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Monday, 13 March 2017

A copy of the Bankruptcy Act is out

A copy of the Bankruptcy Act is out: A copy of the Bankruptcy Act, which is currently being reviewed by the Council of State (Maglis Al Dawla), has made it to the press. You can view the full text here, courtesy of Al Borsa. The law, which creates a clear regulatory framework for bankruptcy proceedings in the private sector, is part a basket of structural reforms meant to improve Egypt’s business climate and boost investor confidence. By outlining clear steps and guidelines for cases of bankruptcy, the legislation protects heads of failed companies and individuals from debtors prison and a tangle of complex criminal court proceedings. The Council of State expects to conclude its review of the draft act within a month. Among its highlights:

  • Economic courts hold sway, will form bankruptcy divisions: Economic courts are the only authority allowed to look into bankruptcy cases and a bankruptcy judge’s ruling will also be considered final and cannot be appealed. Economic courts will effectively create “bankruptcy courts” — departments to handle bankruptcy filings, including mediation, restructuring and settlement procedures.
  • Who can file for bankruptcy? A request for bankruptcy can be filed in person by the debtor, by the creditor, or by order of the Prosecutor General’s Office, with a statute of limitations of up to one-year after a person’s death or after retirement.
  • It’s not just about liquidation — restructuring is also in the cards: Companies with paid-in capital north of EGP 1 mn can lodge a request to restructure or choose to negotiate a settlement in lieu of declaring bankruptcy before bankruptcy court proceedings begin or a verdict is issued by an economic court in a bankruptcy case.
  • Crime and punishment: Cooking the books to declare bankruptcy or fraudulently reaching a settlement or restructuring agreement could result in prison sentences of up to five years and fines up to EGP 500k. Concealing financial records and accounting negligence in bankruptcy cases carries a minimum sentence of six months in prison and up to EGP 200k for the primary perpetrators and board members convicted of the crime.
  • The law will be applied retroactively to ongoing cases.

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