In an effort to improve Egypt’s ranking as an attractive market for investment, the Egyptian General Assembly in Parliament approved the country’s first bankruptcy law on Tuesday, reported Al-Ahram online.
The law is a guarantee for companies, supporting them and enabling them to file for bankruptcy in order to avoid prosecution, while maintaining an opening for businesses to put them back on the market once their debt repayments are complete.
The law also seeks to protect creditors by guaranteeing that, in any case, companies’ debts will be repaid through debt restructuring.
The law comes at a time when Egypt faces financial challenges. In the current unstable investment climate, the law provides a safety net for investors by allowing their debtors to file for bankruptcy, instead of prosecuting investors.
This law was first approved by the cabinet in January 2017. However, it awaits the final approval of parliament before president Abdel Fattah al-Sisi ratifies it.
Before this law, bankruptcy cases were referred to criminal court.
However, this law does not come as a stand-alone decision, it comes as part of a package – alongside the investment law – in an effort to attract foreign investments into Egypt.
Egypt currently ranks 115 out of 168 countries in the ‘Resolving Insolvency Index’, which is part of the World Bank’s ‘Doing Business 2018’ report.
The report ranks Egypt six places below its 2017 position.
Most developed countries already have functioning bankruptcy laws. However, the specificities of the laws differ from one another.
In the UK, bankruptcy is reserved for individuals experiencing financial difficulties, and is not enforced with failing corporations.
Meanwhile, in Australia, the bankruptcy system supports individuals’ debts only if they are insolvent and unable to pay their bills. A bankruptcy case may be initiated in one of two ways: either individuals will voluntarily file for bankruptcy due to their inability to adequately address their debt, or a creditor will file a bankruptcy petition to place a debtor in bankruptcy.