II. 5.Consequences of companies' dissolution in Rwanda
When a company is dissolved, it ceases its existence and its
assets are transferred to the creditors and the name of a dissolved company
becomes free for use in new company incorporation. Rwanda as a country which
adopted the politic of attracting investors, when a company is dissolved it can
decrease a number of those people that were wishing to come and invest in the
country. They may quest themselves which reasons conducted the dissolved
company to its insolvency. The consequences of a company dissolution touch so
many people and here below the researcher is going to show the impact the
dissolution of Rwandatel did to Rwandan trade, to its then employees and
finally to its customers.
II.5.1.Consequences Rwandan economy
Any country has to be worried if the companies that were
operating within its territory are being dissolved. Bankruptcy has negative
effects on an economy when it occurs en masse. This is usually a symptom of a
larger economic downturn and serves as part of a negative feedback loop that
can reinforce a recession or depression. For example, significant increase in
the rate of consumer bankruptcy will lower consumer confidence and spending. It
will increase the savings rate, which can have short term negative impacts on a
consumer-driven economy. This, in turn, will have implications for corporate
profits, usually resulting in, if not bankruptcy, and then reduced corporate
investment, hiring and wage freezes and job cuts. These reactions, especially
higher unemployment rates, then further impact consumer attitudes and behavior
and reinforce an economic downturn.Considering Rwandatel, it was a company
which used to be a public company and it was sold to the private investors so
that they manage it well in the interest of country. Those investors are the
one which conducted it bankruptcy and it was like a disappointment to Rwandan
trade.
II.5.2.Consequences to the dissolved companies' staff
Once Rwandatel was declared insolvent, most of its employees
lost their job and as it is known it is hard to get a new job especially when
losing a job comes like a surprise without being prepared of it. Even if all
employees got the six months of salary as it is provided by Rwandan labor law,
till now there are some who did not get another job yet. This increases the
number of jobless people in the country.
II.5.3. Consequences to customers
The dissolution of Rwandatel touched to its customers because
the presence of a lot of telecommunication companies is good for customers as
they have a lot of choice and the fact that it gives the competition on market,
all companies compete for having the best services so that it attract
customers. Rwandatel was known as the cheapest telecommunication company and
upon its mobile license revocation, its customers had to join other remaining
companies and it was because they were no other choice.
GENERAL CONCLUSION
Company dissolution and liquidation varies from country to
country, each country has its procedure and process of doing it. That is to
say; the way it is done in Canada differs from that in Kenya or in Rwanda.
A company may be dissolved voluntarily when it is a result of
the will of itsshareholders, or when it achieves the purpose for which it was
established;on the contrary it can also be involuntarily dissolved when it is a
forced dissolution. Here, most of the time it is a result of a court order.
A court decides on company dissolution when the company is no
longer capable of meeting its liabilities. The court has first to declare the
company insolvent so that the procedure of liquidation starts. This is where
the problematic of how dissolution is done comes.
There are steps of liquidating a company, and those steps have
to be provided for by the Law.
On a comparative approach, it was found that the Kenyan
Companies' Act provides for the procedure employed in the dissolution of an
insolvent company, besides the use of Kenyan case law and the UK case law.
On the other hand, the Canadian Companies' Act also provides
for the procedures of dissolving a company and both the common law andcivil law
practices are employed.
The Canadian approach is interesting because investors have
more options in a hybrid system.
Under Rwandan law, company dissolution and its liquidation
have undergoes several steps.First of all, a company's insolvency is
established, ushering into its dissolution which then gives birth to its
liquidation where its assets are distributed to its creditors.
Normally, company dissolution procedures give rise to issues
including problems in the country's economy while on the other hand problems
relating to company liquidation.
The Law should provide for all procedures that should govern
dissolution and liquidation in order to protect company stakeholders from
falling victim to the companies' bankruptcy.
Rwandan company law does not contain provisions governing
dissolution of companies even though law N. 12/2009 of 26/05/2009 relating to
commercial recovery and settling of issues arising from insolvency has
provisions governing company liquidation and all things related to the process,
it does not provide for circumstances in which a company may be dissolved. This
may be seen as a gap in Rwandan laws as thelegislator should have regulated all
such matters to avoid misinterpretation of laws and to encourage judgment based
on existing laws and provisions.
Having noticed this raised concerns on which law the court
based its decision of dissolving Rwandatel. The court judgment refers to laws
on which it based its decision, and they include the above said law relating to
commercial recovery and settling of issues arising from insolvency, yet when
this law is analyzed, one finds that the provision the court referred to was on
the liquidation and the appointment of a temporary administrator.
Though the court claims to have based on the above said law,
there is no single provision in it relating to the dissolution of
companies.This then creates a dilemma because normally when a company is
declared insolvent; it has first to be dissolved and then the liquidated.
Rwanda is rebuilding itself and as a country that faced its
worst darkness 20 years ago when the economy of the country completely
collapsed, and now it is classified among the top countries with investor
friendly policies, as like laws are being adoptedalong amending old provisions
to meet the needs and expectations of investors, we can therefore be sure of an
improvement in the future.
In conclusion therefore, as a recommendation, the legislator
should revise Rwandan company law and adopt provisions regulating dissolution
of companies.
The lack of these provisions may stand as an obstacle to the
Rwandan policies of attracting investors, because the later may be frustrated
withtheir company' fate in cases of bankruptcy as there is no legal provisions
regulating such issues under Rwandan law.
In addition, Rwanda should learn from Kenyan case law relating
to the winding up of companies, this will help her develop her laws which in
return shall attract Kenyan and other foreign investors to come and invest in
Rwanda.
Before declaring a company insolvent, there should be prior
assessment of the impact its dissolution will have on the Rwandan society and
other stakeholders so that corresponding precautions be taken in order to
reduce or eliminate resulting consequences.
Rwandan laws have many untimely amendments that have a
negative impact on companies' stability in business, so the legislator should
adopt stable laws that will meet the requirements of their subjects;
companies.
All in all, this work showed thatRwandan law posses a
problematic relating to dissolution of companies and this should be corrected
by the study and assessment by concerned institutions and take all necessary
steps in order to fill the gap which is in the Rwandan law.
Now that Rwanda has established the law reform commission, it
would be very helpful for it to review the Rwandan company law as it regulates
matters relating to commerce, yet commercial activities are very essential to
the development of the Rwandan investment sector. Once these steps are taken,
there won't be any problematic related to company dissolution anymore thus
encouraging more investment in companies, both domestic and foreign.
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