Insolvency

Insolvency in Rwanda

Rwanda's insolvency framework is governed by Law N° 007/2021 governing companies (as amended by Law N° 019/2023), promoting both rescue culture and orderly liquidation.

Types of Insolvency Proceedings

1. Voluntary Administration (Rescue)

Company appoints administrator

Aims to save the business

Moratorium on creditor actions

Restructuring plan proposed

2. Liquidation

Company wound up and dissolved

Assets sold to pay creditors

Can be voluntary or compulsory

3. Receivership

Secured creditor appoints receiver

Manages secured assets

Pays secured debt first

Tests for Insolvency

Cash Flow Test:

Unable to pay debts as they fall due

Balance Sheet Test:

Liabilities exceed assets

Priority of Claims

1. Secured creditors (from secured assets)

Costs of insolvency proceedings

Employee wages (last 6 months)

Government taxes

Unsecured creditors

Shareholders (last)

Director Responsibilities

Directors must:

Not incur new debts if insolvent

Act in creditors' interests

Avoid wrongful trading

Can face personal liability

Court Involvement

Commercial High Court:

Appoints liquidators

Approves restructuring plans

Resolves disputes

Discharges directors