Govt to introduce new and improved parate law to protect SMES
By: Staff Writer
Colombo (LNW): The government will take steps to introduce major reforms to the existing parate law and bring in a new and improved act through parliament,. Justice Minister Wijeyadasa Rajapakshe assured.
Addressing a conference organised by Small and Medium Scale Enterprises on Parate Executions and their impact, the Minister said while the parate law is part of the Roman-Dutch law, it fails to exist today in both Rome and the Netherlands.
The Minister acknowledged that banks are currently misusing the existing parate law to confiscate the assets of creditors and at times to even benefit personally.
“Relatives of certain heads of banking institutions have become owners of assets taken possession of and auctioned off under parate executions,” he alleged.
The Minister emphasised that while safeguarding the banking system is crucial, its strength is intrinsically tied to the strength of its customers.
“Back then only the Bank of Ceylon, People’s Bank and State Mortgage and Investment Bank could carry out parate executions. However, the free economy allowed for the creation of financial institutions and banks,” he noted.
The Minister emphasised that SMEs would not be facing challenges today if the Bank of Ceylon and People’s Bank had remained true to the objectives for which they were initially established.
“Electricity tariffs and taxes have exerted tremendous pressure on entrepreneurs. A decision regarding the parate law is crucial, and significant amendments are imperative. Recommendations will be formulated, presented to the cabinet for approval, and subsequently passed in parliament to establish a new parate law,” he said.
Small and Medium-scale Enterprises yesterday requested the Government to temporarily halt parate executions allowing them time to rebuild after suffering major setbacks following the Easter Sunday terror attacks and the COVID-19 pandemic.
They urged the Government to also take steps to reform the law to suit modern times and restructure loans obtained by SMEs.
Addressing the Anti-parate Activists Business Forum held at the Bandaranaike Memorial International Conference Hall (BMICH) National Construction Association of Sri Lanka (NCASL) Chairman Susantha Liyanaarachchi said businesses have failed to gain any support from the banking sector following the Economic crisis.
He said that Sri Lanka’s declaration of bankruptcy was the cause, prompting all banks to tighten up and refrain from offering any relief to businesses. “They refused to even approve a temporary overdraft for businesses,” he noted.
According to Liyanaarachchi, many SMEs in the country’s South have now closed shop which has led to a drop in Sri Lanka’s Gross Domestic Product (GDP). The prominent businessman noted that SMEs had previously contributed to around 51% of the GDP.
He said that while SMEs used their own funds to protect staff post-COVID-19, these businesses are currently experiencing significant hardships. “Our businesses have started to collapse. they have failed to fulfil them, leaving not only businessmen but also their staff unemployed.