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Tuesday, 22 June 2021

Egypt's parliament approves amendments to bankruptcy law

The parliament speaker said the amended law is expected to contribute to stimulating Egypt's investment market.

Gamal Essam El-Din , Monday 15 Mar 2021
The Egyptian Parliament
The Egyptian Parliament.
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Egypt's House of Representatives approved on Monday government-drafted amendments to the bankruptcy law, which are set to be referred to the State Council for revision before being put up for a final vote, according to parliament speaker Hanafy Gebaly.

Gibali said the amended law will help contribute to stimulating the investment market in Egypt.

"This is one of the most complicated laws, but it is also one of the most important laws that will give a boost to economic and investment activities," said Gebaly

Ibrahim El-Henedy, chairman of parliament's legislative and constitutional affairs committee, indicated that the amended law aims to extend a helping hand to default and insolvent investors who suffer from a shortage of liquidity to obtain funding and resume economic activities.

"In this respect, the law will open the door to non-banking institutions to offer credit facilities to defaulting enterprises and projects provided that these institutions get full information about the financial conditions of defaulters, prior to offering them any credit," Henedy said.

A report prepared by the House's economic affairs committee said the new amendments aim to strike a balance between the interests of well-intentioned but ill-fated debtors on one hand and the interests of creditors on the other.

"This will help pave the way for stimulating the investment market in terms of creating a climate of confidence between debtors and creditors," said the report.

The report also explains that the amendments to "the Law on Restructuring, Reconciliation and Bankruptcy Protection" mainly seek to help default and insolvent companies and investors settle commercial disputes outside courtrooms.

"This will come through introducing a new mechanism of mediation to help creditors and debtors reach a reconciliatory settlement of their commercial disputes without resorting to filing lawsuits," added the report.

The legislative amendments would also allow debtors to request bankruptcy protection.

"This would protect good-intentioned but ill-fated merchants from being declared bankrupt, keep their commercial reputation intact and create a climate of confidence in the investment market," said the report.

On Sunday, the House approved a legislative amendment to the 2020/21 state budget to help contain the negative impact of COVID-19 on the country's economic institutions.

A report prepared by the House's budget committee said the legislative amendment to the 2020/21 budget would open a credit line of EGP 2 billion to be allocated to supporting the financial position of some of the country's economic institutions and units.

"The coronavirus pandemic has negatively impacted the financial performance of these economic institutions and units in terms of stripping them of many of their revenues due to the partial or entire halt of their business activities, and [therefore] weakening their financial capacities to either pay salaries or service their debts," said the report, adding that "as a result, these institutions and units were forced to turn to the state to seek financial help and get credit."

"So, the 2020/21 budget would be amended to introduce an increase of EGP 2 billion to the allocations sector, to be offered to the negatively impacted economic institutions and units," the report said, indicating that "the new budgetary allocation will lead to widening the budget deficit by 0.03 percent of GDP."

Minister of Finance Mohamed Maait indicated that the EGP 2 billion allocation would be specifically earmarked to Egypt's Sovereign Fund.

"As the ministry shouldered many financial burdens in the last period to help the country contain the Covid-19 pandemic, it was not able to send its contribution to the Sovereign Fund," said Maait, adding that "as a result, we requested to open a new credit line estimated at EGP 2 billion in the state budget to send it to the Sovereign Fund."

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