The government has launched the Insolvency Act 2022, a major comprehensive legal framework for managing business insolvency and financial distress.
The law is expected to revolutionise how failing businesses are treated, pivoting from punitive shutdowns to structured recovery, a move long overdue in the local business environment.
Until now, Lesotho’s insolvency framework was split between the Insolvency Proclamation 1957, which regulated personal bankruptcy, and the Companies Act 2011, which governed corporate insolvency matters like liquidation and judicial management.
The new legislation, officially launched last week at a joint event by the Ministry of Trade, Industry and Business Development and the Ministry of Law and Justice, represents a fundamental shift in how financial distress will be addressed in the Kingdom.
The Act sets out the distinction between the powers of the Master of the High Court and Registrar of Companies in relation to insolvency procedures. The Master of the High court will oversee liquidation of individuals while the registrar of companies will oversee liquidation of juristic person, other institutions and business rescue proceedings.
“This is a unique reform. It represents a joint effort between the two ministries, resulting in a more streamlined and modern approach to insolvency,” said Mokhethi Shelile, the Minister of Trade, Industry and Business Development.
The law introduces structured mechanisms for corporate rescue, debt restructuring, and fair treatment of all stakeholders, a critical step toward building economic resilience.
Shelile called on the stakeholders to support the implementation of the law.
“The government recognises that not every business journey ends in success. In challenging times, there must be a fair, transparent, and efficient process not only for failing businesses but also for their creditors, employees, and investors,” Shelile said.
Through the Act, Lesotho now has formal business rescue provisions, allowing viable companies to reorganise and return to profitability instead of being forced into liquidation.
“Not all struggling businesses need to shut down. Some simply need time and a fair process to recover,” Shelile said.
The shift is expected to have far-reaching implications, as businesses will now have the opportunity to restructure their debt, protect jobs, and preserve investor value. The new law also supports a healthier investment climate, as it introduces predictable rules for managing failure, a crucial factor in attracting foreign capital and supporting domestic entrepreneurship.
“Given that our Ministry is responsible for business development, it makes sense that we also oversee corporate insolvency. Businesses in financial distress, or those seeking to wind down, must be able to do so in a timely, orderly and fair manner,” Shelile added.
On his part, the Minister of Law and Justice, Richard Ramoeletsi, speaking at the same event, praised the law’s shift in focus from punishment to recovery.
“Companies facing financial crisis will no longer be forced into immediate closure or court-ordered liquidation. Instead, they will have the opportunity to undergo corporate rescue, a process that allows for reorganisation and recovery,” Ramoeletsi said.
The act also provides for establishment of the office of the Insolvency Regulator, which will regulate the insolvency and business rescue practice and oversee the code of conduct for all insolvency and business rescue practitioners.
While acknowledging that the insolvency regulatory body is not yet fully operational, Ramoeletsi emphasised that the law lays the institutional and legal groundwork for effective oversight and enforcement.
“This law is a vital tool for enabling businesses to survive financial setbacks, ultimately protecting jobs and livelihoods,” he said.
The Act also introduces new and modern ways of making notices during winding-up. these new was include emails and facsimile which will ease the manner in which practitioners, the master and the registrar make notices to save time and costs of winding-up while increasing the recovery rate of the insolvent estate.
It finally introduces the new concept of cross boarder insolvency wherein creditors in Lesotho can lodge their claims in foreign countries. This will also improve cooperation and collaboration between Lesotho and other countries in relation to ease of recovering debts.
Seabata Mahao is a general news reporter with special focus on Business and Sports. Started working at Newsday in 2021. Working in a team with a shared goal is what I enjoy most and that gives me the motivation to work under any environment leading to growth.
