The New Bankruptcy Law no. 11 of the year 2018
On February 19, 2018, the Egyptian Government set a new milestone in the
investment plan by passing Bankruptcy Law no. 11/2018 in a significant move to
encourage more local and foreign investment and a part of the Government
noticeable efforts in the last few years to revive the economy and the investment
environment by introducing new laws regulating entering and exiting the
The New Law is considered the first bankruptcy law in Egypt, for instance, it
introduces for the first time the concepts of mediation and reorganization, giving
both the debtor and the creditor a higher degree of flexibility in dealing with
debts. It also regulates the penalties by including a whole chapter explaining and
organizing the same unlike the previous legislation.
The absence of a law organizing the bankruptcy was one of the main factors for
which Egypt was considered as a high-risk country for investment. Thus, it was
crucial to issue an effective law to organize and regulate the bankruptcy.
The new Bankruptcy Law introduces the following new concepts:
• Reorganization System
– The Reorganization System is a new mechanism introduced by the Bankruptcy
Law to reorganize the administrative and financial business of the non-viable
companies through a plan including the ways to get over the financial and
– The Reorganization System is open for any merchant with a minimum capital of
one million EGP as long as his business remained active for two years prior to the
submission of the application of reorganization and did not commit any
– In case of applying for reorganization, the bankruptcy as well as the preventive
settlement requests shall be suspended until the reorganization request is
– The merchant shall continue in managing his business normally during
implementing the reorganization plan which is determined by five years; with the
possibility of appointing an assistant to the merchant if required.
– The Bankruptcy Department has been established by virtue of the Bankruptcy
Law and initiating the mediation procedures is considered as one of its significant
– The Department works on settling the disputes between the debtors and creditors
amicably prior to commencing the procedures of declaration of bankruptcy.
– The legislator under the Bankruptcy Law is trying to create a balance between the
act committed and the penalty prescribed. Hence, the Law differentiated between
the fraudulent and the non-fraudulent bankrupt in terms of the penalty prescribed.
– The fraudulent bankrupt is penalized by fine and imprisonment from three to five
years; while the non-fraudulent bankrupt is penalized by fine only without
imprisonment unlike the old rules which did not consider whether the bankruptcy
involved fraud or not.
In the light of the above mentioned, it is clear that the new Bankruptcy Law shows
the Egyptian Government efforts to promote the national economy by encouraging
foreign and national investments and solving the financial crisis of investors and
facilitating the entry and exit of funds from the Egyptian market smoothly under a
solid legal system, delivering a message of reassurance to the foreign and local
investors about the possibility of liquidation or bankruptcy without being subject to
Moreover, it eliminates the barriers and obstacles that may face the creditors in
order to obtain their rights.
The new law assists in reducing the accumulation of cases in the courts by creating
a mediation system for the settlement of commercial disputes by convergence of
views between the parties