On 1 April 2025, the Insolvency Act, 2022 came into operation in Lesotho, introducing a transformative and unified insolvency regime. The Act repeals the dual-structure system that separately governed personal and corporate insolvency, and introduces new mechanisms aligned with international and regional best practices, particularly those implemented in South Africa.
1. Historical Context and Need for Reform
Prior to the commencement of the Insolvency Act, 2022, Lesotho’s insolvency laws were split across two primary legal instruments. Corporate insolvency, including judicial management and liquidation, was governed by the Companies Act, 2011, while personal insolvency remained under the colonial-era Insolvency Proclamation 51 of 1957. This bifurcation led to procedural inefficiencies, outdated remedies, and a lack of uniformity across legal persons and individuals.
The Insolvency Act, 2022 repeals both statutes and consolidates all insolvency law into a single statute. This mirrors developments in South Africa, where the Companies Act 71 of 2008 introduced business rescue proceedings, though personal and corporate insolvency remain governed by separate legislation.
2. Redistribution of Institutional Oversight
A major structural reform introduced by the Act is the realignment of regulatory oversight:
- The Master of the High Court now exclusively oversees insolvency matters relating to natural persons.
- The Registrar of Companies has been tasked with oversight of corporate insolvencies, bringing company windings-up within the purview of the Companies Registry.
This division is comparable to South Africa’s framework, where the Master of the High Court administers estates under the Insolvency Act 24 of 1936, while corporate insolvency and rescue proceedings fall under the jurisdiction of the CIPC and the courts.
3. The Insolvency Regulator: A Centralised Regulatory Innovation
The creation of an Insolvency Regulator, as contemplated in Part 8 of the Act, represents a major innovation. The Regulator will be responsible for:
- Licensing and accrediting insolvency practitioners;
- Monitoring compliance with ethical and legal standards;
- Receiving performance reports and maintaining oversight; and
- Enforcing disciplinary measures against non-compliant practitioners.
This regulatory model differs markedly from the South African position, where regulation is dispersed among the Master’s Office, the CIPC, and industry bodies such as SARIPA. Lesotho’s model, if effectively implemented, may serve as a useful reference point for reform in other Southern African jurisdictions. However, it is worth noting that Part 8 has not yet commenced. Its effective date will be determined by the Minister through notice in the Government Gazette.
4. Substantive Innovations in the New Act
The Act introduces several significant legal developments:
(i) Abolition of Judicial Management: The Act has abolished judicial management—a mechanism long criticised for its inefficacy and limited success rate and has replaced it with corporate rescue proceedings modelled on modern restructuring principles. South Africa undertook a similar reform in 2011 with the introduction of business rescue proceedings under Chapter 6 of the Companies Act 71 of 2008.
(ii) Cross-Border Insolvency: The Act includes provisions dealing with cross-border insolvency, a necessary step in light of increasing transnational business activity. This brings Lesotho closer to the approach adopted in South Africa, which implemented the UNCITRAL Model Law on Cross-Border Insolvency under the 2008 Companies Act.
(iii) Non-retroactivity: The Act includes transitional provisions confirming that it will not apply to estates in which winding-up proceedings have already commenced and a liquidation and distribution account has been finalised before the effective date.
5. Conclusion
The Insolvency Act, 2022 represents a bold and timely reform in Lesotho’s commercial legal framework. By introducing a consolidated legal regime, realigning institutional responsibilities, and modernising core procedures such as corporate rescue and cross-border coordination, Lesotho is setting a precedent for modern insolvency legislation in the region.
The full potential of the Act will depend on effective implementation, particularly the operationalisation of the Insolvency Regulator. However, the legislative foundation reflects a commitment to economic resilience, legal certainty, and regional alignment.