📈 Modernizing Financial Recovery: Sri Lanka’s New Insolvency Law

Sri Lanka is set for a landmark structural shift with the proposed Rescue, Rehabilitation and Insolvency Law. Moving away from the 1853 Ordinance, the bill shifts the focus from simple liquidation to business continuity and economic stability. • Strategic Objectives The framework aims to preserve enterprise value and protect employment by providing viable businesses a "second chance." It aligns Sri Lanka with global standards, crucial for boosting investor confidence following recent economic restructuring. • Core Pillars of the Bill Corporate Rescue: Introduces an administration regime allowing a temporary pause on creditor actions to facilitate restructuring negotiations. SME Support: Tailored mechanisms specifically for MSMEs to ensure the recovery process is accessible for smaller enterprises. Personal Insolvency: A shift for individuals, offering structured debt protection and rehabilitation orders before bankruptcy. Regulatory Oversight: Establishment of an independent Insolvency Regulatory Authority to professionalize practitioners and maintain high standards. • Economic Impact & Implementation The law addresses the high NPL (Non-Performing Loan) environment by creating predictable outcomes for creditors. Key challenges include the need for specialized training for the judiciary and balancing the new "moratoriums" with the rights of secured lenders. _Status: Based on provisional legislative drafts as of February 2026._