Insolvency is a state when an individual or a company can no longer pay such individual’s or company’s debts due to financial problems.
LAW N° 23/2018 OF 29/04/2018 relating to Insolvency and Bankruptcy establishes all commercial recovery proceedings and the settling of issues arising from insolvency and bankruptcy.
Article 7 of this law establishes grounds for the commencement of insolvency proceedings.
These include when the debtor;
I. is unable to pay the debts when they are due.
II. is over-indebted and is not in the position to pay the debts by the due date.
Article 8 states that application for commencement of insolvency proceedings may be carried out by the following persons:
i. Creditors
ii. Debtor
iii. members of the Board of Directors or one of them
iv. Registrar General
A creditor’s application is admissible if he or she has an interest and if he or she shows his or her claim as well as the reason why insolvency proceedings should be commenced.
The Insolvency Law, 2018 also states that the Court does not appoint an insolvency practitioner if it is manifestly evident that the value of the assets of the debtor is insufficient to cover the costs of the insolvency proceedings. In such a case the court issues a declaration of debtor’s insolvency and orders the Chief Administrator to carry out the distribution of available assets to creditors.
Article 9 states that the insolvency proceedings application must include the following:
i. a detailed list of debts and claims
ii. relevant financial and accounting reports
iii. other elements the applicant court considers necessary and which are linked with his or her application.
Article 10 provides for the general effects of commencement of insolvency proceedings.
Upon the commencement of the insolvency proceedings:
i. The commencement or continuation of individual actions or proceedings concerning the assets of the debtor and the rights, obligations or liabilities of the debtor shall be stayed
ii. The execution of judgments related to the assets of the debtor’s property shall be stayed
iii. The right of counterparty to terminate any contract with the debtor shall be suspended
iv. The right to transfer, mortgage or otherwise dispose of any assets of the debtor shall be suspended.
The law further states that provisions of Article 10 (discussed above) shall not prejudice the right to institute actions or initiate proceedings against individuals in order to protect a debt owed. The Court may also take an additional decision aimed at easing the measures taken during the commencement of insolvency proceedings.