Egypt: The New Bankruptcy Law And Its Effects In Egypt

Last Updated: 8 February 2019
Article by Youssry Saleh & Partners

The Egyptian Government set a new business plan of investments in Egypt which should encourage the local and the foreign investors by issuing the New Bankruptcy Law No. 11 of the year 2018.

The Law has been issued on the 19th of February and came into force on the 22nd of March which revokes the bankruptcy rules set out in Chapter 5 under the Commercial Code No.17 of the year 1999 (the "Commercial Code").the newly introduced provisions have been adopted from the US Bankruptcy Law, Chapter 11.

The New Law aims to provide a safe environment for investors, continuation of the business rather than declaring bankruptcy and facilitates smooth entrance to and exit from the Egyptian Market, it also provides an opportunity for the startups to invest and not to worry about the risk-taking.

Egypt ranks number 115 in the Resolving Insolvency index in the 2018 Doing Business report, while it dropped 18 places in its overall ranking in the 2018 edition, standing at 128 out of 190 countries, down from 122 in the 2017 report.

The law modified ways to get over financial and administrative crises otherwise it creates a win-win situation for all the related parties as follows:

1. The Re-structuring System (Plan Re-structuring Organization):

It's a new business plan for reorganizing the company's financial and administrative system with the aim of paying off its debts; so instead of declaring bankruptcy or opting for liquidation it will help business owners and merchants in restructuring and re-organizing the company system.

Article 15:"Any trader whose capital is not less than one million Egyptian Pounds and has continuously engaged in the trade business in the two years preceding the filing of the petition and has not committed fraud, shall have the right to apply for re-structuring. A company under liquidation may not be re-structured."

Article16:a trader's business or property may be re-structured after his death at the request of his heirs within the year subsequent to the year of his death.

Article 18:"Restructuring aims to develop a plan for re-structuring the financial and administrative business of a trader, illustrating how could he get out of the financial and administrative disturbance, and how to pay his debts, and identifying the proposed source of finance. This could be done through a number of mechanisms, including revaluation of assets; restructuring of debts, including debts due to the State; capital increase; acceleration of cash inflows; reduction of cash outflows; and administrative restructuring."

Article 24 stipulated that "The trader shall continue to manage his property during the restructuring period, and shall remain liable for any obligations or contracts, prior or subsequent to the approval of the restructuring plan, so long as they do not conflict with this plan."

After approval of the re-structuring plan creditors will be prohibited from taking any action against the debtor until the end of the process which is stipulated in Article 29.

After approval of the re-structuring plan, no suits may be initiated between the trader and any of the signatory creditors, in connection with the re-structuring plan, nor may be proceeded with. Likewise, no individual lawsuits may be initiated or judicial actions be taken. The time bar related to the lawsuits, claims and loans shall be suspended pending the completion of the re-structuring plan.

Although this organizing plan serves the interest of the creditors and the debtors and guarantees their rights herein according to Article 25 which stipulates that:

The trader shall be barred from making any dispositions that are likely to adversely affect the interests of the creditors, including sale out of the trader's ordinary course of commercial business, donation, gift, borrowing or lending or any of the free-of-charge acts and guarantees, in addition to any pledge or lien or any analogous acts inconsistent with the re-structuring plan.

The re-structuring plan will be run by a re-structuring committee managed by (bankruptcy administration experts) wherein a number of offices and companies specialized in re-structuring and asset management registered together with experts from Ministries of Finance, Investment Trade, Industry, Manpower, And the Central Bank of Egypt, General Authority for Investment and Free Zones, Egyptian Financial Regulatory Authority, Egyptian Exchange, Egyptian Federation of Chamber of Commerce, Federation of Egyptian Industries, trustees in bankruptcy, appraisers and others, if necessary.

The aforementioned committee will have authority to re-evaluate the company's assets, re-structure its debts, increase its capital, increase its cash flow and decrease the expenditure.

2. Preventive composition:

Any trader who may be declared bankrupt and who did not commit any fraud or wrongful act that cannot be made by the ordinary trader may apply for preventive composition if his financial business is so disturbed, although, he should meet the conditions prescribed in the paragraph of the proceeding.

According to Article 35 "Petitions for preventive composition shall be submitted to the head of the bankruptcy department at the competent court, indicating the reason for business disturbance and proposals for composition and guarantees for implementation thereof."

This method prevents declaration of bankruptcy, protects the bankrupts' reputation and saves time for the creditors rather than facing complex procedures.

3. Mediation:

Resolving disputes by negotiating with the parties collectively or separately through a qualified independent judge (the Bankruptcy Judge) in order to reach an agreed point of view out-of-court or may propose an appropriate solutions for them.

The Judge must preserve the secrecy of all information related to the mediation procedures unless disclosure of such information is mandatory by Law.

The Jurisdictional Court and the specialized Judges

The competent court to hear the cases is the first instance circuit at the economic courts as defined by the domicile of the debtor (i.e. registered office of the company).

If the registered office is located outside of Egypt, jurisdiction shall rest with the court within whose jurisdiction the local management center is located and if the trader doesn't have a domicile the competent court shall be the court within whose jurisdiction the trader's usual residence is located.

The Penalties:

The Law distinguished between the non-fraudulent bankrupts who face difficulties while running his business and the fraudulent bankrupts who commit fraud and ruined their business intentionally as the new law abolishes imprisonment in cases of non-fraudulent bankrupts in which case the penalty will apply. Whereby the fraudulent bankrupt is penalized by fine in addition to the pre-existing penalty of imprisonment from three to five years.

Finally, the New Law brings faith in the investment climate in Egypt through re-organizing the company's administrative and financial system with paying of its debts and rather than declaring bankruptcy or opting for liquidation, the creditors may apply for re-structuring to save their business. In other words, the investors will no longer worry about the future financial and administration crises which will guarantee entering and the exiting the Egyptian market safely.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions