Bankruptcy is a legal process that allows individuals or companies to seek relief from overwhelming debt and financial hardship. It typically involves the liquidation of assets to repay creditors or the restructuring of debts to create a manageable repayment plan.

Environmental bankruptcy refers to the situation where a company facing bankruptcy also has significant environmental liabilities, like contaminated land or past pollution. This can complicate the bankruptcy process because the “fresh start” principle of bankruptcy law clashes with the principle of environmental law that the “polluter pays” for remediation. 

These liabilities can affect the value of the company’s assets, the ability to reorganise, and the outcome for creditors. 

Several Ugandan industries collapsed due to various factors, including corruption, economic instability, and the impact of the Covid-19 pandemic. Some notable examples include British American Tobacco (BAT), Grain Milling, Chillington Uganda Ltd, Mulco Textile Ltd, Dairy Factory and Print Packers. 

Additionally, sectors like education, hospitality, tourism and entertainment also suffered during the pandemic. 

Several companies in Uganda have faced bankruptcy or insolvency, including Uchumi Supermarkets Uganda, Roko Construction and Vodafone Uganda. Companies such as Steel Rolling Mills, Spencon Services Ltd and Civil Engineering and Construction Company have also been placed in receivership or have faced foreclosure. 

Several Ugandan businesses have faced bankruptcy or distress in recent years, including ROKO Construction and Vodafone Uganda. While ROKO was reportedly rescued by government investment, Vodafone Uganda filed for bankruptcy due to challenges with service quality and quick management changes. 

Additionally, a significant number of companies struggled with debt obligations, with some seeking financial assistance from the government. 

In Uganda, the increasing collapse of businesses under heavy debt has become a major concern, dominating headlines as panicky business owners call for government bailouts. Hundreds of employees have lost their jobs, and many Ugandans are anxiously speculating on further debt defaults.

In Uganda, bankruptcy, also referred to as insolvency, is governed by the Insolvency Act (Act 14 of 2011) and the Insolvency Regulations of 2013. This legal framework provides mechanisms for corporate bodies facing financial difficulties to either reorganise and continue operating or to be safely shut down and de-registered after sservicing their debts. The Act defines insolvency as the state of being unable to pay debts. 

Acts of bankruptcy

A debtor commits an act of bankruptcy in each of the following cases –

(a) If in Uganda or elsewhere he or she makes a conveyance or assignment of his or her property to a trustee for the benefit of his or her creditors generally;

(b) If in Uganda or elsewhere he or she makes a fraudulent conveyance, gift, delivery or transfer of his or her property or of any part of the property;

(c) If in Uganda or elsewhere he or she makes any conveyance or transfer of his or her property, or any part of the property or creates any charge on it, which would under this or any other Act be void as a fraudulent preference if he or she were adjudged bankrupt;

(d) If with intent to defeat or delay his or her creditors he or she does any of the following things, namely, departs out of Uganda or being out of Uganda remains out of Uganda or departs from his or her dwelling house, or otherwise absents himself or herself, or begins to keep house;

(e) If execution against him or her has been levied by seizure of his or her goods in any civil proceeding in any court and the goods have been either sold or held by the bailiff for 21 days; except that where an interpleader summons has been taken out in regard to the goods seized, the time elapsing between the date at which the summons is taken out and the date at which the proceedings on the summons are finally disposed of, settled or abandoned shall not be taken into account in calculating the twenty-one days;

(f) If he or she files in the court a declaration of his or her inability to pay his or her debts or presents a bankruptcy petition against himself or herself;

(g) If a creditor has obtained a final decree or final order against him or her for any amount and execution on the final decree or final order not having been stayed, has served on him or her in Uganda or, by leave of the court, elsewhere, a bankruptcy notice under this Act and he or she does not within seven days after service of the notice, in case the service is effected in Uganda, and in case the service is effected elsewhere, then within the time limited in that behalf by the order giving leave to effect the service, either comply with the requirements of the notice or satisfy the court that he or she had a counterclaim, setoff or cross demand which equals or exceeds the amount of the decree or sum ordered to be paid, and which he or she could not set up in the action in which the decree was obtained or the proceedings in which the order was obtained.

For the purposes of this paragraph and section 3, any person who is, for the time being, entitled to enforce a final decree or final order shall be deemed to be a creditor who has obtained a final decree or final order;

(h) If the debtor gives notice to any of his or her creditors that he or she has suspended, or that he or she is about to suspend, payment of his or her debts.

In Uganda, bankruptcy practice is governed primarily by the Insolvency Act of 2011 and related regulations. This act provides a framework for addressing corporate insolvency and individual bankruptcies. The process typically involves a petition to the court, a receiving order, and the appointment of an Official Receiver or Trustee to manage the debtor’s estate. 

“It is said that the world is in a state of bankruptcy, that the world owes the world more than the world can pay,” explains  Ralph Waldo Emerson cited by Andrew N. Davis and Cynthia C. Retallick (2010) in their article ‘Conflicting Goals of Environmental Law and Bankruptcy Demand Innovative Business Strategies’ published by Aspatore. They note that there is an inherent conflict between environmental law and bankruptcy law.

The underlying policy goals of Chapter 11 bankruptcy law are to provide a company (or an individual) a fresh start and to promote financial rehabilitation by discharging a debtor’s past obligations.

Environmental law, however, seeks to ensure that the government (through its ‘police powers’) can order a responsible party to, among other things, clean up pollution, including historic contamination caused by business predecessors. This conflict represents a dynamic area of the law in which new precedent is being created with great frequency. Thus, counselling clients about environmental liabilities and bankruptcy requires an up-to-date understanding of the state of law in both areas (Davis and Retallick, 2010).

August (1992) writes that the status of environmental claims in bankruptcy is uncertain because of the conflicting policy goals of environmental and bankruptcy law. He explains the lower courts have reached diverse and conflicting results. The rights of polluters and environmental regulators in bankruptcy often depend on the jurisdiction in which the case is brought, the facts of the particular case, and a myriad of other factors.

Shenfield (1992) also observes that there is a fundamental clash between the purposes and objectives of environmental laws and those of bankruptcy. Environmental laws at a federal, state or local level are aimed at particular activities, facilities, or conditions and are designed to protect the environment and the public from extant hazardous substances and by halting continuing violations

Holland and Knight (2020) emphasised that when considering bankruptcy, we should not forget about environmental obligations. There are environmental issues in bankruptcy. Therefore, there is need to reconcile the conflicting goals of Bankruptcy and Environmental Laws.

Weil Restructuring (2022) discusses the recent developments at the intersection of environmental and bankruptcy laws. It starts off by citing retired US Bankruptcy Judge Robert E. Gerber who once observed that “issues as to the interplay between environmental law and bankruptcy are among the thorniest on the litigation map.”¹  It then submits that difficulties navigating this interplay largely stem from the inherent conflict between the goals of bankruptcy and environmental laws, with the former aimed at providing debtors with a fresh start, while the latter cast a broad net to hold parties (even some innocent parties) responsible for past harm to the environment. 

An inherent conflict exists between the policies underlying environmental and bankruptcy laws. Environmental laws, on the one hand, are designed to protect public health and safety by providing for liability, compensation, cleanup, and emergency response to the release or disposal of hazardous substances. The goals of our bankruptcy laws, on the other hand, are to provide debtors with a fresh start by preserving their assets for equitable distribution to creditors, and by discharging debts and obligations through the confirmation and consummation of a plan of reorganization.

Gelber, Kim, Roth and Zabel have explored the intersection of environmental and Bankruptcy laws.

Environmental concerns in bankruptcy are primarily governed by a combination of insolvency laws and environmental regulations. In the United Kingdom, the Insolvency Act 1986 and related insolvency legislation set out the procedures for dealing with a company’s debts and assets when it enters administration, liquidation, or other forms of insolvency. Meanwhile, environmental regulations such as the Environmental Protection Act 1990 and various European Union-derived directives (which remain influential post-Brexit) place obligations on companies to prevent and remediate environmental damage.

Environmental regulators play a crucial role in managing liabilities during bankruptcy. Agencies such as the Environment Agency in England and the Scottish Environment Protection Agency in Scotland have the authority to enforce environmental laws and take action against companies that violate regulations. During bankruptcy proceedings, these regulators may file claims for environmental damages or seek to prevent the abandonment of contaminated sites.

In general, environmental law seeks to protect public health and the environment by providing for liability, compensation, cleanup, and emergency response to the release or disposal of hazardous substances (Bender, Jay, Delaney l. Beier, Joshua A. Lesser, 2024). The costs of cleaning up contaminated sites can be staggering and quite often beyond the financial means of a potentially responsible party. When confronted with such cleanup liability, polluters often have, whether voluntarily or involuntarily, filed bankruptcy to obtain relief from their liabilities, including their environmental obligations, under bankruptcy law(Bender, Jay, Delaney l. Beier, Joshua A. Lesser, 2024). Their article examines the aspects of environmental liability that may or may not be dischargeable in bankruptcy, including the efforts made to strike a balance between the competing policies underlying bankruptcy law and environmental law.

Environmental bankruptcy refers to the situation where a company facing substantial environmental liabilities, such as cleanup costs for contaminated sites, files for bankruptcy. This can occur when the financial burden of addressing environmental issues becomes unsustainable, and the company seeks relief through bankruptcy laws. 

In bankruptcy, environmental enforcement or injunctive measures are more likely to avoid application of the bankruptcy code than claims for monetary damages. Timing of claims and equitable considerations also can affect the likelihood that environmental claims will survive. The firm has advised public and private clients regarding the extent to which bankruptcy protections do and do not extend to environmental regulatory requirements and liabilities and how best to preserve environmental claims against bankrupt and insolvent polluters (Smith, et.al

Stitt (2002) concluded that although placing a priority on the claim provides some comfort, if the debtor has no property to pay the debt, then the costs will still ultimately be passed on to the public.

Hammer Hill (2015) observed that in the American legal system, nowhere has the conflict been more serious than between environmental protection law and the law of bankruptcy. While this problem has attracted significant attention in the law reviews, it has been little noticed outside legal circles. 

Gouzoules (2022) concluded that Industrial greenhouse gas emissions have driven the world toward a crisis point, jeopardizing the habitability of the environment for both humans and other species. Fossil fuel companies, the major contributors to this climate emergency, continue to ride out the boom-and-bust cycles inherent to the oil and gas sector

Ahern III and Marsh, 2025) offer thorough discussion and analysis of the interplay between bankruptcy and environmental law. The authors assist practitioners and other professionals in identifying potential bankruptcy problems and offer a suggested course of action for the future.  They also:

• Offer an in-depth examination of bankruptcy code provisions and environmental statutes
• Explains cases dealing with conflicts between the two bodies of law
• Provides a methodology for analysing and solving problems posed by environmental obligations
• Covers dischargeability of environmental obligations
• Examines problems of definition and timing
• Includes the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)
• Includes coverage related to BAPCPA legislation

Zilberberg (2021) discusses how bankruptcy impacts the environmental liabilities and obligations of the debtor, affiliates and other related parties, including buyers of debtor assets. He gives environmental lawyers a better understanding of the intersection of environmental and bankruptcy law and helps transactional lawyers navigate environmental risks that may come up in deals involving debtor assets or businesses with prior bankruptcies.

There is need to take environmental bankruptcy seriously in Uganda, where many firms are because power wants them to be; only worry about making money at the expense of the environment and where they have roots outside the country benefit from public money and repatriate most of the money they make to their countries of origin with no thought of investing in environmental improvement.

Many may even deliberately go bankrupt to benefit from further public money. Many firms belong to people in power but have fronts of foreign origin, mostly Indians and Chinese to run them, often circumventing payment of taxes.

One thing is, therefore, true. There is a crisis of bankruptcy and proliferating environmental concerns arising because of the exploitative nature of firms, their environmentally – unconscious operations and the lack of proper means of handling the pollution they generate. Some dump their wastes in lakes and swamps, while others dump their wastes on productive or settled land.

Public-private partnership should not just involve government giving them money to start their businesses and excusing them from paying taxes for 10 years. It should involve both the firms and the government ensuring that waste management and/or pollution management is environmentally effective.

Even the Kampala City Council Authority (KCCA) carelessly dumps waste generated in the city, causing deaths of residents as did happen recently at Kitezi Dumpsite. Many people died when rubbish flowed as a result of heavy rain and gravity operating together. Many relatives never had the bodies of their dear ones and were not justly compensated. The dead were like any other biological substances.

I propose that to combat environmental bankruptcy in Kampala City in particular and Uganda in general can be achieved if the government and KCCA, in the spirit of public-private partnership, resolve to work together towards managing rubbish and pollution effectively. Afterall when many of the firms start business in Uganda, the government gives them starting capita and even comes to them to salvage them when they become bankrupt with cash donations. Not all rubbish is rubbish.

Public-private partnership can result in the erection of giant enterprises – one to make tiles from plastic waste and another to make biogas from organic matter.

However, this will not be possible unless the government deemphasises investing heavily in the project of politics, which involves the political buying of key political actors in the Opposition, or bribing Members of Parliament to pass legislation preferred by the Executive (read President) or allocate money according to what the President prefers.

This has become very costly to the taxpayers and denied humanity a clean, safe and healthy environment, let alone quality life in the 21st century, leading to disguised genocide. Unclean, unhealthy unsafe environment kills.

For God and my country

• A Tell report / By Oweyegha-Afunaduula / Environmental Historian and Conservationist Centre for – Critical Thinking and Alternative Analysis (CCTAA), Seeta, Mukono, Uganda.

About the Centre for Critical Thinking and Alternative Analysis (CCTAA)

The CCTAA was innovated by Hyuha Mukwanason, Oweyegha-Afunaduula and Mahir Balunywa in 2019 to the rising decline in the capacity of graduates in Uganda and beyond to engage in critical thinking and reason coherently besides excellence in academics and academic production. The three scholars were convinced that after academic achievement the world outside the ivory tower needed graduates that can think critically and reason coherently towards making society and the environment better for human gratification. They reasoned between themselves and reached the conclusion that disciplinary education did not only narrow the thinking and reasoning of those exposed to it but restricted the opportunity to excel in critical thinking and reasoning, which are the ultimate aim of education. They were dismayed by the truism that the products of disciplinary education find it difficult to tick outside the boundaries of their disciplines; that when they provide solutions to problems that do not recognise the artificial boundaries between knowledges, their solutions become the new problems. They decided that the answer was a new and different medium of learning and innovating, which they characterised as “The Centre for Critical Thinking and Alternative Analysis” (CCTAA).