

(15)

In relation to a MSME Company Debt Restructuring

Arrangement, “insolvency-related term” is a provision of an agreement for the supply of any essential goods or services to a MSME debtor under which –

(a)

the agreement or the supply shall terminate, or any other thing may take place, because the MSME Company Debt Restructuring

Arrangement procedure has commenced; or

(b)

the supplier shall be entitled to terminate the agreement or the supply, or to do any other thing, because the MSME Company Debt Restructuring

Arrangement procedure has commenced.

Read on from s 288

Part XII

Read on from Part XII

Part XIII

Read on from Part XIII

Part XIV

Cross - Border Insolvency

Read on from Part XIV

Part XV

Read on from Part XV

Part XVI

Read on from Part XVI

Part XVII

Read on from Part XVII

Schedules