The New Bankruptcy Law and Its Effects in Egypt – Insolvency / Bankruptcy / Restructuring


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The Egyptian government has established a new investment business plan in Egypt which should encourage local and foreign investors by promulgating the new bankruptcy law No.11 of the year 2018.

The law was enacted on the 19the of February and entered into force on 22sd of March which repeals the bankruptcy rules set out in chapter 5 of the Commercial Code n ° 17 of the year 1999 (the “Commercial Code”). the newly introduced provisions were adopted from the US bankruptcy law, chapter 11.

The new law aims to provide a safe environment for investors, the continuation of the activity rather than declaring bankruptcy and facilitates the smooth entry and exit of the Egyptian market, it also offers startups the opportunity to invest and don’t worry about the risk. socket.

Egypt ranks 115th in the Insolvency Resolution Index in the Doing Business 2018 report, while it lost 18 places in its overall ranking in the 2018 edition, falling to 128 out of 190 countries, against 122 in the 2017 report.

The law has changed the means of overcoming financial and administrative crises otherwise it creates a win-win situation for all parties involved as follows:

1. The restructuring system (Organizational restructuring plan):

It is a new business plan to reorganize the financial and administrative system of the company in order to repay its debts; thus, instead of declaring bankruptcy or going into liquidation, it will help business owners and traders to restructure and reorganize the business system.

Article 15:“Any trader whose capital is not less than one million Egyptian pounds and who has engaged in commerce continuously during the two years preceding the filing of the complaint and has not committed fraud, has the right to request a restructuring. A company in liquidation cannot be restructured.

Article 16:the business or property of a merchant can be restructured after his death at the request of his heirs in the year following that of his death.

Article 18:“Restructuring aims to develop a plan for restructuring the financial and administrative activity of a trader, illustrating how he could come out of financial and administrative disruption, and how to pay his debts, and identify the proposed source of funding. This could be done through a number of mechanisms, including revaluation of assets, restructuring of debts, including debts to the government, capital increase, acceleration of cash inflows, reduction of debts. cash outflows and administrative restructuring.

Article 24 stipulated that “The trader will continue to manage his assets during the restructuring period and will remain responsible for any obligations or contracts, before or after the approval of the restructuring plan, as long as they do not conflict with this plan.”

After approval of the restructuring plan, creditors will be prohibited from taking any action against the debtor until the end of the procedure provided for in Article 29.

After approval of the restructuring plan, no action can be taken between the merchant and one of the signatory creditors, within the framework of the restructuring plan, or be continued. Likewise, no individual legal action can be taken and no legal action can be taken. The limitation period relating to lawsuits, claims and loans will be suspended pending the completion of the restructuring plan.

Although this organizational plan serves the interests of creditors and debtors and guarantees their rights hereunder in accordance with the Article 25 which states that:

The professional is prohibited from making any provision likely to harm the interests of creditors, including the sale outside the ordinary course of business of the professional, donation, gift, loan or loan or any free act and guarantees. , in addition to any pledge or pledge or any similar act incompatible with the restructuring plan.

The restructuring plan will be managed by a restructuring committee managed by (experts in bankruptcy administration) in which a number of offices and companies specializing in restructuring and asset management have signed up with experts in bankruptcy. Ministries of Finance, Trade, Investments, Industry, Manpower, And the Central Bank of Egypt, General Authority for Investment and Free Zones, Egyptian Financial Regulatory Authority, Egyptian Stock Exchange, Egyptian Federation of Chambers of Commerce , Federation of Egyptian Industries, bankruptcy trustees, appraisers and others, if necessary.

The aforementioned committee will have the authority to reassess the assets of the company, restructure its debts, increase its capital, increase its cash flow and reduce expenses.

2. Preventive composition:

Any trader who can be declared bankrupt and who has not committed fraud or fault that cannot be committed by the ordinary trader can apply for a preventive composition if his financial affairs are thus disrupted, although he must meet the conditions. prescribed in the paragraph of the procedure.

According to article 35 “The requests for a preventive composition are filed with the head of the bankruptcy service of the competent court, indicating the reason for the business disruption and the proposals for the arrangement and the guarantees for its execution. “

This method avoids filing for bankruptcy, protects the reputation of bankrupts, and saves creditors’ time rather than dealing with complex proceedings.

3. Mediation:

Resolve disputes by negotiating with the parties collectively or separately through a qualified independent judge (the bankruptcy judge) in order to reach an amicably agreed point of view or may propose appropriate solutions for them.

The judge must preserve the secrecy of all information relating to mediation proceedings, unless disclosure of such information is required by law.

The Jurisdictional Tribunal and Specialized Judges

The competent court to hear cases is the circuit of first instance before the economic courts as defined by the domicile of the debtor (i.e. the registered office of the company).

If the head office is located outside Egypt, jurisdiction lies with the court in which the local management center is located and if the trader has no domicile, the competent court is that in whose jurisdiction it is located. finds the habitual residence of the located merchant.


The law distinguishes between non-fraudulent bankrupts who encounter difficulties in operating their business and fraudulent bankrupts who commit fraud and intentionally ruin their business, as the new law abolishes imprisonment in cases of non-fraudulent bankrupts. , in which case the penalty will apply. Whereby the fraudulent bankrupt is punished with a fine in addition to the pre-existing term of imprisonment of three to five years.

Finally, the new law brings confidence in the investment climate in Egypt by reorganizing the administrative and financial system of the company with the payment of its debts and rather than declaring bankruptcy or opting for liquidation, creditors can apply restructuring to save their business. In other words, investors will no longer worry about future financial and administrative crises that will guarantee safe entry and exit from the Egyptian market.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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