FILE - Parliament General Assembly
CAIRO – 28 January 2018: Egypt’s parliament has finally approved on Sunday a new bankruptcy law in another boost to the investment climate.
The law regulates the financial and administrative restructuring for failed projects and companies.
The new law abolishes prison sentences in bankruptcy cases and limits punishments to a monetary fine. It also aims to minimize the need for companies or individuals to resort to the courts and to simplify post-bankruptcy procedures.
Difficulty in exiting the Egyptian market had been a concern among investors, a reason which lowered the country's ranking on the World Bank's Doing Business Index.
Until now, Egypt has had no specific law on bankruptcy, meaning failed companies have had to go to court on a case-by-case basis, which caused difficulties such as long judicial procedures.
The new law will allow any business that is close to bankruptcy to have the option of conciliation with its creditors or restructuring its financial position.
The new law is expected to improve Egypt’s rating in global indices such as the Global Competitiveness Index (GCI) and Doing Business Report because criteria for ease of exiting the market are currently major obstacles for the business environment.
Egypt ranks number 115 in the Resolving Insolvency index in the 2018 Doing Business report, while it dropped 18 places in its overall ranking in the 2018 edition, standing at 128 out of 190 countries, down from 122 in the 2017 report.
The bankruptcy law was approved by the cabinet in January 2017, and it now awaits the President’s ratification after the final approval of the Parliament.
The law complements the investment law, which was passed by the Parliament last year, to attract foreign investors and reduce bureaucracy. They come as part of the reform drive aimed at encouraging investment.