Insolvency Law Takes A Knock: A Review Of Roofings v Roko Construction (Podcast)

• Published date: 20 October 2021
• Subject Matter: Corporate/Commercial Law, Insolvency/Bankruptcy/Re-structuring, Compliance, Corporate and Company Law, Insolvency/Bankruptcy
• Law Firm: ENSafrica
• Author: Donald Nyakairu

The High Court in Uganda has ruled that a petitioner for liquidation of a company must issue a statutory demand regardless of the grounds of the petition.

the background

In Roofings v Roko Construction a petition was filed for winding up of the Roko Construction ("Roko") on the grounds that a consent judgment against it remained unsatisfied. Roko contended that the law required that despite the unsatisfied judgment, it still had to be served with a statutory demand and the petitioner had not done so. Roko prayed for a dismissal of the petition as improperly before court. The petitioner argued that the issue of a statutory demand was only one of the methods under the law, of proving that a debtor was unable to pay its debts. In this case the unsatisfied judgment proved the inability to pay debts and therefore no statutory demand was necessary.

the law

The Insolvency Act, 2011 provides that a debtor is presumed to be unable to pay its debts if,

• the debtor has failed to comply with a statutory demand;
• the execution issued against the debtor in respect of a judgment has been returned unsatisfied in whole or in part or
• all or substantially all the property of the debtors is in possession or control of a receiver or some other person enforcing a charge over that property.

The Insolvency Regulations, 2013 provide that a petition to liquidate a company may be presented to the court where the company:

• has been served with a statutory demand and is unable to comply with the demand;
• is unable to pay its debts;
• has agreed to make a settlement with its creditors or entered into administration.

There is no conjunctive or disjunctive (and/or) applied between these conditions.

the decision

The court found that the use of the semicolons at the end of each paragraph in the Regulations meant that all the conditions above were interlinked. A petitioner must therefore issue a statutory demand notwithstanding that inability to...