OUTLINE OF THE EGYPTIAN BANKRUPTCY LAWOUTLINE OF THE EGYPTIAN BANKRUPTCY LAW

CONDTIONS - EFFECTS CONDTIONS - EFFECTS

Adopted fromAdopted from

Bankruptcy – Part 1Bankruptcy – Part 1

Prof. Dr. Nagy Abdel MOAMEN Prof. Dr. Nagy Abdel MOAMEN

Professor of commercial Law, Professor of commercial Law,

Faculty of Law, Ain Shams UniversityFaculty of Law, Ain Shams University

Translated byTranslated by

Dr. Yassin EL SHAZLY Dr. Yassin EL SHAZLY

Lecturer of commercial Law, Lecturer of commercial Law,

Faculty of Law, Ain Shams UniversityFaculty of Law, Ain Shams University

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Meaning of bankruptcy

The plain meaning of the term bankruptcy could be incapacity or weakness. However, from a legal perspective it has a different meaning.

Bankruptcy is a system applied only to traders and which aims to establish a collective execution on the funs of the debtor who stopped paying his commercial debts.

This system includes a series of procedures and rules designed to such procedures

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Meaning of bankruptcy

The legislator states that the bankruptcy decisions will consequently prevent the debtor from managing his funds and in the time will entrust the distribution of his funds to the creditors conduct to an agent called trustee.

This system has two major objectives: Firstly, bankruptcy aims to protect the

creditors from their bankrupted debtor whose property is not sufficient to meet the amount of their debts.

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Meaning of bankruptcy Secondly, bankruptcy system aims to protect

creditors themselves from each other. In fact, the bankruptcy situation could create a struggle among the creditors as every one of them will try to collect separately and rapidly his debts trying to get the greatest possible interests from the debtor, regardless the right and the interest of the other creditors.

To avoid such a prejudice of such a conflict the bankruptcy system is used in order to create a fair distribution of the debtor funs according to a collective procedure in which all creditors are included.

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11 - -Regarding the physical personRegarding the physical person

1.1. Taking the commercial acts as a Taking the commercial acts as a professionprofession

2.2. Professionalism should be in the Professionalism should be in the person name and for his own account person name and for his own account

3.3. Enjoying the legal capacityEnjoying the legal capacity

4.4. Being obligated of holding Being obligated of holding commercial books ( article 21)commercial books ( article 21)

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2- Regarding the moral persons 2- Regarding the moral persons

1.1. The company should take one of the forms The company should take one of the forms mentioned in the law ( article 10-2)mentioned in the law ( article 10-2)

2.2. Special case : public sector company – Special case : public sector company – public private companies) public private companies)

3.3. Exception related to the silent companyException related to the silent company

4.4. The company in the phase of liquidation The company in the phase of liquidation

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DefinitionDefinition Art no 10 of the new commercial code defines the Art no 10 of the new commercial code defines the

merchant as: exercises regularly commercial merchant as: exercises regularly commercial transactions in own name, and for his own transactions in own name, and for his own account.account.

2- "Every company which takes one of the forms 2- "Every company which takes one of the forms stipulated in the company law for whichever stipulated in the company law for whichever purpose it is establishpurpose it is establish

From that we can understand that the law From that we can understand that the law recognizes two kinds of merchants : A person who recognizes two kinds of merchants : A person who acts by his own name and for his a commercial act acts by his own name and for his a commercial act and takes this act as a profession. And, a and takes this act as a profession. And, a company that takes the form of commercial company that takes the form of commercial company if this company is engaged in civil acts company if this company is engaged in civil acts (e.g. law firms) (e.g. law firms)

Kinds and forms of Kinds and forms of companiescompanies

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Professionalism=Regular basis Professionalism=Regular basis

That is to say a merchant is one who operates at least That is to say a merchant is one who operates at least one of the acts presented by law to be commercial inone of the acts presented by law to be commercial in

nature such as buying for the purpose to sell or lease, nature such as buying for the purpose to sell or lease, etc.etc.

Should any one carries a commercial transaction for Should any one carries a commercial transaction for once, he cannot be considered a merchant. A man once, he cannot be considered a merchant. A man purchase an aircraft or establishes a company the act purchase an aircraft or establishes a company the act is commercial but he is not a merchant unless he is commercial but he is not a merchant unless he makes this act regularly and takes it as a profession. makes this act regularly and takes it as a profession.

It was decided that persons who areIt was decided that persons who are ..- being prevented - being prevented from practicing trade such as judges or lawyers are from practicing trade such as judges or lawyers are deemed merchants if they practice these acts on a deemed merchants if they practice these acts on a regular basis in spite of this prohibition. regular basis in spite of this prohibition.

Professionalism=Regular basis Professionalism=Regular basis

Art. 17 of the new code which stipulates. "If Art. 17 of the new code which stipulates. "If any person exercises commerce whom is fo,-any person exercises commerce whom is fo,-bidden from trading by laws, regulations bidden from trading by laws, regulations and/or a special system will be considered as and/or a special system will be considered as a merchant, and the provisions of a merchant, and the provisions of commercial law are applicable to him.commercial law are applicable to him.

A profession means that the person involved A profession means that the person involved must carry on this business regularly as an must carry on this business regularly as an occupation he follows for making livelihood. occupation he follows for making livelihood. Should a mere employee has a taxi which he Should a mere employee has a taxi which he sometimes uses to improve his income he is sometimes uses to improve his income he is not a trader because he does not depend not a trader because he does not depend upon such commercial act for living.upon such commercial act for living.

On the merchant's own name, and On the merchant's own name, and for his own ac-countfor his own ac-count

It is submitted that exercising of the commercial It is submitted that exercising of the commercial acts must be on the merchant's own name, and for acts must be on the merchant's own name, and for his own ac-count: Thus an employee or sales his own ac-count: Thus an employee or sales representative will not be qualified as merchant representative will not be qualified as merchant but his master is. On the contrary a commercial but his master is. On the contrary a commercial agent can be considered a merchant when he acts agent can be considered a merchant when he acts independently even for the principal account or by independently even for the principal account or by the principal naive. Such as brokers, commission the principal naive. Such as brokers, commission agents and commercial agents. agents and commercial agents.

In the case of agents the issue will de pend upon In the case of agents the issue will de pend upon the control and supervision practiced by the prin the control and supervision practiced by the prin cipal and the kind of independence he has in cipal and the kind of independence he has in performing the job.performing the job.

On the merchant's own name, and On the merchant's own name, and for his own ac-countfor his own ac-count

The question is raised where a man practicing trade The question is raised where a man practicing trade behind the name of somebody else. According to Art 18 behind the name of somebody else. According to Art 18 of the code the character of a merchant shall be proved of the code the character of a merchant shall be proved to any-one who exercises commerce professionally by to any-one who exercises commerce professionally by a false name, or who is concealed behind another a false name, or who is concealed behind another person, besides proving the said characteristic to the person, besides proving the said characteristic to the ostensible person.ostensible person.

Professionalism is not presumed but must be proved. Professionalism is not presumed but must be proved. The burden of proving such thing lies upon the person The burden of proving such thing lies upon the person who relays upon the charac ter of the merchant. (e.g. who relays upon the charac ter of the merchant. (e.g. man wants claim bankruptcy of his debtor). However, it man wants claim bankruptcy of his debtor). However, it could be proved by the fact that the al leged person has could be proved by the fact that the al leged person has an office and employees of special skill or by the fact an office and employees of special skill or by the fact that the person is registered in the commercial that the person is registered in the commercial Registry. It is also for the court to deduce the Registry. It is also for the court to deduce the characteristic of a merchant for someone characteristic of a merchant for someone

On the merchant's own name, and On the merchant's own name, and for his own ac-countfor his own ac-count

According to art no. 14 of the new code a According to art no. 14 of the new code a man as sumes the character of merchant by man as sumes the character of merchant by advertising it through journals, circulars advertising it through journals, circulars radio, television, or any other means, will be radio, television, or any other means, will be presumed as a merchant. This assumption presumed as a merchant. This assumption can be dis proved by proving that he did not can be dis proved by proving that he did not in fact exercise commerce.in fact exercise commerce.

Anyway the state and other organs Anyway the state and other organs associations and departments of public law associations and departments of public law shall not have the character of a merchant shall not have the character of a merchant although commercial law rules will apply to although commercial law rules will apply to com mercial operations done by them. (art 20 com mercial operations done by them. (art 20 of the code).of the code).

Legal capacity Legal capacity (1) Anyone reaches the age of twenty one has the right of (1) Anyone reaches the age of twenty one has the right of

exercising commerce in Egypt. The rule will include any exercising commerce in Egypt. The rule will include any Egyptian woman and also any foreigner even if the law of his Egyptian woman and also any foreigner even if the law of his country deems him a minor in such age (21 years)country deems him a minor in such age (21 years) ''

(2)- Egyptians minor, completed 18 (2)- Egyptians minor, completed 18 years old years old male or female male or female can exercisecan exercise.. commerce, subject to commerce, subject to the the obtaining of special obtaining of special permission from the competent court.' Such a person must be permission from the competent court.' Such a person must be express clear and limited. A court permit may be conditional by express clear and limited. A court permit may be conditional by restricting certain transactions or limited to certain fund.restricting certain transactions or limited to certain fund.

.A minor who is authorized to practice .A minor who is authorized to practice tirade tirade has full capacity has full capacity to carry out all legal operations which his trade to carry out all legal operations which his trade re-re-quires. He quires. He has to fulfill the legal obligations of a has to fulfill the legal obligations of a `̀merchants and canmerchants and can.. declared bandeclared bankkrupt.rupt.

(3) (3) For For aliens the matter need more details: aliens the matter need more details: aalt must be noted lt must be noted that aliens even adults are prevented from practicing some that aliens even adults are prevented from practicing some kinds of business (e.g. importing, agency).kinds of business (e.g. importing, agency).

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1- what is meant by 1- what is meant by discontinue of payment discontinue of payment

First view : First view : The merchant should stop paying the debts The merchant should stop paying the debts

of his creditors regardless the reason behind of his creditors regardless the reason behind the discontinue of payment the discontinue of payment

Second view : Second view : The discontinue of payment of the creditors The discontinue of payment of the creditors

should be due to a real financial turbulence should be due to a real financial turbulence which the debtor is passing and a real crisis which the debtor is passing and a real crisis facing himfacing him

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22 - -Elements of the Elements of the discontinue paymentdiscontinue payment

1- the actual or material stop of payment :1- the actual or material stop of payment : It means that the debtor should stop paying It means that the debtor should stop paying

his debts. his debts. It should be noted that a merchant can not be It should be noted that a merchant can not be

declared bankrupted if he resorted to declared bankrupted if he resorted to fraudulent means in order to hide his fraudulent means in order to hide his financial situation , like complement bill of financial situation , like complement bill of exchange or contracting loans with high exchange or contracting loans with high interest. interest.

The court take in consideration the actual The court take in consideration the actual date of discontinue of payment and not the date of discontinue of payment and not the real date ( date of the collapse of the debtor real date ( date of the collapse of the debtor financial statues).financial statues).

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22 - -Elements of the discontinue paymentElements of the discontinue payment

2- The financial turbulence of the debtor 2- The financial turbulence of the debtor status : status :

The discontinue of payment of the creditors The discontinue of payment of the creditors should be due to a real financial turbulence should be due to a real financial turbulence which the debtor is passing and a real crisis which the debtor is passing and a real crisis facing himfacing him

Financial turbulence should lead to the lost of Financial turbulence should lead to the lost of confidence between the debtor and his confidence between the debtor and his creditors as well as weakling the credit. creditors as well as weakling the credit.

Temporary financial turbulence won’t lead to Temporary financial turbulence won’t lead to declaration of bankruptcy.declaration of bankruptcy.

Financial turbulence is not related to Financial turbulence is not related to asset/debt equation. asset/debt equation.

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2- The financial turbulence of the debtor status : 2- The financial turbulence of the debtor status : It is not necessary that the discontinue of payment It is not necessary that the discontinue of payment

cover the whole debts. In other terms, It could be cover the whole debts. In other terms, It could be partial.partial.

A merchant could be declared bankrupted if he stops A merchant could be declared bankrupted if he stops the payment of only one creditor as long as the non-the payment of only one creditor as long as the non-payment reflects a serious financial turbulence. payment reflects a serious financial turbulence.

The detriment factor is the amount of the unpaid The detriment factor is the amount of the unpaid debts and how it reflects the collapse of the financial debts and how it reflects the collapse of the financial status of the debtor which could threaten the rights status of the debtor which could threaten the rights of his creditors. of his creditors.

Financial turbulence covers only the commercial Financial turbulence covers only the commercial acts performed by the merchant.acts performed by the merchant.

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33 - -The proof of the discontinue of The proof of the discontinue of paymentpayment

Burden of proof is upon the plaintiffBurden of proof is upon the plaintiff The plaintiff should proof the discontinue of The plaintiff should proof the discontinue of

payment by all means of evidence. payment by all means of evidence. The proof should cover the existence of a The proof should cover the existence of a

debt and that such non-payment will lead to a debt and that such non-payment will lead to a legal discontinue of payment due reflecting a legal discontinue of payment due reflecting a real financial turbulence. real financial turbulence.

It should be noted that the discontinue of It should be noted that the discontinue of payment should continue until the date of the payment should continue until the date of the declaration of the bankruptcy judgment. declaration of the bankruptcy judgment.

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33 - -The proof of the discontinue of paymentThe proof of the discontinue of payment

It should be noted that the plaintiff should proof that It should be noted that the plaintiff should proof that his debtor enjoyed the status of merchant when he his debtor enjoyed the status of merchant when he stopped paying his debts. stopped paying his debts. A person who is dead or quite exercising commerce A person who is dead or quite exercising commerce could be declared bankrupted under 2 conditions : could be declared bankrupted under 2 conditions : A- he should die or quite at a moment where he was A- he should die or quite at a moment where he was in situation of discontinue of payment his debts. in situation of discontinue of payment his debts. B - the bankruptcy claim should be filed within one B - the bankruptcy claim should be filed within one year from the date of death or abolishment of the year from the date of death or abolishment of the merchant name from the commercial registry. merchant name from the commercial registry.

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44 - -conditions of the unpaid conditions of the unpaid debtdebt

1.1. The debt should be an amount of The debt should be an amount of money money

2.2. The debt should be immediately The debt should be immediately due due

3.3. The debt should be cleared from The debt should be cleared from claims claims

4.4. The debt should be commercial The debt should be commercial

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1- The debt should be an amount of 1- The debt should be an amount of money money

1.1. The unpaid debt should not be an The unpaid debt should not be an obligation to do or an obligation not to obligation to do or an obligation not to do. do.

2.2. This could be justified by the fact the This could be justified by the fact the bankruptcy is a system which tends to bankruptcy is a system which tends to the liquidation of the debtor assets and the liquidation of the debtor assets and fairly distributed among his creditors.fairly distributed among his creditors.

3.3. This is also following the objective of This is also following the objective of protecting the credit and trust between protecting the credit and trust between merchants. merchants.

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2- The debt should be immediately due 2- The debt should be immediately due

1.1. The unpaid debt should be immediately due The unpaid debt should be immediately due and not postponed. and not postponed.

2.2. The debt should be conditioned. The debt should be conditioned.

3.3. To know whether the debt is due or not, we To know whether the debt is due or not, we should look to the date of filing the should look to the date of filing the bankruptcy action. bankruptcy action.

4.4. According to article 554/2, a creditor with a According to article 554/2, a creditor with a postponed debt could exceptionally request postponed debt could exceptionally request the bankruptcy of his debtor if : his debtor the bankruptcy of his debtor if : his debtor run away or didn’t have a known domicile in run away or didn’t have a known domicile in Egypt or committed an act with the intention Egypt or committed an act with the intention to prejudice his creditors. to prejudice his creditors.

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3- 3- The debt should be cleared from claims The debt should be cleared from claims

1.1. A debtor can be declared bankrupted if his A debtor can be declared bankrupted if his debts was doubtful and not certain.debts was doubtful and not certain.

2.2. If there is a claim or a dispute related to the If there is a claim or a dispute related to the debt, the bankruptcy action should be refused. debt, the bankruptcy action should be refused.

3.3. However, the claim should be serious. This is However, the claim should be serious. This is appreciated by the court discretionary power. appreciated by the court discretionary power.

4.4. The power of court in this regard is to examine The power of court in this regard is to examine the seriousness of the debt without dealing the seriousness of the debt without dealing with the substantial defenses or merits. with the substantial defenses or merits.

5.5. Consequently, the court can not transfer the Consequently, the court can not transfer the action to investigate or examine a claim of action to investigate or examine a claim of falsification. falsification.

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44 - -The debt should be commercialThe debt should be commercial

1.1. A merchant can not be declared bankrupted if A merchant can not be declared bankrupted if he stops paying his civil debts. he stops paying his civil debts.

2.2. A merchant can not be also declared A merchant can not be also declared bankrupted if he stops paying taxes or bankrupted if he stops paying taxes or criminal fines or social insurance. criminal fines or social insurance.

3.3. The appreciation of the commercial character The appreciation of the commercial character of the debt is at the moment of discontinue of of the debt is at the moment of discontinue of payment and not when the debt has been payment and not when the debt has been created. created.

4.4. According to article 554 : a civil creditor could According to article 554 : a civil creditor could request the bankruptcy if he proofs that his request the bankruptcy if he proofs that his debtor stopped paying his commercial debts. debtor stopped paying his commercial debts.

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1- Persons entitled to initiate the 1- Persons entitled to initiate the bankruptcy procedures bankruptcy procedures

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11 - -The debtorThe debtor The debtor is most people knowing his financial The debtor is most people knowing his financial

status. status. Presenting a bankruptcy declaration protects the Presenting a bankruptcy declaration protects the

debtor from exposing himself to the criminal sanction debtor from exposing himself to the criminal sanction of stated in the case of bankruptcy by negligence. of stated in the case of bankruptcy by negligence.

The court can confine the debtor if he presents a The court can confine the debtor if he presents a request of bankruptcy within 15 days of his request of bankruptcy within 15 days of his discontinue of payment.discontinue of payment.

Regarding companies., the legal representative is the Regarding companies., the legal representative is the one who is entitled to present such a request. one who is entitled to present such a request.

If the court refuses the debtor request, it can order If the court refuses the debtor request, it can order how to be a fine for superficially creating a how to be a fine for superficially creating a bankruptcy status. bankruptcy status.

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22 - -One of the creditorOne of the creditor This is the most common way to request This is the most common way to request

bankruptcy. bankruptcy. This is allowed to all kind of debtor even those This is allowed to all kind of debtor even those

with a civil debt. with a civil debt. A partner in a company could present a A partner in a company could present a

bankruptcy request if he is a creditor of the bankruptcy request if he is a creditor of the company. company.

The debtor could be declared bankrupted The debtor could be declared bankrupted although he has only one creditor. although he has only one creditor.

Rules of bankruptcy are related to public order Rules of bankruptcy are related to public order and can not be contracted in any agreement. and can not be contracted in any agreement.

Any agreement to avail a debtor from declaring Any agreement to avail a debtor from declaring his bankruptcy is considered void. his bankruptcy is considered void.

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33 - -The competent courtThe competent court Before 2008, the subject matter jurisdiction of Before 2008, the subject matter jurisdiction of

the bankruptcy request was in the competence the bankruptcy request was in the competence of the primary court regardless the amount of of the primary court regardless the amount of the dispute. the dispute.

After the promulgation of the law no120 for the After the promulgation of the law no120 for the year 2008, the competence is now transferred year 2008, the competence is now transferred to the economic courts. to the economic courts.

Regarding the local jurisdiction, the Regarding the local jurisdiction, the competent court should be the court of the competent court should be the court of the commercial domicile of the debtor or his commercial domicile of the debtor or his regular place of residence. regular place of residence.

Regarding companies, the action must be filed Regarding companies, the action must be filed in the company head-office or the company in the company head-office or the company local-office if the head –office is abroad. local-office if the head –office is abroad.

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33 - -the authority of the court in the authority of the court in postponing the bankruptcy actionpostponing the bankruptcy action

According to article 702, the court is entitled to According to article 702, the court is entitled to postpone the bankruptcy action, only for postpone the bankruptcy action, only for companies and not individuals. companies and not individuals.

The postpose should be for a period of 3 The postpose should be for a period of 3 months and should be done once.months and should be done once.

This faculty is restricted on two conditions : This faculty is restricted on two conditions : A- the potentiality of a support to the debtor A- the potentiality of a support to the debtor

financial status.financial status. B- The need to protect the interest of the B- The need to protect the interest of the

national economy. national economy.

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44 - -The content of bankruptcy judgmentThe content of bankruptcy judgment..

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55 - -Characteristics of the bankruptcy Characteristics of the bankruptcy judgmentjudgment

1.1. The The res judicata res judicata of the bankruptcy judgment is of the bankruptcy judgment is absolute and not relative as ordinary absolute and not relative as ordinary judgments : judgments :

A- regarding the persons A- regarding the persons : the debtor is : the debtor is considered bankrupted in his relationship with considered bankrupted in his relationship with the all his creditor not only the one who filed the all his creditor not only the one who filed the bankruptcy claim.the bankruptcy claim.

B- regarding the assets B- regarding the assets : the judgment is not : the judgment is not only related to the debt subjected to the claim only related to the debt subjected to the claim but all the debtor money even though those but all the debtor money even though those unrelated to commercial activities. unrelated to commercial activities.

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55 - -Characteristics of the bankruptcy Characteristics of the bankruptcy judgmentjudgment

2.2. The double nature of the bankruptcy The double nature of the bankruptcy judgment: judgment:

A- Declaring or Clearing judgment A- Declaring or Clearing judgment : as it : as it declares the status of discontinue of declares the status of discontinue of payment as well as the invalidity of the payment as well as the invalidity of the transactions committed by the debtor transactions committed by the debtor during the suspect period. during the suspect period.

B- Constitutive judgment B- Constitutive judgment : as one of its result : as one of its result lead to the creation of the creditors lead to the creation of the creditors assembly – confining the debtor from the assembly – confining the debtor from the management of his assets – stopping the management of his assets – stopping the unilateral actions - unilateral actions -

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1)1) Effects of bankruptcy judgment s to Effects of bankruptcy judgment s to the debtor assets before the the debtor assets before the issuance of bankruptcy declaration issuance of bankruptcy declaration

1.1. The meaning of the suspect periodThe meaning of the suspect period

2.2. The sanction ( the non-enforcement) The sanction ( the non-enforcement)

3.3. Types of non-enforcement Types of non-enforcement

The suspect period

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1- The meaning of the suspect period 1- The meaning of the suspect period Performing certain transaction during the suspect Performing certain transaction during the suspect

period is not void in itself. period is not void in itself. On the other hand, there is a fear that certain On the other hand, there is a fear that certain

transaction could affect the creditor rights. transaction could affect the creditor rights. The suspect period starts from the date of The suspect period starts from the date of

discontinue of payment till the date of the issuance discontinue of payment till the date of the issuance of the bankruptcy judgment. of the bankruptcy judgment.

The court has discretionary authority in The court has discretionary authority in determining the date of the discontinue of determining the date of the discontinue of payment. payment.

according to article 563 the suspect period can not according to article 563 the suspect period can not go retroactively to more than 2 years before go retroactively to more than 2 years before issuance of the bankruptcy judgment issuance of the bankruptcy judgment

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Firstly : Firstly : Mandatory Mandatory non-non-enforcementenforcement

The court has no authority regarding the The court has no authority regarding the mandatory non- enforcement. The action mandatory non- enforcement. The action should be initiated by the trusteeshould be initiated by the trustee

Conditions of mandatory non- enforcement : Conditions of mandatory non- enforcement : The transition should be among those The transition should be among those

enumerated in article 598. enumerated in article 598. The transaction should be performed during The transaction should be performed during

the suspect period. the suspect period. The transaction should be from the debtor The transaction should be from the debtor

and concerning his assets. and concerning his assets.

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suspect period suspect period

The issuance of the bankruptcy judgementThe issuance of the bankruptcy judgement

The date of discontinue of paymentThe date of discontinue of payment

Relative non-enforcementRelative non-enforcement Absolute non-enforcementAbsolute non-enforcement

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11 - -DonationsDonations All donations made by the debtor is not enforced All donations made by the debtor is not enforced

towards the creditors regardless its objective or towards the creditors regardless its objective or substance. substance.

Donations for charity reasons are also not enforced. Donations for charity reasons are also not enforced. The court has discretion to qualify the transaction The court has discretion to qualify the transaction

regardless the parties agreement.regardless the parties agreement. The dowry (wedding gift) is not considered donations The dowry (wedding gift) is not considered donations

as contract of marriage is not donation contract. as contract of marriage is not donation contract. Life insurance policy for the debtor son or his wife is Life insurance policy for the debtor son or his wife is

not a donation contract however the premium paid is not a donation contract however the premium paid is considered indirect donation and should be restituted. considered indirect donation and should be restituted.

Small gifts are excepted according to customs. Small gifts are excepted according to customs.

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2- 2- Settling debts before its maturity date Settling debts before its maturity date

It should be noted that the main objective of It should be noted that the main objective of the bankruptcy system is to achieve equity the bankruptcy system is to achieve equity between all creditors.between all creditors.

This case could lead to a violation of the This case could lead to a violation of the equity between the creditors as it shows that equity between the creditors as it shows that the debtor favored one of his creditor on the the debtor favored one of his creditor on the others. others.

Creation a consideration for an undue Creation a consideration for an undue commercial paper (cheque –bill of exchange) commercial paper (cheque –bill of exchange) is considered as settlement before the is considered as settlement before the maturity date. maturity date.

In the previous case the paper will remain In the previous case the paper will remain valid but the consideration will be part of the valid but the consideration will be part of the debtor estate. debtor estate.

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3- Settling due dates with a thing other 3- Settling due dates with a thing other than the agreed uponthan the agreed upon

The aim of such interdiction is the fear that The aim of such interdiction is the fear that the debtor could fulfill his obligation with a the debtor could fulfill his obligation with a thing more valuable from the thing originally thing more valuable from the thing originally agreed upon. agreed upon.

Interdiction in this case also aims to achieve Interdiction in this case also aims to achieve equity between all creditors and not to equity between all creditors and not to disadvantage one of them.disadvantage one of them.

Exception : commercial papers and banking Exception : commercial papers and banking transfer are considered equivalent to money. transfer are considered equivalent to money.

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4- issuance of securities or pawn after 4- issuance of securities or pawn after the debt has been created the debt has been created

The assumption here is the debt was created The assumption here is the debt was created clear from any securities and then a pawn has clear from any securities and then a pawn has been created during the suspect period. been created during the suspect period.

Interdiction in this case also aims to achieve Interdiction in this case also aims to achieve equity between all creditors and not to equity between all creditors and not to disadvantage one of them.disadvantage one of them.

Example : Mortgage – Pledge - Example : Mortgage – Pledge - HYPOTHECATION.HYPOTHECATION.

Privileged rights are out of scope of this Privileged rights are out of scope of this interdiction. interdiction.

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4- issuance of securities or pawn after 4- issuance of securities or pawn after the debt has been created the debt has been created

HYPOTHECATIONAn agreement whereby someone puts up collateral to secure the debt of another. This means that someone may agree that a piece of real estate will be collateral for a debt. If the debt isn't paid the creditor may have the property seized to satisfy the debt, although the person hypothecating the property is not personally liable if the collateral doesn't pay off the debt. Thus the property is liable for the debt, not the person guaranteeing the debt.

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22 - -OPTIONAL NON-ENFORCEMENTOPTIONAL NON-ENFORCEMENT This decision is in the discretion authority of the This decision is in the discretion authority of the

court. court. The optional non enforcement of all the transaction The optional non enforcement of all the transaction

performed by the debtor during the suspect period is performed by the debtor during the suspect period is the rule and not the exception.the rule and not the exception.

According to article 600 : the payment of commercial According to article 600 : the payment of commercial papers is excluded from the scope of optional non-papers is excluded from the scope of optional non-enforcement. enforcement.

The previous exception tends to balance between two The previous exception tends to balance between two different interests : on the one hand, the creditor different interests : on the one hand, the creditor union and on the other hand, the interests of those union and on the other hand, the interests of those using the commercial papers. using the commercial papers.

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22 - -Conditions of OPTIONAL NON-Conditions of OPTIONAL NON-ENFORCEMENTENFORCEMENT

Firstly Firstly : The transaction should be preformed during : The transaction should be preformed during the suspect period. the suspect period.

Secondly :Secondly : The transaction should prejudice the The transaction should prejudice the interests of the creditors unions. This condition is left interests of the creditors unions. This condition is left to the appreciation of the court. The court should take to the appreciation of the court. The court should take in consideration the interests of the entire creditor not in consideration the interests of the entire creditor not few of them. few of them.

Thirdly : Thirdly : The other contracting party should be aware The other contracting party should be aware the debtor stopped paying his debts. The legislator the debtor stopped paying his debts. The legislator didn't require the knowledge of the financial didn't require the knowledge of the financial turbulence of the debtor. turbulence of the debtor.

The burden of proof of the previous conditions is on The burden of proof of the previous conditions is on charge of the trustee. charge of the trustee.

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2) Effects of bankruptcy judgment s to the 2) Effects of bankruptcy judgment s to the debtor assets after the issuance of bankruptcy debtor assets after the issuance of bankruptcy

declaration declaration

Binding the debtor hands from Binding the debtor hands from managing and disposing his managing and disposing his

assets = article 589. assets = article 589.

5757

Binding the debtor hands from managing Binding the debtor hands from managing and disposing his assets = article 589. and disposing his assets = article 589.

Binding the debtor hands is a mean to liquidate Binding the debtor hands is a mean to liquidate his assets collectively and distribute it fairly his assets collectively and distribute it fairly between his creditors each according to his between his creditors each according to his proportion. proportion.

This effects is not considered as an This effects is not considered as an expropriation or sealing the debtors assets.expropriation or sealing the debtors assets.

Banding the debtor hands doesn’t mean that Banding the debtor hands doesn’t mean that he lost his legal capacity. he lost his legal capacity.

Banding the debtor hands shall not prevent Banding the debtor hands shall not prevent him from taking the necessary measures him from taking the necessary measures towards maintaining and preserving his rights. towards maintaining and preserving his rights.

5858

5959

Firstly : Binding the debtor hands regarding his assets

6060

Secondly : Binding the debtors hands regarding Secondly : Binding the debtors hands regarding legal transitions legal transitions