Egypt’s bankruptcy law has undergone significant reforms in recent years, reflecting a broader effort to modernize the country s economic framework and create a more business-friendly environment. This article explores the key aspects of Egyptian bankruptcy law, focusing on its purpose, procedures, and implications for businesses and creditors.

The Evolution of Bankruptcy Law in Egypt

Historically, bankruptcy in Egypt was governed by outdated legal frameworks that often discouraged entrepreneurs from taking risks. Recognizing the need for reform, Egypt enacted Law No. 11 of 2018, also known as the Restructuring, Preventive Composition, and Bankruptcy Law. This legislation marked a pivotal shift towards fostering economic resilience and supporting distressed businesses.

Objectives of the Bankruptcy Law

The primary objectives of the bankruptcy law are:

1. Encouraging Economic Growth: By offering mechanisms for restructuring and recovery, the law aims to prevent the unnecessary liquidation of viable businesses.
2. Protecting Creditors’ Rights: The law establishes clear procedures for debt repayment, ensuring a fair balance between creditors and debtors.
3. Reducing Stigma: The law seeks to eliminate the social stigma associated with bankruptcy, encouraging a culture of entrepreneurship.

Key Features of Law No. 11 of 2018

1. Restructuring and Preventive Composition:
• The law introduces restructuring as an alternative to liquidation, allowing businesses to reorganize their operations and debts.
• Preventive composition agreements enable debtors to negotiate repayment plans with creditors before declaring bankruptcy.
2. Specialized Bankruptcy Courts:
• The establishment of specialized courts expedites bankruptcy cases, ensuring timely resolutions.
3. Role of the Bankruptcy Trustee:
• A court-appointed trustee oversees the bankruptcy process, managing assets and facilitating negotiations between parties.
4. Simplified Procedures for Small Enterprises:
• The law provides streamlined procedures for small and medium-sized enterprises (SMEs), recognizing their critical role in the economy.

Bankruptcy Procedures

The bankruptcy process in Egypt typically involves the following stages:

1. Filing for Bankruptcy:
• A debtor or creditor may initiate bankruptcy proceedings by submitting a petition to the specialized bankruptcy court.
2. Appointment of a Trustee:
• The court appoints a trustee to evaluate the debtor’s financial situation and manage the process.
3. Debt Restructuring or Liquidation:
• Based on the trustee’s report, the court decides whether to proceed with restructuring or liquidation.
4. Creditor Meetings:
• Creditors participate in meetings to discuss repayment plans or asset distribution.
5. Court Approval:
• The court approves the final plan, ensuring compliance with legal and financial standards.

Challenges and Opportunities

While Law No. 11 of 2018 represents a significant step forward, challenges remain:

• Awareness and Implementation: Many businesses and legal practitioners lack awareness of the law’s provisions, leading to inconsistent application.
• Cultural Barriers: Overcoming the cultural stigma associated with bankruptcy requires ongoing efforts to educate stakeholders.

However, the law also presents opportunities:

• Attracting Investment: A transparent and efficient bankruptcy framework enhances Egypt’s appeal to foreign investors.
• Supporting SMEs: Tailored provisions for SMEs promote innovation and economic diversification.

Conclusion

Egypt’s bankruptcy law underscores the country’s commitment to economic reform and sustainable growth. By prioritizing restructuring over liquidation and protecting the rights of all stakeholders, the law fosters a more resilient and dynamic business environment. As awareness and implementation improve, this legal framework has the potential to drive significant economic transformation in Egypt.