On 02/10/2023, law number 51 of 2023 was issued regarding financial restructuring and bankruptcy, to be implemented six months after its publication in the official gazette, taking effect in March 2024.
This law introduces some new provisions that need clarification, as they will alter the procedures related to bankruptcy claims, protective reconciliation, and restructuring, summarized in several points:
1. Repealing Law number 9 of 2016.
2. Introducing a new law establishing a court for financial regulation, bankruptcy, and restructuring, named the Bankruptcy Court, created in Federal and local courts, with all unresolved cases transferred to the new bankruptcy court.
3. The current law applies to natural persons with merchant status and commercial companies with legal personality not subject to specific laws.
4. Exemptions from this law includes government and semi- governmental companies, companies affiliated with free zones governed by specific laws on preventive settlement and restructuring or bankruptcy entities licensed by the Central Bank subject to their specific legislation, and all personal, family, or consumer debts.
Examining the law's provisions, it appears to offer positive aspects leading to expedited proceedings and resolution of bankruptcy, preventive settlement, or restructuring cases. This is facilitated through newly established committees, such as:
- Creating an organizational unit called the Bankruptcy Administration, headquartered in the Bankruptcy Court, and led by an appellate judge. This administration is responsible for receiving applications, issuing notifications, collecting information, and handling documents related to settlement, restructuring or bankruptcy.
- Appointing sufficient number of experts, either affiliated with the court or external provided they take the legal oath to assist judges in their tasks.
5. The application period for initiating preventive settlements, restructuring proceedings, or declaring bankruptcy has been extended from 30 days to 60 days from the date of default or when the debtor has confirmed inability to settle debts.
6. The debtor loses control over their funds from the application date, and any transaction involving these funds is void except for funds necessary for the debtor's or their dependents' expenses or funds not subject to seizure.
7. Creditors have the right to apply to the Bankruptcy Court for restructuring or bankruptcy proceedings if the debtor fails to settle the debt within 30 days of the payment notice.
8. The debt must be unconditional, specified in amount, and due for payment.
9. All decisions issued by the Bankruptcy Court are immediately enforceable without announcement and execution cannot be stopped except by the judge's decision or upon the debtor's request or based on a ruling by the appellate court for a stay of execution.
10. Decisions from the new Bankruptcy Court are effective upon issuance, must be implemented without the need for announcement, and opponents cannot request a stay of execution except in cases specified by law.
These amendments ultimately aim to balance the interests of the debtors and creditors, monitoring all settlement, preventive, restructuring and bankruptcy procedures through the Bankruptcy Administration.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.