The new Insolvency Law no. 11/2018 entered into force on March 22, 2018. Prior to the issuance of this law, Egyptian Courts dealt with Bankruptcy and Insolvency matters on a case by case basis and rulings were based on the civil and commercial laws in effect. By virtue of the new law, the Cairo Economic Court was given jurisdiction to oversee any and all matters and disputes involving Bankruptcy and Insolvency. By virtue of the new law no. 11/2018; Insolvency matters will be administered by a Committee consisting of Insolvency Experts.
The issuance of the new Insolvency Law was made in conjuction with the recent efforts of the Egyptian Government and the Minister of Investment to encourage foreign and local investment in Egypt and in light of the issuance of the Executive Regulations pertaining to Investment which came into effect in June of 2017.
That being said, the new Bankruptcy Law no. 11 stipulates in the Article 5 of the prefix stipulates “The cancellation of Chapter 5 of the Commercial Law no. 17/1999 and the cancellation of any other law contrary to the provisions thereof.” As such, the provisions of the Bankruptcy Law prevail if they contradict with previous laws. As of March 2018, the Law 11/2018 has replaced the provision related to bankruptcy which was previously set forth in the Commercial Law.
Prior to the enactment of the legislation, Insolvency and bankruptcy were dealt with and handled by courts with reference to general provisions of both civil and commercials law governing said matters. However and by virtue of this new Law; Bankruptcy and Insolvency Proceeding became part of the Cairo Economic Court’s Jurisdiction and shall be governed in the accordance to the provisions of Law no. 11.
The Re-Structuring Procedure
When thinking of Bankruptcy and Insolvency; perhaps the most important issue or practice is the re-structuring process. That being said, Law 11 has created a scheme and procedures throughout the provisions of the Law itself in which in explains and sets forth in detail the required procedures that are mandatory in connection to any given re-structuring. In accordance to Law no. 11/2018 effective as of March 2018; which is the first Egyptian Legislation issued to governing bankruptcy and insolvency proceeding giving exclusive jurisdiction to the Economic Courts and replacing the provisions of Commercial Law no. 17/1999.
As per the new law, restructuring procedures will be run by a committee of experts who are listed in the “Bankruptcy Expert List” at the Economic Courts. Said committee will perform an evaluation and prepare a respective report to be sent to the Judge overseeing the proceedings within three months.
Once ratified by the Judge after approval by the shareholders; the restructuring is deemed binding and the Judge may appoint a Bankruptcy Expert to assist in the implementation thereof.
Is the Law Effective?
At this point in time, it is hard to identify the effectiveness of the Law as it entered into effect very recently. That being said, and in parallel to the recent developmental trend in Egyptian legislation for all matters economic related. There is no doubt that Law 11 is a major and significant stepping stone that has been long overdue.
Having a Legislation that is specific to Bankruptcy and Insolvency is crucial for any state or government that that encourages investment. As such, protecting Creditors by virtue of a clear cut legislation that can be referenced when making decision is crucial. Additionally, the passing of this legistlation and granting the Economic Courts jurisdiction for all thing Bankruptcy is another important element. As it will give Judges and those in their vicinity a clear guideline that streamlines the Bankruptcy Process in addition to the fact that it will allow the Economic Courts and its respective Judges, Experts, Committees and Clerks to create a more expedited dynamic in accordance to the Bankruptcy Law that would render handling such cases more efficient and effective.
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