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CORPORATE GOVERNANCE | BG9
dilemma. They argue that both are
important and that companies need to
monitor both closely.
Other experts argue that a company
cannot realise its potential profit if it
can t remain solvent along the way.
They argue that the relative impor-
tance of solvency versus profitability
depends on the time horizon that is
being used. If you are focusing upon a
short-term time horizon then solvency
is more important than profitability. If,
however, you are focusing upon a medi-
um- and longer-term time horizon, then
profitability will become relatively more
Managing the affairs of the
organisation and the director
Company acts and corporate gover-
nance codes throughout the region
require directors to manage the affairs
of the organisation (See Table 1). In order
to govern well, a board must identify
very clearly what constitutes risk and
then put measures in place to mitigate
the risk or identify as fast as possible
when the risk materialises.
The insolvency definitions in the
region are the same but the practices
are very different!
In a previous article, we noted that
the insolvency definitions used in the
Caribbean are essentially identical. How-
ever, the insolvency practices vary sig-
nificantly. For example, the length of
time for the courts to deal with insol-
vency varies from just over one year in
Jamaica to Haiti, St Kitts and Nevis, St
Vincent and the Grenadines and Grenada
having no insolvency resolution practices
(See Table 2).
The World Bank has recently recog-
nised that T&T has made its insolvency
processes easier by introducing a formal
mechanism for rehabilitation, establish-
ing a public office responsible for the
general administration of insolvency
proceedings and clarifying the rules on
appointment of trustees.
Globally, T&T stands at 66 in the
ranking of 189 economies on the ease
of resolving insolvency and is one of the
top 10 countries in the world that has
improved the most across three areas
or more as measured by Doing Business
However, there is still much room for
The insolvency recovery rates similarly
vary significantly between countries. For
example, the recovery rate varies from
just over 65 cents in every dollar in Bar-
bados to Suriname, Haiti, St Kitts and
Nevis, St Vincent and the Grenadines
and Grenada having no recovery rate
practices (See Table 3).
Many companies in T&T have expe-
rienced profitability and solvency issues.
Perhaps one of the most well known
cases is Trinidad Cement Ltd (TCL) that
was discussed in the previous article.
This article has shown that although
the laws and regulations concerning
insolvency between the various countries
in the region are very similar, the prac-
tices associated with the time to resolve
the insolvency and the recovery rates
A recovery rate of 27 per cent in T&T
when the OECD average is 72 per cent
provides a considerable disincentive for
international investors and trade.
Despite some countries improving
their international position, policy makers
in the region should consider introducing
methods for improving the insolvency
practices in the region still further.
Perhaps consideration needs to be
given to alternative dispute resolution
so that all insolvency cases do not have
to go through the courts. Also, perhaps
more status should be given to the insol-
vency practitioners in the region. There
is still much room for improvement in
This column does constitute legal advice.
Readers are advised to seek professional
advice for their specific situations.
The CCGI is an independent, non-profit,
professional membership organisation reg-
istered with the Accreditation Council of
T&T. CCGI is the award body that provides
the certificate and diploma in corporate gov-
ernance and the chartered director qualifi-
cation throughout the Caribbean. CCGI wel-
comes membership applications and
participation in its courses, events, and future
chapters throughout the region. For more
information visit: www.caribbean gover-
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