Bankrupts are going to be barred from foreign trips, joining state-sponsored events, appointment as company directors or taking membership to a club. Besides, restrictions are also likely to be imposed on operating multiple bank accounts.
The changes are being brought in the existing Bankruptcy Act, 1997. The Financial Institutions Division has published the draft proposal of the act on its website on Sunday, seeking recommendations from the stakeholders.
Recent steps to change the Bank Company Act or Financial Institutions Act also aim at putting same restrictions on wilful loan defaulters.
Enacted in 1997, the Bankruptcy Act apparently failed to deliver results as only a company in 2000 was declared bankrupt under the act. Financial Institutions Division officials pointed finger at the lack of bankruptcy court and specific dateline for resolving a case for the failure.
Since the existing law lacks proper implementation, the wilful defaulters may not heed to the amendments. However, bringing changes at the same time in the Money Loan Court Act-2003 might help correct their attitudes.
The amended Money Loan Court Act will enable the creditor seeking legal remedy at bankruptcy court if the debtor does not settle the dues within 90 days of the order passed by the Money Loan Court. Thus, a wilful defaulter faces risk to be declared bankrupt, which means a stop of the facilities.
Bankers have appreciated the changes and said the proposed provisions will check wilful loan defaulting tendency. However, company law experts said toughening laws will shrink businesses and new investments.
"After amendment, proper enactment must be emphasised to end the culture of default loans," former deputy governor at the central bank Ibrahim Khaled told The Business Standard.
In the meantime, company law expert Barrister Shahriar Kabir said no one wishes to be a bankrupt.
"Situations often lead them to bankruptcy and stripping the person off starting over a business is not logical. Moreover, travelling abroad is a fundamental right," added the lawyer.
Barrister Shahriar believes taking action against the wilful defaulters is possible under the existing laws.
According to the existing law, realising the loans from a bankrupt is not possible if the borrower bank cannot sell the collaterals. The proposed changes in the Bankruptcy Act enables the bank to take over the asset.
Besides, the proposed draft set a 120-day deadline to resolve a bankruptcy case. It proposed draft says cases will have to be settled down in 90 days, and can be allowed 30 more days if not resolved within the time.
The proposed amendments emphasise increasing the number of bankruptcy court.
In the existing law, a district judge can permit an additional district judge to conduct the legal proceedings. In the proposed draft, one or multiple joint district judges under the district judge have been proposed to run money loan court and bankruptcy court.
The proposed amendments also aim at discouraging appeal as it mandates the payment of 25 percent of the debt prior to the appeal. In the existing law, one can appeal after clearing 10 percent of the dues.
The amendments also impose more conditions for the release of a borrower who is either apprehended or in jail.
An official of the Financial Institutions Division, preferring anonymity, said a borrower in the United States can negotiate and settle down the debt before getting declared bankrupt. This also paves the way for reconstructing the entities with the help of the court.
"The existing bankruptcy law in Bangladesh did not have such scopes for reconstruction. The proposals have covered the aspects," added the official.
After assuming office, Finance Minister AHM Mustafa Kamal announced to bring changes in the bankruptcy law in a bid to check default bank loans. Then the Economic Affairs Adviser to the Prime Minister Mashiur Rahman also recommended the premier for bankruptcy act amendment.
In line with that, the financial institutions division has taken the initiative.