Insolvency Law at Burkina Faso
In Burkina Faso, insolvency law is also governed by the OHADA (Organisation pour l'Harmonisation en Afrique du Droit des Affaires) framework, particularly the Uniform Act on the Organization of Collective Proceedings for Wiping Off Debts. Burkina Faso is a member of OHADA, which harmonizes business laws across several African nations.
Key Features of Insolvency Law in Burkina Faso under OHADA:
Types of Proceedings:
Preventive Settlement (Règlement Préventif): This aims to help businesses facing financial difficulties to avoid insolvency by restructuring their debt before reaching a point of no return.
Judicial Reorganization (Redressement Judiciaire): This is the procedure for a distressed business to reorganize and continue its operations under the supervision of a court-appointed administrator. The goal is to allow the business to recover financially.
Judicial Liquidation (Liquidation Judiciaire): This process is used when a business cannot be saved, and its assets are liquidated to satisfy creditor claims.
Court Jurisdiction:
The Commercial Court handles all insolvency matters. Either the debtor or creditors can initiate insolvency proceedings.
Administrator (Syndic or Trustee):
A court-appointed administrator manages the process, either overseeing the business's reorganization or liquidation. The administrator is responsible for protecting creditors' interests and ensuring fair treatment.
Creditors' Rights:
Creditors are required to declare their claims within a prescribed period. They may have to participate in meetings or vote on the proposed reorganization plan.
Certain creditors, such as employees and secured creditors, may have preferential claims over other creditors.
Moratorium on Debts:
Once insolvency proceedings begin, the business is typically protected from individual creditor actions, such as lawsuits or seizures of assets. This allows the business a fair chance to reorganize or liquidate its assets without further financial pressure.
Criminal Sanctions:
Fraudulent bankruptcy or mismanagement of funds may result in criminal charges against the business's executives or owners.
Recent Reforms and Developments:
The OHADA Uniform Act was revised in 2015, aiming to improve transparency, enhance creditor protection, and streamline the reorganization process. The reforms also focus on the prevention of insolvency by encouraging early intervention and better management.
Steps to Initiate Insolvency Proceedings in Burkina Faso:
Filing for Insolvency: A business facing insolvency can file a petition with the Commercial Court. Creditors may also file a petition if they believe the debtor is insolvent.
Appointment of a Court Administrator: If the court accepts the petition, an administrator will be appointed to oversee the process.
Review of Debts and Assets: The administrator will review the business’s financial situation, including assets and liabilities, and propose a reorganization or liquidation plan.
Creditor Approval: Creditors will be involved in the decision-making process, with a voting mechanism for restructuring plans.
Implementation: The court will oversee the implementation of the plan, whether it’s for reorganization or liquidation.
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