Hawkamah, the first Institute for corporate governance, and the Insolvency Special Interest Group (Insol) supported by the World Bank yesterday launched a regional task force on developing sound insolvency and creditor rights systems.
The task force will develop a Mena policy based on an individual country analysis of the legal framework for insolvency and creditor rights, along with recommendations and policy options for consideration by Mena policy makers.
The task force will consist of experts and officials from the Mena countries, the World Bank, Insol, OECD, PwC and will include representatives of Mena government agencies, banks, judiciary, regulators, the financial sector and insolvency professionals.
The task force aims to conduct an assessment of country-level insolvency and creditor rights systems in the Mena region, and will propose recommendations on improving the systems and making them more effective. This assessment is based on the methodology of the World Bank’s Report on Observance of Standards and Codes (ROSC) programme and the World Bank Principles on Effective Insolvency and Creditor Rights Systems.
“There is a clear underlying link between insolvency, corporate governance, foreign investment and access to capital. Indeed, companies with a good corporate governance record reduce the risks of lenders and are often able to borrow more and on more favourable terms than their competitors with a poor governance record,” said Hawkamah Executive Director Nasser Saidi.
Market efficiency, corporate governance and insolvency are closely linked.
As experience from both developed and emerging markets has shown, the corporate governance framework should be complemented by an effective, efficient insolvency framework and by effective enforcement of creditor rights to get viable results.
Hawkamah has been established in partnership with a group of international institutions, including the Dubai International Financial Centre and Organisation for Economic Co-operation and Development, the Ministry of Economy among others.
Corporate governance in insolvent enterprises poses specific challenges. Legal frameworks often impose on directors of insolvent enterprises to act in the interests of creditors, and provide the latter with a specific role in the governance of distressed debtors.