On October 31 a new Federal Decree-Law on issuing Financial Reorganization and Bankruptcy Law was published, and will come into force on May 1 2024. The Cabinet is expected to issue its implementing regulations and several principles have been adopted in order for the law to achieve its purpose, which includes maintaining the vitality of the national economy, preserving creditors rights, and assisting debtors in settling its debts to prevent declaring bankruptcy, where possible.
There were serval significant provisions introduced, and the following is an overview of a few aspects of the new law.
Important consequences
Unlike the previous law, upon issuing a final judgment relating to opening a preventive composition plan, or bankruptcy, the court should determine in the judgment a date of debtor(s) ceasing payment, will have important consequences on certain acts executed by debtor(s) in the past.
All bankruptcy court’s decisions and judgments will be considered as writ of execution and enforceable under the new law. Additionally, bankruptcy courts will have the power to issue precautionary decisions and issue decisions to suspend ongoing claims against the debtor(s) prior to the issuance of a final judgment opening preventive composition plan, restructuring plan, which was not the case under the previous law.
The moratorium following the issuance of the decision to open restructuring proceedings will not be limited, as it was under the previous law, and will remain open until the ratification of the restructuring plan. However, employment claims and personal status matters (except inheritance matters) are exempted from the moratorium, which will contribute to preserving employees, spouses and children’s rights.
Right to petition
Pursuant to the creditor(s) refusal to proceed with the proposed restructuring plan, the debtor(s) will have the right to petition the bankruptcy count requesting the ratification of said restructuring plan. The bankruptcy court may ratify the plan after examination of the trustee’s opinion and the creditor(s) objections may ratify the restructuring plan under the condition that the creditor(s) rights under the plan will not be less than their rights in the event of bankruptcy. Under the previous law if the creditor(s) rejected the restructuring plan it will lead automatically to declaring debtor’s bankruptcy.
All decisions and judgments issued from the bankruptcy court will be subject to appeal within 30 days from the date of issuance of the relevant decision or judgment, which was not the case under the previous law as only judgments pertaining, accepting and rejecting the claim were subject to appeal, in addition to other judgments pertaining to accepting or rejecting a certain debt.
As for the managers (including persons who are actually involved in the management), board members, and liquidator, they will be considered personally liable if they commit particular actions such as using commercial methods of ill-considered risks, fulfilling any of the creditors’ debts with the intent to cause damage to other creditors, etc., we note that said liability is similar to the provisions of the previous law, however, it is clearly mentioned under the new law that it applies to actions committed two years prior to the date of cessation of payment.
Further the claim against managers, board members, and liquidators should be filed within two years from the issuance of a judgment declaring the bankruptcy of the company. Needless to mention, that said persons will be criminally liable as well if they committed crimes which are specified under the new law.
As with any new amendments, the implementation of the new provisions by the bankruptcy counts will become clearer with time.
