The ILA team visited Colombo from April 26th to 28th, 2023. During this visit, meetings were held with various stakeholders to gain a better understanding of Sri Lanka’s ongoing efforts to reform its insolvency laws and the best practices adopted by it. It is evident that the banking sector has been able to survive the economic crisis. But as the impact of the economic crisis unfolds in the months to come, there is likely to be a surge in distressed assets, exposing the banks to the risk of loan defaults and a rise in non-performing assets. The present insolvency framework is not designed to provide an effective and efficient resolution to distressed assets. There appears to be an increase in the levels of household debt. It appears the existing personal insolvency law (based on Roman-Dutch law) is not used by lenders or borrowers. Insolvency is considered stigmatic and the concept of a second chance for the unfortunate defaulter has not developed. However, there is a need to gather data and research in this area.

INSOLVENCY ROUNDTABLE

It was agreed to set up a bi-lateral roundtable by ILA and Business Recovery and Insolvency Practitioners Association of Sri Lanka (BRIPASL) to serve as a platform for continuous dialogue and the exchange of knowledge with ILA.

COLLABORATION WITH THE WORLD BANK

The World Bank is supporting insolvency law reform in Sri Lanka through a technical assistance programme. The World Bank and ILA have decided to collaborate and join efforts to build and develop a robust insolvency industry in Sri Lanka.