Trade ministry streamlining bankruptcy

Launches modern insolvency framework from the helm

MOSA MAOENG

MASERU – The Ministry of Trade and Industry (MTI) has formally assumed responsibility for administering corporate insolvency under Lesotho’s landmark Insolvency Act of 2022. Officially implemented on April 1, as Act No 26 of 2025, the Act establishes a modernized and unified legal framework for managing both corporate and personal insolvency. Crucially, it introduces a clear jurisdictional division – while the Master of the High Court under the Ministry of Law and Justice retains oversight of personal insolvency, the MTI will now manage corporate insolvency matters.

The new legislation aims to enhance business restructuring, facilitate business rescue, and promote economic stability by providing viable pathways for financial recovery for struggling companies.

This week, the MTI held a workshop for media practitioners to raise awareness and enhance understanding of the Act’s key provisions, particularly those strengthening business restructuring and rehabilitation.

Monaheng Monaheng, Director of the One-Stop-Business-Facilitation-Centre (OBFC), emphasized the Act’s significance during the workshop. He described insolvency law as “a technical and often misunderstood area” with profound real-world impacts.

“It affects real people: business owners fighting to keep their doors open, employees worried about their jobs, creditors seeking fairness, and investors gauging the security of Lesotho’s economic environment,” Monaheng stated.

He stressed the ministry’s commitment to changing the narrative by making the law accessible, pointing out that “we are here to make it clear for the media to comprehend, so they can accurately translate it into stories that every Mosotho will understand.”

Monaheng highlighted the media’s crucial role in demystifying the insolvency process, explaining rights and responsibilities under the law, and showcasing how it offers businesses a structured path to recovery through rescue mechanisms.

“This is a fair second chance,” he added, “to reorganize, renegotiate, and return to viability.”

Mpho Makhabane, Corporate Rescue Officer at the MTI, provided clarity on the core mechanism for businesses: Corporate Rescue. She defined it as “a legal process aimed at facilitating the rehabilitation of a financially distressed company,” specifically one “reasonably unlikely to pay all its debts as they become due within the next six months.”

Makhabane outlined the voluntary corporate rescue process as beginning with steps for a company’s shareholders pass a resolution to commence proceedings, followed by court-appointed Corporate Rescue Practitioner filing this resolution with the Registrar of Companies. Then a temporary moratorium (legal protection) is imposed, halting most legal actions against the company without the Practitioner’s or Registrar’s consent.

The Practitioner then develops and implements a Business Rescue Plan to rehabilitate the company.

According to Makhabane, key effects of corporate rescue include maintaining employee job security during proceedings. She further advised small businesses dealing with companies in rescue to seek legal advice regarding their rights as creditors.

At the Act’s official announcement on May 14, trade minister, Mokhethi Shelile, underscored the necessity of a structured insolvency system.

“Not all businesses succeed,” he acknowledged, “but even in failure, a structured, fair, and inclusive insolvency process must exist for all parties involved – creditors, employees, and investors.”

Minister Shelile confirmed the jurisdictional split: personal insolvency remains with the Master of the High Court, while corporate insolvency is now managed by the MTI through the Registrar of Companies. He hailed this as “groundbreaking reform,” noting the “dual oversight model reflects a unified approach between the two ministries” and is designed to be “simpler and more cost-effective.”

Echoing the collaborative spirit, Minister of Law and Justice, Richard Ramoeletsi, confirmed the Act’s implementation date and its core objective.

“The Act introduces mechanisms to give struggling businesses an opportunity to recover rather than be pushed directly into liquidation.”

He emphasized the shift, stating, “Instead of being summoned to court immediately, companies will have the chance to negotiate and reorganize if they are facing financial difficulties.”