Guyana

The most commonly used corporate insolvency procedures are winding up by the court/compulsory or voluntary creditors’ winding up. These are governed under the Guyana Companies Act, Part V.

Court/compulsory winding up

A court winding up will occur where:

• the company has, by special resolution, provided for a court winding up;
• the company fails to commence within the year of its incorporation or suspends business for a whole year;
• the company is unable to pay its debts;
• an inspector appointed under the Companies Act finds that the company is unable to pay its debts and should be wound up in the interest of the public, shareholders and creditors; or 
• it is just and equitable that the company is wound up.

A court winding-up petition may be presented by one or more of the following persons or entities:

• the company;
• a creditor, including a contingent or prospective creditor, of the company;
• a contributory (every person liable to contribute to the assets of the company if it is being wound up);
• the trustee in bankruptcy to, or personal representative of, a creditor or contributory; or
• the minister.

Where a company is being wound up under a special resolution, the Official Receiver and any other authorised person may present a winding-up petition. 

The Official Receiver acts as the provisional liquidator pending their or another’s appointment as liquidator by the court or automatic appointment where the position is vacant.

Voluntary creditors’ winding up 

A voluntary creditors’ winding up involves several key steps, as follows. 

1. General meeting. The process begins with a general meeting, at which the shareholders pass a resolution — either special or ordinary — that the company cannot pay its debts. This marks the commencement of the winding-up process. 
2. Notification. Within 14 days of passing the resolution, the company advertises the resolution in The Official Gazette of Guyana and provides written notice to the Registrar of Companies. 

3. Creditors’ meeting. This is convened in one of two ways: 

   • Convened by liquidators in a members’ winding up. Liquidators appointed following a Director’s Declaration of Solvency, upon realising the company is insolvent, will convene a meeting of creditors, at which point the members’ winding up becomes a creditors’ winding up.
   • Convened by the company upon the winding-up resolution. The company will facilitate a meeting of creditors the day of or the day following the meeting at which the voluntary winding-up resolution was made. This involves:
     • The company sends notices of the creditors’ meeting to the creditors simultaneously with the notices of the company’s meeting for the voluntary winding up. The notices are advertised once in the Gazette and once in at least one daily newspaper printed and circulating in Guyana.
     • Directors’ statement of affairs. The directors are to provide a full statement of the companies’ affairs along with a list of creditors and an estimate of their claims to be laid before the creditors’ meeting. They should also appoint a director to attend the creditors’ meeting. 

   During their respective meetings, both the creditors and the company will appoint a liquidator. If the creditors nominate different individuals for the role, those persons will serve as liquidators. However, if the creditors fail to nominate a liquidator, the individual nominated by the company will take on that role. Additionally, creditors, directors, or members can apply to the court within seven days of the nomination to have their nominee or another individual appointed jointly or solely as the liquidator. 

4. Liquidation of assets. Finally, the liquidators will be responsible for selling the company’s assets to fulfil its debts.

Individual debtors can obtain protection from creditors under the Insolvency Act, under the provisions which allow debtors to submit a proposal for a composition or scheme of arrangement. This presents some form of protection for debtors because it offers debtors some breathing room to pursue restructuring through a compromise or a statutory arrangement that would otherwise not provide a stay or moratorium.

The breathing room is created because the scheme of arrangement must be accepted by the creditors and approved by the court. Also, it is part of a process involving the public examination of the debtor and the issue of a report to the creditors.

Concerning companies, the Companies Act protects debtors from creditors in the following ways:

• It allows, via application to the court, the prescription of a time within which creditors are to prove their claims, after which they will be excluded from the benefit of any distribution made before those debts are proved. This allows for a cap on creditors’ claims to the benefit of the debtor.
• It allows the company to participate in the choice of a liquidator or members of the committee of inspection. Thus, the debtor has a choice in the individuals who lead or impact the debt restructuring.
• It provides for voluntary winding up, whereby debtors can have control over the debt restructuring process before the point of insolvency.
• It facilitates general recourse to the courts regarding disputes arising in the liquidation process, for example, the nature and the extent of a debt.

The regime provides for the approval of compromises or arrangements between a company and its creditors or any class of them, or between a company and its members. Such compromises or arrangements may be proposed outside of the insolvency context.

Separately, the regime also provides for the appointment of provisional liquidators by the court. The court may limit a provisional liquidator’s powers in the appointing order. However, subject to any relevant limitations imposed, the default position is that a provisional liquidator is required to take custody and control of the company’s property, including things in action.

3.1 What are the conditions to entry?

For a compromise or arrangement to be entered:

• The court must order a meeting of the creditors or class of creditors or members or class of members to approve the proposal. An application for such an order may be made by the company, a creditor or member, or the liquidator where the company is being wound up.
• The proposal is then voted on and must be approved by a majority in number which represents at least 75% by value of the creditors or class of creditors or members or class of members present and voting.
• The proposal must then be sanctioned by the court and the court’s order lodged with the Registrar of Companies, upon which the compromise or arrangement becomes binding upon the company (or liquidator) and the creditors or class of creditors or members or class of members.

3.2 Can creditor claims be compromised “within a class”?

A compromise can either be proposed and approved in respect of any class of creditors or in respect of all creditors. For a compromise to be approved, it must be agreed to by a majority in number which represents at least 75% by value of the creditors or class of creditors present and voting.

3.3 Is there a “cross-class cramdown”?

A compromise in respect of a specific class only must be approved by that class. However, it is possible that a compromise affecting all creditors could succeed even if all creditors of a specific class disapprove, if the requisite threshold is otherwise met.

3.4 Can shareholder claims be compromised?

There are no restrictions on the types of claims that may be compromised.

3.5 Can secured creditors’ claims be compromised? Are deficiency claims treated differently?

There are no restrictions on the types of claims that can be compromised. Secured creditors’ claims may therefore be compromised if approved. Deficiency claims may also be compromised, but for classification purposes are treated as unsecured.

3.6 Can creditors propose competing plans?

Any creditor may make a proposal and apply to the court for an order directing a meeting to approve the proposal.

3.7 What level of court or other third-party supervision is there of the process(es)?

The court is involved at two stages. First, the court gives directions for the conduct of the meeting approving the proposal. Secondly, the court must sanction any proposal approved by the creditors or class of creditors or members or class of members before it becomes binding.

Clawback claims are provided for and may be pursued on several bases. Regarding companies, clawback claims may be pursued where:

• Transactions were made in favour of a creditor with a view of giving that creditor a preference over other creditors.
• Transactions were made with intent to defraud creditors.
• In the case of execution or attachment proceedings by a creditor, the proceedings are not completed before the commencement of winding up.

Regarding individuals, in addition to the above, there is also scope for clawback claims with respect to certain transactions not for valuable consideration within the applicable “look-back” periods or transactions made in contemplation of insolvency.

4.1 What is the applicable law that provides for clawback and/or antecedent transaction claims?

The Companies Act (sections 435–441) and the Insolvency Act (sections 45–47) provide for clawback claims.

4.2 What are the relevant “look-back” periods for claims?

There are various “look-back” periods for different types of claims. The various periods typically run (backwards) from the date of presentation of the petition. These include the following:

• Three months in respect of fraudulent preferences.
• Twelve months in respect of floating charges on the undertaking or property of companies, unless the company was solvent immediately after the creation of the charge, and except for the amount of any cash paid to the company at or after the creation of the charge and in consideration of the charge together with interest at the statutory rate.
• Two years in respect of settlements of property by individuals where there is no valuable consideration, irrespective of whether the settlor was otherwise solvent at the time of the settlement.
• Ten years in respect of settlements of property by individuals where there is no valuable consideration where the settlor was not otherwise solvent at the time of the settlement.

In respect of the latter two categories, settlements made before and in consideration of marriage, on or for the spouse or child of the settlor of property accruing to the settlor after marriage in right of the spouse, or otherwise in good faith and for valuable consideration, are all exempted.

There is no limitation on clawback claims in respect of transactions made with intent to defraud.

4.3 Who can pursue the claims?

The liquidator or assignee in insolvency, as the case may be, can pursue the claims.

4.4 What remedies are available and how do they operate in practice?

The various antecedent transactions captured by the regime are declared void against the assignee/liquidator under the relevant statutes. In practice, this allows the assignee/liquidator to seek any necessary declaration confirming that a subject transaction is void, and, if necessary, any further remedies appropriate to the context to recover the asset. These could include orders for possession, and orders for taking of accounts and payment of sums found due and damages, among others.

4.5 What defences are available?

It is a defence to a clawback claim that the subject transaction was made for valuable consideration and before the date of the receiving or winding-up order, and the third party involved did not have notice of any available act of insolvency by the debtor at the time of the transaction.

4.6 Is there a general right of action in respect of transactions defrauding creditors or Actio Pauliana claims?

Settlements of property made with intent to defraud creditors are void against the assignee/liquidator as well as against the defrauded creditors.

4.7 Who can pursue the claims?

Pre-insolvency, these claims may be pursued by creditors, but once a receiving or winding-up order is made, such claims must be pursued by the assignee or liquidator.

4.8 What remedies are available and how do they operate in practice?

Because such transactions are declared void under statute, this allows the assignee/liquidator or the affected creditor(s) to seek any necessary declaration confirming that the subject transaction is void, and, if necessary, any further remedies appropriate to the context to recover the asset. These could include orders for possession, and orders for taking of accounts and payment of sums found due and damages, among others.

4.9 What defences are available?

Transactions made in good faith for valuable consideration in favour of any person without notice or knowledge of the fraudulent motive at the date of the transaction are not affected.

The duties and liabilities of the directors and managers of an insolvent company are governed by the Companies Act, the Articles of the Company, and the common law contained in case law.

5.1 What are the duties of directors and managers?

Generally, a director and manager’s duty is to exercise the company’s powers directly or indirectly through employees and agents and direct the management of the company’s business and affairs. 

Under the common law, directors have a fiduciary duty to act in good faith. This includes the duty to:

• act in the best interests of the company;
• not act beyond the scope of its powers;
• exercise independent discretion and judgement;
• exercise reasonable care, skill and diligence;
• avoid conflict of interest and prioritise company’s interests over personal benefit;
• not make secret profits or possible incidental profits;
• not misappropriate corporate opportunities; and
• disclose personal interests in contracts, existing transactions or arrangements with the company.

The common law duty is codified in the Companies Act, which requires the directors and officers to:

• act honestly and in good faith with a view to the best interest of the company; 
• exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances; and 
• comply with this Act and the regulations and with the articles and bye-laws of the company.

Specific liabilities include doing the following contrary to the Companies Act:

• a purchase, redemption, or other acquisition of shares;
• payment of a commission;
• payment of a dividend;
• financial assistance; or
• payment of indemnity.

Where the directors act contrary to the Companies Act concerning the above-mentioned actions, they are liable to restore to the company any amounts so distributed or paid and not otherwise recovered by the company.

Regarding insolvency, the director and officer of the company must:

• To the liquidator:
  • fulsomely report all property of the company;
  • deliver up any company property within their control or custody;
  • deliver up all books and papers (accurate and unaltered) belonging to the company in their custody or control;
  • identify all material information as it relates to the affairs of the company and not present any false information; and
  • identity any false debts as soon as known.
• Twelve months before the commencement of the winding up or after, not:
  • conceal or remove company property valued GYD 100 or upwards;
  • dispose of any company property;
  • obtain property on the credit of the company which the company does not subsequently pay for;
  • pawn, pledge or dispose of any property of the company which has been obtained on credit and has not been paid for, unless such pawning, pledging or disposing is in the ordinary way of the business of the company; or
  • otherwise defraud creditors or act in reckless disregard for the company’s obligation to pay its debts and liabilities and the sufficiency of its assets for the same.
• not falsely trade, that is, carry on business of the company in the course of winding up with: (1) intent to defraud creditors of the company or the creditors of any other person or for any fraudulent purpose; or (2) reckless disregard of the company’s obligation to pay its debts and liabilities or the insufficiency of the company’s assets to satisfy its debts and liabilities (fraudulently trading);
• not make false representation or other fraud for the purpose of obtaining the consent of the creditors of the company or any of them to an agreement with reference to the affairs of the company or to the winding up; and
• keep proper books of accounts for at least the two years immediately preceding the commencement of winding up or a period between the incorporation of the company and the commencement of the winding up, whichever is shorter.

In this regard, proper accounts are those that clearly explain the transactions and financial position of a company’s trade or business. This includes maintaining daily records of all cash received and cash paid. Furthermore, if the trade or business involves the buying and selling of goods, it is essential to prepare statements of annual stocktaking. Additionally, except in cases of goods sold through ordinary retail trade, all goods bought and sold should be documented in detail. This should include information about the goods as well as the buyers and sellers, allowing for clear identification of both the goods and the parties involved in the transactions.

5.2 What claims can be brought against directors and managers arising from breaches of those duties?

The following claims may be brought against directors and managers for breach of their duties:

• breach of statutory duty, including a claim for recovery of monies lost; 
• breach of fiduciary duty/trust; 
• negligence;
• fraudulent trading; and
• criminal complaints to the Director of Public Prosecution regarding breaches of duty related to insolvency, which will result in a criminal offence, provided intent and knowledge can be proved. Offences include fraud and falsification of books.

5.3 Who can pursue the claims?

The following persons can pursue the above-mentioned claims:

• liquidators; and
• persons interested in the winding up, such as creditors.

5.4 Do directors have, at any time, a strict obligation to file for insolvency and, if so, when does that arise?

Directors do not have any strict obligations to file for insolvency. Where insolvency is not voluntary, the creditor, contributory or other authorised person (see Question 3, above) may apply for a court order winding up the company.

5.5 Can directors and managers be found liable for the increase in sums owed to creditors after a company becomes insolvent?

Directors and managers can be found liable for increases in sums owed because of a breach of their duties.

5.6 In what other circumstances can directors and managers be found liable directly to creditors of the company?

Directors and managers can be found liable directly to creditors in tort in respect of:

• fraudulent trading;
• false representations and/or misrepresentations made to obtain a creditors’ consent or agreement;
• negligence in respect of reporting false debts and falsified company records or other breaches of their duty; and
• fraud

6.1 What information can be obtained by office holders in respect of a debtor’s property, information and affairs?

A liquidator is mandated upon being appointed to take custody and control of all property of the company, including things in action. This extends to the company’s books.

6.2 How is that information obtained in practice?

How the information is obtained in practice depends on the context in which the winding up is occurring. In a voluntary winding up, the necessary credentials may be voluntarily delivered to the liquidator upon appointment. In a winding up by the court, the liquidator ultimately has recourse to the court to summon relevant officers in the case of any resistance.

6.3 Can the court assist in obtaining that information and how does that work in practice?

The court can summon any person known or suspected to have company property in their possession or be capable of giving information as to the affairs of the company. Such persons may be examined on oath and/or ordered to produce any books or papers in their custody.

The Companies Act provides for the recognition in Guyana of the powers a liquidator by a person appointed as a liquidator in a designated state under rules to be developed by the relevant government Minister. The intended rules are to allow for the recognition of and to give effect to a winding-up order made in a designated state in relation to an external company incorporated or formed in the designated state.

A designated state in the Companies Act is defined as any country that is a Member State of the Caribbean Community (that is, the Community of States established by the Treaty of Chaguaramus) or published in the Gazette as a designated country that enacted similar statutory provisions, as determined by the minister. The minister has not Gazetted other designated states. Currently, therefore, the only designated states are Antigua and Barbuda, Bahamas, Barbados, Belize, Bermuda, the British Virgin Islands, the Cayman Islands, Curacao, Dominica, Jamaica, Grenada, Guyana, Haiti, Monserrat, Saint Kitts and Nevis, Saint Vincent and the Grenadines, Saint Lucia, Suriname, Trinidad and Tobago, and the Turks and Caicos Islands.

No rules have been enacted to give effect to the recognition of a foreign liquidator or other office holders under the Guyana Companies Act.

7.1 Is the UNCITRAL Model Law on Cross-Border Insolvency adopted?

The UNCITRAL Model Law on Cross-Border Insolvency has not been adopted in Guyana.

7.2 Is it possible to recognise office holders from other jurisdictions?

Without the requisite rule enacted by the minister, there is no mechanism in place to recognise office holders from other jurisdictions.

Foreign companies (external companies) must be registered under the Guyana Companies Act. An unregistered foreign company may not maintain any action, suit or other proceedings in any court in Guyana in respect of any contract made in whole or in part within Guyana in the course of or in connection with the carrying on of any undertaking by the company in Guyana.

An external company, therefore, needs to appoint an office holder in Guyana.

7.3 What is the process and what are the conditions for recognition?

There are no established rules for recognition.

However, the Companies Act gives the relevant government minister the discretion to provide recognition rules concerning:

• a foreign liquidator from a designated state, which at present only includes the Caribbean Community; and
• liquidation concerning a company formed in a designated state. 

7.4 What information can be obtained by office holders in respect of a debtor’s property, information and affairs?

Since office holders from other jurisdictions are not recognised, they are not entitled to any information on the debtor’s property, information and affairs.

7.5 What steps can a foreign office holder take to recover assets belonging to the debtor?

There are no prescribed steps that a foreign office holder can take to recover assets belonging to the debtor.

Currently, only if the debtor is an external company registered under the Guyana Companies Act can the debtor bring an action to recover assets. However, such action would have to be taken by a local office holder.

7.6 Is a foreign office holder able to bring clawback claims or fraudulent transaction claims?

A foreign office holder is not able to bring clawback claims or fraudulent transaction claims. However, if the debtor is an external company registered under the Guyana Companies Act, a local office holder can bring a clawback or fraudulent transaction claim.

At present, insolvency office holders are not regulated in Guyana.

8.1 Can a foreign office holder take appointments?

There are no restrictions on foreign office holders taking appointments.

8.2 What are the conditions for becoming an office holder?

The only statutory disqualifications for holding office are in respect of bodies corporate and undischarged bankrupts, neither of whom may be appointed liquidators.

8.3 What are the main rules of professional conduct?

There are no codified rules of professional conduct applicable to insolvency office holders specifically.