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Resolving Insolvency in

Lesotho

Below is a description of the time, cost and outcome of the most common insolvency proceeding in each economy under the case study assumptions, as well as the strengths and weaknesses in existing insolvency regulations in four areas: commencement of proceedings, management of debtor’s assets, reorganization proceedings and creditor participation.

This information was collected as part of the Doing Business project, which measures and compares regulations relevant to the life cycle of a small- to medium-sized domestic business in 190 economies. The most recent round of data collection was completed in June 2016.

Compare Lesotho to 189 other economies.

  • Indicator Explanation Answer
    Recovery rate (cents on the dollar) 28.6
    Proceeding After Mirage's default, BizBank would initiate liquidation by filing the claim at the High Court. liquidation
    Outcome Upon the completion of liquidation proceeding, the hotel will stop operating and Mirage assets will be sold piecemeal usually through private sale. piecemeal sale
    Time (in years) The liquidation proceeding takes approximate 2.6 years. After receiving BizBank's application to initiate liquidation proceeding, the High Court will review the case; notify relevant parties and hold hearing if necessary. In practice, it takes around 8 months to obtain a hearing and a judicial resolution (provisional liquidation order) on the issue. The decision to start the liquidation proceeding made by the High Court can be appealed by Mirage by filing the petition at the Court of Appeals. The decision on the appeal will be made within 6 months. Once the final decision of liquidation is made, the Court will appoint a liquidator immediately. The liquidator usually holds the first creditors' meeting within the first month of appointment, and finalizes creditors' claims before the second creditors' meeting which usually is held 6 months after the final liquidation order is made. The preparation and execution of sale of Mirage's assets will take an additional one year until BizBank is repaid some or all of the money owed to it. 2.6
    Cost (% of estate) The costs associated with the case would amount to approximately 20% of the value of the debtor's estate. Cost incurred during the entire insolvency process mainly include court or government agency fees (1%), attorney fees (5-10%), liquidator fee (3-6%), and auctioneer fee (3-10%). 20.0
    Answer Score
    Strength of insolvency framework index (0-16) 7.0
    Commencement of proceedings index (0-3) 3.0
    What procedures are available to a DEBTOR when commencing insolvency proceedings? (a) Debtor may file for both liquidation and reorganization 1.0
    Does the insolvency framework allow a CREDITOR to file for insolvency of the debtor? (a) Yes, a creditor may file for both liquidation and reorganization 1.0
    What basis for commencement of the insolvency proceedings is allowed under the insolvency framework? (a) Debtor is generally unable to pay its debts as they mature 1.0
    Management of debtor's assets index (0-6) 3.0
    Does the insolvency framework allow the continuation of contracts supplying essential goods and services to the debtor? No 0.0
    Does the insolvency framework allow the rejection by the debtor of overly burdensome contracts? Yes 1.0
    Does the insolvency framework allow avoidance of preferential transactions? Yes 1.0
    Does the insolvency framework allow avoidance of undervalued transactions? Yes 1.0
    Does the insolvency framework provide for the possibility of the debtor obtaining credit after commencement of insolvency proceedings? No 0.0
    Does the insolvency framework assign priority to post-commencement credit? (c) No priority is assigned to post-commencement creditors 0.0
    Reorganization proceedings index (0-3) 0.0
    Which creditors vote on the proposed reorganization plan? N/A 0.0
    Does the insolvency framework require that dissenting creditors in reorganization receive at least as much as what they would obtain in a liquidation? No 0.0
    Are the creditors devided into classes for the purposes of voting on the reorganization plan, does each class vote separately and are creditors in the same class treated equally? No 0.0
    Creditor participation index (0-4) 1.0
    Does the insolvency framework require approval by the creditors for selection or appointment of the insolvency representative? No 0.0
    Does the insolvency framework require approval by the creditors for sale of substantial assets of the debtor? No 0.0
    Does the insolvency framework provide that a creditor has the right to request information from the insolvency representative? Yes 1.0
    Does the insolvency framework provide that a creditor has the right to object to decisions accepting or rejecting creditors' claims? No 0.0